The SEC has finalized a rule expanding the definition of a dealer, a move that could significantly affect the DeFi industry. This regulation, described by DeFi proponents as antagonistic, might compel DeFi projects to register as dealers.

The rule broadens SEC oversight, potentially encompassing operations within the crypto securities domain. The SEC emphasized that its dealer framework applies regardless of the securities involved, including crypto asset securities. This decision aligns with efforts to regulate the digital assets industry more comprehensively, alongside other regulatory initiatives from agencies like the Internal Revenue Service.

SEC Chair Gary Gensler stated that the rule aims to align with legislative intentions, mandating registration for entities engaging in market-making activities. However, the rule has sparked concern within the crypto community, particularly among DeFi operators, who fear compliance may be unfeasible.

SEC Commissioners Mark Uyeda and Hester Peirce expressed dissent, highlighting the rule's potential to sow further regulatory uncertainty, especially in crypto securities markets. The DeFi Education Fund criticized the rule as "misguided and unworkable," arguing that it presents insurmountable compliance challenges for DeFi entities.

Set to be enforced in April of the following year, the rule applies equally to all entities it classifies under the expanded dealer definition. This includes the requirement to register with the SEC, adhere to securities laws, and join a self-regulatory organization, posing significant hurdles for many in the DeFi space.