a16z Crypto and the DeFi Education Fund are asking the U.S. Securities and Exchange Commission to provide regulatory relief for decentralized exchanges (DEXs), their applications and the developers behind them as the agency develops its proposed “Innovation Exemption” framework.
In a September 22 letter, a16z Crypto General Counsel Miles Jennings and the DeFi Education Fund asked the SEC to clarify when developers of decentralized exchange protocols and applications that provide access to them would fall outside the Exchange Act’s exchange-registration requirements. The proposal is aimed at extending regulatory clarity to permissionless systems without placing developers under the same framework as traditional intermediaries.
The groups argue that the relief should also apply when a DEX handles tokenized securities, provided the platform remains fully non-custodial and does not control users’ assets. The request is particularly significant as the SEC considers tokenized assets within the securities framework, while the industry continues to seek clearer rules for decentralized applications.
a16z also proposed a separate approval pathway for crypto trading platforms that operate as traditional intermediaries and control customer funds. That approach would distinguish non-custodial DeFi protocols from centralized platforms that function more like conventional financial intermediaries.
The push comes after the SEC’s previous enforcement efforts involving DeFi platforms, including its 2024 action against Uniswap, which a16z cited as part of the rationale for greater clarity. The CFTC has separately provided relief for certain passive software, although that framework applies to derivatives markets rather than securities.
The proposal could face resistance from parts of traditional finance. SIFMA, which represents securities firms including major broker-dealers, has raised concerns about the SEC’s broader Innovation Exemption proposal. While traditional intermediaries could potentially support a clearer approval pathway for centralized crypto trading platforms, their position on exemptions for non-custodial DEXs and their developers remains a key issue to watch.
