The DeFi Education Fund and a16z urge the SEC to establish a safe harbor for Blockchain applications.

[Coin World] As the U.S. Securities and Exchange Commission ( SEC ) turns to a new approach to regulating digital assets, the DeFi education fund and Andreessen Horowitz have proposed establishing a safe harbor for certain applications. In a letter sent to SEC Commissioner Hester Peirce on Wednesday, the venture capital firm and DeFi advocacy group called for the creation of a safe harbor to clarify broker-dealer rules for blockchain applications (such as certain DEXs, certain trading platform wallets, and certain NFT trading platforms). They stated in the letter: "The safe harbor would provide much-needed regulatory clarity, preserve the Commission's authority to oversee high-risk activities, and ensure that developers can build in the U.S. without the fear of having legal categories misapplied that do not fit modern software infrastructure."

Under the leadership of the Donald Trump administration, there has been a significant shift in regulation, accompanied by calls for reform. Over the past year, the agency created a new cryptocurrency working group to "put the SEC on a sensible regulatory path," dropped investigations into several cryptocurrency companies, and launched a new initiative called "Project Crypto" to update its rules surrounding digital assets. At the highest level, Trump has repeatedly vowed to make America the "capital of cryptocurrency."

The DeFi education fund and a16z stated that under the leadership of the previous government, the SEC took specific enforcement actions, indicating that the agency implied these applications need to register as brokers. The SEC had claimed that a certain trading platform's wallet acted as a broker and was unregistered, but the court later dismissed that claim. The agency had previously issued notices to a certain DEX Labs and a certain NFT trading platform, stating that they were under investigation, but those notices were later withdrawn.

In order for applications to qualify for the proposed safe harbor and be excluded from the agency's broker-dealer regulatory regime, they need to be non-custodial, not offer recommendations or exercise discretion, and they indicate that the underlying protocols need to be decentralized. They stated in the letter: "The basis of these conditions is that most applications are fundamentally non-custodial, passive software tools that allow users to interact directly with public, decentralized network and protocol infrastructure."

Amanda Tuminelli, the Executive Director of the DeFi Education Fund, stated that the safe harbor is intended to be flexible. Tuminelli said in a statement: "Developers should receive clear information, and our hope in submitting this proposal is to provide guidance to front-end developers so they can build without worrying about being subjected to unreasonable requirements that do not align with technical realities."