A16z and DeFi Education Fund propose ‘safe harbor’ policies for DeFi apps
Under the suggested criteria, non-custodial apps would not have to pursue broker registration
DeFi Education Fund Chief Legal Officer Amanda Tuminelli | DAS 2025 New York by Mike Lawrence for Blockworks
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A16z and the DeFi Education Fund are asking the SEC for a safe harbor for blockchain technology. Simply put, this means that projects wouldn’t have to pursue broker registration for DeFi apps.
“While decentralized blockchain systems underlying apps are clearly excluded from the SEC’s broker-dealer registration regimes, apps face regulatory uncertainty because they are typically developed and maintained by centralized actors. The SEC has previously taken the position — through enforcement actions and Wells notices — that developers of apps could be deemed brokers if they enabled users to transact in securities,” a16z wrote in a blog post this morning.
In order for an app to qualify, a16z and DEF proposed four criteria: underlying protocols have to be decentralized, it has to be non-custodial, there can’t be investment recommendations, and no discretion.
“The guiding principle of the safe harbor is that only those Apps which do not engender the risks that the Exchange Act’s broker-dealer regulatory regime was designed to address should be eligible; in such cases, registration as a broker under the Exchange Act is unwarranted and inappropriate,” the two said in their official proposal to the SEC.
So, all in all, they have to be credibly neutral and permissionless. Makes sense, right?
Both DEF and a16z have made it pretty clear that they’re looking out for projects in crypto. Heck, if you missed it earlier this week, a16z’s Miles Jenning and Eddy Lazzarin even went on the Empire podcast to discuss safely launching tokens.
“Developers shouldn’t have to guess whether building public, neutral, and non-custodial software exposes them to the risk of being treated like financial intermediaries,” a16z said.
The push comes roughly a week after Tornado Cash’s Roman Storm was found guilty of conspiracy to operate an unlicensed money transmitter business by a jury in a trial that’s left all of us wondering about potential implications. This push from a16z and DEF would help to clear some of the current murkiness.
“This proposal aims to be flexible to account for the ever-evolving nature of early-stage tech development and is grounded in the understanding that most apps are fundamentally non-custodial, passive software tools that allow users to interact directly with public, decentralized network and protocol infrastructure — and, therefore, should not be subject to broker-dealer registration requirements,” DEF’s Amanda Tuminelli said.
Despite the fact that it’s very clearly a new era at the SEC, there’s work to be done to allow projects and developers in the space to continue to innovate safely.
Now to see how the SEC plans to approach this topic.
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