Polygon Labs Critiques SEC Proposed Rulemaking That Threatens Permissionless Blockchain Networks

Polygon Labs, the main blockchain expertise agency, issued a response right now to a proposed rule from the Securities and Alternate Fee (SEC) that redefines the time period “change.” The corporate argues that the proposed rule may pose a extreme danger to the existence of permissionless blockchain networks and decentralized finance (DeFi) protocols inside the USA.

The SEC’s reopening launch means that not solely DeFi software program protocols enabling particular transactions on a permissionless, distributed ledger must register as a nationwide securities change (NSE) or an alternate buying and selling system (ATS), but in addition, the underlying ledgers or networks. Additional, people or entities operating or sustaining such techniques would additionally must register.

Polygon Labs has identified that the brand new rule can be logistically unworkable, given the construction of blockchain expertise. They spotlight that the quite a few impartial validators of blockchain transactions can’t virtually coordinate to register as an change, and these validators, by design, do not management DeFi protocols.

The blockchain expertise agency additionally criticizes the SEC’s proposal for its technological bias. It asserts that the principles are inconsistent, treating blockchain expertise otherwise from different technological infrastructures resembling cloud-based techniques. The SEC’s launch proposes that any a part of a blockchain-based system, together with validators, should register, in comparison with solely requiring the deployers of apps on cloud techniques to take action. This strategy, in line with Polygon Labs, embodies a transparent technological bias.

In its response, Polygon Labs maintains that implementing the proposed rule would successfully ban all permissionless blockchain networks within the U.S., in addition to many software program protocols constructed atop such networks, together with DeFi protocols. The corporate’s critique underscores the excessive stakes at hand, drawing consideration to the potential influence of the SEC’s proposed rule on the way forward for blockchain expertise throughout the nation.

The SEC has but to answer Polygon Labs’ critique, however this newest change underscores the growing rigidity between regulatory our bodies and the blockchain business, as every navigates the complexities of recent applied sciences and their implications for monetary techniques.