The SEC reopens its proposal to expand the definition of exchange to DeFi systems

The United States Securities and Exchange Commission (SEC) voted on April 14, 2023 to reopen the comment period on a proposal that expanded the exchange definition for DeFi systems. The agency added information to explain how the reform could affect platforms that trade cryptoasset securities and use distributed ledger technology.

It was not a definitive rule or a declaration that every decentralized protocol was an exchange. The SEC requested opinions on proposed criteria, costs and alternatives. To be understood, a system would have to bring together elements of the legal definition and facilitate transactions on assets that were securities.

What Rule 3b-16 was intended to change

The current regulation identified an exchange through, among other elements, the use of established and non-discretionary orders and methods that allow buyers and sellers to interact. The 2022 proposal replaced some of that language to cover systems that bring together trading interests and use communication protocols to bring them into contact.

The term “communication protocols” generated uncertainty because it could include tools that did not perform a complete operation. Forums, interfaces, messages, and code could make it easier for two parties to express interest without holding assets or matching orders like a traditional exchange. Commenters asked to better define the limit.

In 2023, the SEC incorporated economic analysis and explicit references to cryptoassets and DeFi. Their preliminary position was that certain systems could satisfy the modified definition even if their operators presented themselves as decentralized. If they traded securities, they would have to register as a national exchange or comply with an exemption, usually as an alternative trading system.

The problems of applying registration to DeFi

The registry presupposes a responsible person capable of presenting documentation, monitoring operations, maintaining records and controlling participants. Some protocols have a clearly identifiable company, interface and equipment; others distribute governance among token holders and autonomous contracts. Determining who «organizes» the system was a central question.

It was also necessary to know if the assets traded were securities. The proposal did not by itself change that classification. A protocol could functionally appear to be a market and yet be outside the exchange rule if it did not gather securities operations; conversely, nominal decentralization did not give an automatic exemption.

Critics warned that the breadth could reach developers or communication providers without sufficient control to register. Those who defended the reform argued that equivalent functions should offer equivalent protections, even if they were implemented through smart contracts.

Why the reopening was legally relevant

Reopening comments allows you to correct or complete the administrative file before approving a rule. The SEC received comments on scope, technical feasibility, economic estimates and deadlines. That record would be necessary to justify a final rule and withstand eventual judicial review.

For companies and autonomous organizations, April 2023 was a signal to map functions: who developed the interface, collected commissions, updated contracts, selected tokens or attracted liquidity. These facts could be more important than the name chosen for the project.

Outlook from 2026

The SEC did not finalize the expansion. On June 12, 2025, it approved the formal withdrawal of fourteen proposals published between 2022 and 2023, including that of systems that use communication protocols and their reopening in April 2023. The withdrawal took effect on June 17 and the Commission indicated that it did not intend to issue final rules based on those files.

The agency left open the possibility of submitting a new proposal in the future, which would have to be republished and receive comments. Therefore, as of August 2026 it is not correct to describe the 2023 text as the current definition of an exchange for DeFi. Its relevance was to show a possible regulatory path and force the sector to examine market functions; Legally, it remained a withdrawn proposal, with no new obligations derived from it.