called ConsenSys SEC Make it clear that networks based on distributed ledger technology are not subject to the proposal to expand the term “exchange” in the Securities Exchange Act of 1934.

The company noted that the proposed phrase could mistakenly identify some decentralized systems as exchanges. Furthermore, the regulator did not mention blockchain, cryptocurrencies or DeFi in the document and did not clarify how the requirements of the Act should apply to the industry.

We(@ConsenSys) posted a comment in response @SECGov ‘s proposal to expand the definition of security “exchange” to include “communication protocol systems”. We recommend reading it here: https://t.co/NKDXk2hcNz.
1/21
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— wchughes.eth 🦊 (@BillHughesDC) April 18, 2022

“It seems highly unlikely that the SEC would actually want to extend this rule to blockchain systems, as they are completely different from the centralized exchanges where the Act was passed,” said Bill Hughes, ConsenSys senior advisor.

Seems very unlikely to us. @SECGov He actually wants this rule to cover blockchain systems, as they are completely different from the centralized stock exchanges that the Exchange Act was enacted to address. 3/21

— wchughes.eth 🦊 (@BillHughesDC) April 18, 2022

The company said the proposal violates the Securities Exchange Act, the Administrative Procedures Act and the Constitution if the language intentionally covers decentralized systems.

Regarding the Exchange Act, Hughes noted that its text and purpose were “significantly inconsistent” with the Commission’s proposed regulation for potential sellers and buyers.

“Blockchain systems, especially DeFi, replace middlemen with software. The risks posed by real intermediaries, including abuse of power, are essentially nonexistent,” he said.

The company felt that the proposed SEC phrase “change” in this section would overturn Congress’ regulatory framework and leave society without clearly defined rules.

“The scope of blockchain systems will leave too many questions unanswered for the proposal to be finalized. The SEC will need to start over and do a thorough review of the rationale, costs and benefits,” Hughes said.

As for the APA, covering blockchain systems would leave too many questions unanswered for the proposal to be finalized. The SEC needs to start over and do a thorough analysis of its rationale and costs and benefits. 10/21

— wchughes.eth 🦊 (@BillHughesDC) April 18, 2022

In his view, the Commission’s proposal “regulates speech on the basis of its content”, which goes against the principles of freedom of expression guaranteed by the Constitution.

“We are optimistic that a reasonable resolution to this issue will be provided by the SEC in response to public feedback,” Hughes said.

Recall that the organization for the promotion and protection of the interests of the blockchain industry Coin Center also called the Commission’s proposal unconstitutional.