a16z seeks SEC exemption for DEXs – Could TradFi push back?

The crypto industry wants more concessions from the SEC in the proposed “Innovation Exemption” framework.

On the 22nd of September, Miles Jennings, General Counsel at VC firm a16z Crypto, alongside lobby group DeFi Education Fund, wrote to the SEC and made two major requests.

First, the firms are requesting regulatory relief for decentralized exchanges (DEXes), applications that access them, alongside the developers behind them.

We recommend, as its next steps in advancing Project Crypto, that the SEC clarify the circumstances in which developers of decentralized exchange protocols (DEXs) and the apps that provide access to them (DEX Apps) fall outside the Exchange Act’s exchange registration requirements.

This reads like developer protections, a key policy push that was fiercely contested in the stalled CLARITY Act. In fact, some of the developer protections in the revised draft were watered down.

According to Jennings, such a move would “extend regulatory clarity to truly permissionless systems.”

Worth noting that the industry seeks this relief to hold even if the platform handles tokenized securities; provided it’s fully non-custodial (doesn’t control user funds), it should be exempted from the Exchange Act.