PANews reported on September 9th that, according to Cryptoslate, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce warned that Layer 2 blockchains running centralized matching engines could face exchange registration requirements, while advocating for the protection of truly decentralized protocols. In an interview on "The Gwart Show," she distinguished between immutable code on decentralized networks and centralized entities leveraging blockchain transactions. The head of the SEC's cryptocurrency task force believes that truly decentralized protocols cannot be owned and can be used by anyone. Layer2 solutions, while addressing the MEV problem through centralized transaction ordering, introduce regulatory complexity, and their matching engines deviate from the blockchain's censorship-resistant nature. Peirce stated that a matching engine controlled by a single entity is more like an exchange, and operators must consider relevant requirements if they trade securities, but the SEC hopes to avoid forcing decentralized protocols to register. She emphasized the importance of protecting smart contracts on a fully decentralized Layer1 network. Peirce prefers to let the community solve the MEV problem first before regulatory intervention. As traditional securities migrate to the blockchain, she hopes to protect developers and ensure that centralized intermediaries comply with regulations. She advocates for distinguishing between autonomous code and regulated entities, allowing decentralized protocols to enjoy a safe harbor while centralized Layer2 chains are subject to traditional regulation.PANews reported on September 9th that, according to Cryptoslate, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce warned that Layer 2 blockchains running centralized matching engines could face exchange registration requirements, while advocating for the protection of truly decentralized protocols. In an interview on "The Gwart Show," she distinguished between immutable code on decentralized networks and centralized entities leveraging blockchain transactions. The head of the SEC's cryptocurrency task force believes that truly decentralized protocols cannot be owned and can be used by anyone. Layer2 solutions, while addressing the MEV problem through centralized transaction ordering, introduce regulatory complexity, and their matching engines deviate from the blockchain's censorship-resistant nature. Peirce stated that a matching engine controlled by a single entity is more like an exchange, and operators must consider relevant requirements if they trade securities, but the SEC hopes to avoid forcing decentralized protocols to register. She emphasized the importance of protecting smart contracts on a fully decentralized Layer1 network. Peirce prefers to let the community solve the MEV problem first before regulatory intervention. As traditional securities migrate to the blockchain, she hopes to protect developers and ensure that centralized intermediaries comply with regulations. She advocates for distinguishing between autonomous code and regulated entities, allowing decentralized protocols to enjoy a safe harbor while centralized Layer2 chains are subject to traditional regulation.