DeFi will provide good regulatory test for SEC.

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The SEC commissioner described the DeFi space as "a work in process" but overall "alluring."

Hester Peirce, the commissioner for the U.S. Securities and Exchange Commission known by the nickname "Crypto Mom," welcomes the challenge of regulating decentralized finance.

In a speech for a George Washington University Law School event on the digital economy, Peirce said decentralized finance, or DeFi, could be the alternative legacy financial system many are seeking given the surge in anti-Wall Street sentiment surrounding the short squeeze of GameStop stocks. The SEC commissioner said the technology could provide a "very good test" for the regulatory body in protecting investors and markets.

"Although a work in progress with all the growing pains and rough edges that implies, DeFi’s promises of democratization, open access, transparency, predictability and systemic resilience are alluring," said Peirce. "We regulators, mindful of the potential upsides and downsides, need to provide both legal clarity and the freedom to experiment so that DeFi can compete with CeFi to offer investors financial services."

Peirce added that the SEC should be looking at ways to ensure that the markets are inclusive, given the frustration, many have expressed starting with the 2008 financial crisis but most recently over the GameStop trades. She said the commission should be "more proactive in embracing technology" to make the economy work better for more people.

"The digital economy does pose some new regulatory challenges, but it also gives us new tools to meet those challenges. We should use those tools with genuine care for the freedom of the people we regulate."

The commissioner previously said that DeFi has created new challenges for the SEC for a number of unresolved legal issues. Though it’s likely some projects in the space will fall under securities laws, there are many DeFi offerings consisting of tokens that lack liquidity and are used to fund blockchain projects. She cautioned developers to speak with the SEC if the project "looks like the traditional security."

Reprinted from Cointelegraph, the copyright all reserved by the original author.