A16z and the DeFi Education Fund (DEF) are advocating for ‘safe harbor’ policies from the SEC for decentralized finance (DeFi) applications. Their proposal aims to alleviate regulatory uncertainty faced by developers of non-custodial blockchain apps, who might be considered brokers under current regulations if their projects allow users to transact in securities. To qualify for the safe harbor, DeFi apps must meet specific criteria: utilize decentralized underlying protocols, be non-custodial, avoid making investment recommendations, and exercise no discretion in their functioning. The intent is to ensure that only apps that do not carry the risks associated with broker-dealer regulations should be exempt from such registration requirements. This initiative comes amid growing concerns over regulatory scrutiny, highlighted by the case involving Tornado Cash’s Roman Storm. A16z argues that developers of open-source, neutral software should not be at risk of being classified as financial intermediaries simply for creating applications that facilitate user interactions with decentralized networks. The proposal is seen as an opportunity for the SEC to provide clearer guidance in a rapidly evolving technology landscape.

Source 🔗