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Yellen Lights the Way; SEC Reopens Comment Period on "Exchange" Proposal


It goes without saying that this week’s developments will affect governments’ approach to DeFi policy. How? It’s too soon to tell. The next few weeks will be more revealing than the initial responses we’ve seen already.

Graphs of digital maps and cryptocurrency.

That said, initial responses from legislators have been generally circumspect, which is a silver-lining we shouldn’t dismiss in an otherwise rough week. So far, we’ve only heard from one administration official.

Secretary of the Treasury Janet Yellen’s position deserves a close look. Here’s what she said in a House Financial Services Committee hearing yesterday:

This week we've seen dramatic volatility within a particular algorithmic stablecoin. And by its nature it is not stable when it doesn't have backing by something real and of substance. And I want to be clear that not all stablecoins and not all digital assets are the same. This example this week is a clear sign to the broader world that that is true, not all these assets are the same, nor should they be regulated the same. In fact, we have no regulatory sphere or recognition of digital assets. We don't have a federal regulatory regime for stablecoins, and we need it. And I think there is bipartisan understanding of that. Beginning of last year I made clear to this committee we need to come together to establish a clear regular framework for stablecoins and the broader digital asset ecosystem. It's time for Congress to act on these important markets and provide stability. It's very important in the short-term and long-term and these technologies deserve time to be understood before they are labeled as risks.
  • ✅ Differentiation of various cryptos and stablecoins and their risks.

  • ✅ Recognition that existing “regulatory sphere” isn’t fit for purpose.

  • ✅ Endorsement of building a “clear framework.”

  • ✅ Affirmation of Congress’s central role.

  • ✅ Conclusion that deliberate and detailed consideration is “very important.”

In response to a meltdown in an ecosystem already viewed with suspicion, let us hope that Secretary Yellen’s prudence is emulated far and wide.

SEC Extends the Comment Period on Rule-Making Proposal Dealing with the Scope of “Exchange”

What happened?

On May 9th, the SEC announced that it will reopen and extend the comment period for their recent proposal to expand the definition of “exchange,” which could have major implications for the DeFi ecosystem. More information about the rulemaking and its potential consequences is available at, and you can also submit your own comment through the website.

There has been broad pushback from legislators and the public on the SEC’s short notice and comment period for this rulemaking, along with many, many other pending rulemakings.

What does this mean?

The SEC’s announcement is welcome news, and it reinforces our view that the SEC intends to eventually finalize this rule. Extending the comment period allows the public to exercise its right to provide input on the proposal, and it also reduces the risk that the rule would be thrown out for not complying with the Administrative Procedure Act’s requirements on notice and comment.

Here’s the letter we filed in response to the proposal.


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