a16z and DeFi Education Fund Push SEC for NFT and DeFi Safe Harbor

Andreessen Horowitz (a16z) and the DeFi Education Fund have jointly urged the U.S. Securities and Exchange Commission (SEC) to establish a “safe harbor” for non-fungible token (NFT) and decentralized finance (DeFi) applications from specific broker-dealer registration requirements under the Exchange Act [1]. The request, addressed to SEC Commissioner Hester Peirce and the head of the SEC’s Crypto Task Force, aligns with broader calls from Donald Trump’s Working Group on Digital Assets for regulatory relief for DeFi service providers [2].

The groups argue that a safe harbor would provide much-needed clarity for developers of blockchain-based applications, enabling them to operate in the U.S. without fear of being misclassified as unregistered broker-dealers [3]. The letter emphasizes that the safe harbor should apply only to applications that do not pose the same risks the Exchange Act was originally intended to address. This would allow the SEC to retain its oversight over high-risk activities while supporting innovation [4].

This proposal comes as the SEC continues to enforce its rules against crypto platforms, including Coinbase and Kraken, over alleged violations of registration requirements [1]. At the same time, SEC Chair Gary Gensler has acknowledged the need to modernize outdated rules regarding crypto and blockchain applications [1]. a16z and the DeFi Education Fund also suggested that the safe harbor could extend to airdrops and network tokens, further expanding the scope of regulatory relief [1].

The proposed safe harbor could complement the SEC’s 2020 creation of the Special Purpose Broker-Dealers (SPBD) category for custodying digital asset securities, though SPBD designation is not mandatory for all crypto custody activities [1]. The broader regulatory landscape is also shifting as legislative efforts like the CLARITY Act move forward in Congress. The House passed the CLARITY Act in July, and it now awaits Senate consideration [1].

The safe harbor initiative reflects a larger industry effort to clarify how the SEC interprets its rules in the context of rapidly evolving technologies. The outcome of these proposals will depend on the SEC’s ability to balance investor protection with the promotion of innovation in the digital asset space [1].

Sources:

[1] Cointelegraph - Andreessen Horowitz, DeFi Education Fund urge SEC safe harbor https://cointelegraph.com/news/andreessen-horowitz-defi-education-fund-sec-safe-harbor

[2] The Block - DeFi Education Fund and a16z urge SEC to create regulatory safe harbor for blockchain apps https://www.theblock.co/post/366646/defi-education-fund-and-a16z-urge-sec-to-create-regulatory-safe-harbor-for-blockchain-apps

[3] XT.com - A16z, DeFi Group Pitch U.S. SEC on Safe Harbor For DeFi Apps https://www.xt.com/en/blog/post/a16z-defi-group-pitch-u-s-sec-on-safe-harbor-for-defi-apps

[4] Decrypt - a16z, DeFi Education Fund Want SEC Safe Harbor for DEX, crypto wallet devs https://decrypt.co/334915/a16z-defi-education-fund-want-sec-safe-harbor-for-dex-crypto-wallet-devs