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- The SEC is working with AnChain blockchain analytics firm to scrutinize the DeFi industry by analyzing smart contracts.
- The regulator is working to sort out crypto that are assets and those that are securities.
AnChain.AI, a blockchain surveillance firm, has signed a contract with the US Securities and Exchange Commission (SEC) for its information. Specifically, the SEC wants to keep an eye on the DeFi ecosystem by analyzing and tracing smart contracts. With intelligence from AnChain, the regulator can investigate suspicious DeFi transactions and activity.
The contract, which began in May, was initially worth $125,000. This may, however, rise to $625,000 should the SEC choose to retain the partnership for 5 more ‘option years.’
“The SEC is very keen on understanding what is happening in the world of smart contract-based digital assets,” says Victor Fang, CEO, and co-founder of AnChain.AI.
So we are providing them with technology to analyze and trace smart contracts.
SEC crypto regulation bidding
Notably, AnChain tracks illegal activity across traditional financial institutions, crypto, and DeFi alike. Other than the SEC, the analytics company works with centralized crypto exchanges (CEXs) and fiat institutions. The end game is to develop a “predictive engine that can be used to identify unknown addresses and transactions that could be suspicious.” This “preventive” defense will also work against predatory actors in the space.
On Aug. 19, AnChain firm published a blog post entitled, “You Can’t Stop the Trillion-Dollar Virtual Asset Market, but You Can (and Must) Regulate it,” expressing its support for digital assets regulation.
Despite some former SEC members expressing their faith in crypto and DeFi, bad actors remain a warning signal for all. SEC Chair Gary Gensler, asserted early this month that DeFi operations are not shielded from regulation because they are “decentralized.”
There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees…There’s some incentive structure for those promoters and sponsors in the middle of this.
Embattled crypto industry
The SEC has been trying to gain more insight and simultaneously regulate the budding crypto and DeFi economy. The watchdog is sorting out the plethora of digital assets into securities and actual assets. Currently, the DeFi industry handles digital assets worth over $80 billion. As the SEC roots itself deeper into DeFi, most of these assets will likely be deemed securities.
For these reasons, Hester Pierce urged DeFi projects to be proactive in seeking regulatory approval to prevent future disruptions.
When you start to look at the tokens themselves and try to figure out whether they’re securities, it does get kind of confusing… This is why I encourage individual projects to come in and talk to the SEC because it does require a look at the very particular facts and circumstances.
Recently, the regulator reached a $12M settlement with three Bitconnect promoters infamous for the greatest Ponzi scheme in crypto history.
