SEC Commissioner Hester Pierce Clarifies Innovation Exemption Does Not Apply to DeFi

SEC Commissioner Hester Pierce clarified on Thursday that the recently announced 'Innovation Exemption' does not extend to decentralized finance (DeFi) platforms. The exemption applies solely to tokenized securities venues (TSVs), allowing them to trade tokenized securities using automated market makers (AMMs) and liquidity pools for a five-year period.

Pierce emphasized that the SEC has not pre-designated any businesses utilizing the Innovation Exemption as exchanges or dealers, stating the agency will observe how these platforms operate before making regulatory determinations. She also noted that the exemption does not cover DeFi systems, which differ from traditional securities regulation concerns regarding potential negligence by intermediaries or external attacks on decentralized software.

Pierce explained that peer-to-peer trading via smart contracts without separate authorization does not require the Innovation Exemption in the first place.