Hester Peirce: DeFi projects need real decentralization

Full decentralization from launch is the only hope for DeFi projects to avoid financial regulation. This is the view of SEC Commissioner Hester Peirce, known as the ‘Crypto Mom’.

In a talk with DeFiWatch founder Chris Blec on The Defiant’s YouTube channel, the commissioner noted that decentralized organizations and DeFi are new concepts for regulators. Systems without centralized intermediaries differ greatly from what regulators have typically dealt with, she added.

“If you want to be decentralized, you really have to be so, and that will put you in a different category in the eyes of regulators, because it’s simply not what we have dealt with before,” said Peirce.

She stressed that if a regulator can identify an element of centralization, it will certainly seize on it.

“Therefore, I think it prudent to be careful in building your stuff, because in the future this could have regulatory consequences,” said a representative of the SEC.

In her view, existing rules are designed so that all participants in the financial sector fall under the purview of various regulations.

“If you want to prove that you are something different from the CeFi or TradFi system, then you must show that you are doing something radically different, and that, in my view, requires decentralization,” Peirce says.

She also warned of the danger of “shadow centralization” in the DeFi sector, when groups of developers or investors control a protocol due to the opacity of the governance structure.

Earlier, Peirce urged DeFi project developers to approach the SEC to avoid legal violations in each specific case.