Brookwood PC Managing Partner Collins Belton said that given the SEC’s attitude towards DeFi, the Wonderland incident could be grounds for oversight of decentralized finance projects.
Collins Belton expressed concern that the U.S. Securities and Exchange Commission (SEC) may tighten regulation of the DeFi sector amid the Wonderland incident. The project used Protocol Controlled Value (PCV), in which the platform fully owns the assets locked in smart contracts. Such a tool introduces a very serious element of centralization into DeFi.
“If you are a SEC representative, this is probably one of the best opportunities to get some kind of precedent that will at least get you started clinging to DeFi,” Belton said.
He is confident that platforms that use PCV will be the first to attract the attention of regulators. This will happen when regulators start checking compliance with decentralization requirements in the DeFi sector. According to Belton, first of all, the regulator will analyze whether “they are dealing with securities, or is it a product that should be regulated in accordance with the Investment Company Law.”
The situation with the partial centralization of Wonderland was aggravated by the fact that, in fact, the money of the users of the project was managed by the former co-founder of the infamous Canadian exchange QuadrigaCX, Michael Patryn, who has several criminal cases behind him. LexDAO lawyer Ross Campbell confirmed that the incident involving the management of the investments of users of the DeFi project by a fraudster can serve as a reason for the regulation of both projects using PCV and the DeFi sector as a whole.
Earlier, SEC Chairman Gary Gensler said that the DeFi sector is not as decentralized as it seems at first glance. In September last year, he called on the European Parliament to cooperate in the regulation of crypto assets and DeFi, and in October he spoke about the need for increased control over the DeFi industry to protect the interests of investors.