Vitalik Buterin defended the Ethereum layer-2 network Base against recent regulatory concerns, highlighting its role as an extension of Ethereum rather than an exchange. He stated that Base utilizes centralized features to enhance user experience while remaining tied to Ethereum's decentralized layer for security. Buterin clarified that layer-2s are non-custodial and cannot control user funds, distinguishing them from exchanges. This discussion gained urgency following comments from SEC Commissioner Hester Peirce, who suggested that if a layer-2's sequencer operates similarly to a centralized exchange, it could face regulatory scrutiny. Coinbase's legal chief Paul Grewal supported Buterin's stance, explaining that layer-2s are general-purpose blockchains serving as infrastructure rather than marketplaces for securities. He likened them to AWS, asserting that they’re not exchanges just because they host applications that may interact with them. Furthermore, Base co-founder Jesse Pollak described the role of sequencers in processing transactions without acting as matching engines, underscoring their function to manage transaction order rather than facilitating trades. If regarded as exchanges, these layer-2s would face stringent SEC registration and compliance demands, prompting a strong industry response against such classification.

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