Ethereum co-founder Vitalik Buterin praised Ethereum layer-2 Base for its decentralized approach, emphasizing its ties to Ethereum’s base layer for security. He highlighted that true layer-2s are non-custodial, not exchanges. Concerns over layer-2 networks arose after SEC Commissioner Hester Peirce’s comments on centralization and regulatory implications.

Coinbase’s legal officer argued that calling layer-2 sequencers exchanges misunderstands their role as infrastructure providers, not marketplaces. He compared layer-2s to Amazon Web Services, running code but not acting as exchanges. Base co-founder clarified that sequencers aren’t matching engines but prioritize transaction flow for efficiency.

If layer-2s were classified as exchanges, they would face SEC registration, regulatory compliance, and operational restrictions. The industry resists this classification due to the potential impact on their operations. Jesse Pollak explained that sequencers don’t pair buy/sell orders like traditional exchanges’ matching engines, emphasizing their role in transaction order processing.

Read more at Cointelegraph: Vitalik Defends Base Against SEC Exchange Regulation Threat