Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission (SEC), has expressed concerns regarding potential regulatory requirements for centralized Layer 2 blockchain networks. She explained that blockchain networks operating with central matching engines could face increased regulatory complexities. Layer 2 blockchains, which are used to scale blockchain transactions by providing faster and cheaper processing, resemble traditional exchanges when controlled by a central authority. Peirce clarified that truly decentralized protocols are not owned by any single party and remain open to all. However, Layer 2 solutions, especially those addressing Maximum Extractable Value (MEV) issues in a centralized manner, introduce regulatory challenges. Matching engines controlled by a single entity may be treated like conventional securities exchanges, requiring operators to comply with legal obligations.
As head of the SEC’s cryptocurrency task force, Peirce emphasized the importance of protecting smart contracts on fully decentralized Layer 1 networks. She advocates for the community to resolve MEV problems to avoid regulatory intervention. With traditional securities increasingly moving onto blockchain platforms, Peirce seeks protections for development teams and expects centralized intermediaries to adhere to regulations. She supports clear distinctions between automated code and regulated entities, aiming for safe harbors for decentralized protocols while subjecting centralized Layer 2 chains to conventional oversight. This statement comes amid ongoing efforts to clarify regulatory frameworks in the cryptocurrency and blockchain space, especially in the U.S., where the market is expanding and investor protection measures are being strengthened.
Source: binance
