The Solana Policy Institute (SPI) has formally urged the U.S. Securities and Exchange Commission (SEC) to create a specific regulatory exemption for developers contributing to decentralized finance (DeFi) protocols. This recommendation addresses the growing concern that the SEC’s proposed changes to rules governing ‘exchanges’ and ‘dealers’ could inadvertently subject open-source software developers to onerous registration and compliance requirements originally designed for centralized intermediaries.
The SPI argues that developers who write and deploy smart contracts for non-custodial, decentralized trading systems do not meet the functional criteria of an exchange operator. Unlike traditional centralized exchanges, DeFi protocols operate autonomously based on immutable code, often lacking a central managing entity capable of fulfilling traditional compliance obligations such as Know-Your-Customer (KYC) or anti-money laundering (AML) protocols.
In its submission, the Institute emphasized that regulating non-custodial software development as exchange operation would stifle innovation and push critical technological infrastructure overseas. The current ambiguity regarding the application of Rules 3b-16 and 3b-17, which seek to broaden the definition of an exchange, creates significant legal uncertainty, potentially penalizing individuals merely contributing open-source code rather than operating a trading venue.
To ensure the continued development of decentralized technology in the U.S., the SPI recommends that the SEC clearly distinguish between software development and the operation of a centralized trading platform. The Institute called for targeted exemptions that focus regulatory oversight on centralized points of custody and control within the digital asset ecosystem, while safeguarding the ability of developers to contribute to permissionless, decentralized infrastructure.
Source: Solana Policy Institute urges SEC to exempt DeFi developers from exchange rules
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