Crypto lawyers have sounded the alarm on Twitter, the proposal an “all-out shadow attack on decentralized finance.” Gabriel Shapiro, general counsel at crypto research firm Delphi Digital, that if the proposal is accepted and the rule enforced, it could “kill the tech.”
The proposal would bring all automated market makers (AMMs) and liquidity providers with more than $50 million in total assets under management under the SEC’s regulatory umbrella and thus subject to the SEC’s registration requirements – something that would be impossible for many, if not all, decentralized exchanges.
Any decentralized exchange that fits the new criteria under the proposal and that didn’t register with the SEC could then, Shapiro argued, be declared an unregistered dealers, which is a felony offense under securities law.
Suggestions to add liquidity anonymously / encourage market-making in DeFi
Is there a way to get market makers to participate without knowing their identity? Will regulators simply force KYC? Can the system be built so that it is completely anonymous, shifting the burden to another platform (say, the point of conversion between fiat and crypto)?
Planned and current regulation of liquidity providers with > $50m AUM
Is Kava actually an AMM (automated market maker) or liquidity provider with more than $50m AUM?
The SEC signalled that it won’t do anything aggressive for another two to three years. Continue with business as usual, engage with them directly, or find an alternative avenue that de-risks and takes Kava away from the umbrella.