Enterprise capital agency Andreessen Horowitz (a16z) is asking on US lawmakers to revise a draft crypto regulation invoice, warning that the proposed framework may open harmful loopholes and undermine investor protections.
In a Thursday open letter to the US Senate Banking Committee, the funding agency means that the regulators ought to shut loopholes within the draft crypto laws. The letter is a response to the dialogue draft launched in late July.
The dialogue draft in query builds on the twenty first Century Monetary Innovation and Expertise Act (CLARITY Act) and seeks business enter on the continued crypto regulation. A16z factors to the definition of ancillary belongings, referring to tokens bought with an funding contract that give patrons no fairness, dividend or governance rights.
“The ancillary asset assemble shouldn’t function the inspiration for laws with out vital modifications,” the letter reads.
Associated: A16z doubles down on LayerZero with $55M funding
A16z pushes for “digital commodity” mannequin
A16z mentioned the present method fails to resolve the core points dealing with crypto markets and can be incompatible with the Howey take a look at, the long-standing authorized benchmark for outlining securities.
The funding agency mentioned this method “is not going to resolve the challenges dealing with crypto market contributors.” As a substitute, the agency recommends adopting the CLARITY Act’s narrower “digital commodity” framework, which it says would supply larger certainty whereas preserving regulatory simplicity.
A16z additionally claimed that “the Howey take a look at stays a essential element of US securities legislation” and may stay in its present type. Its instructed resolution is to “codify a modernized software suited to ancillary belongings.”
It described the proposed modifications to the Howey take a look at as “pointless—and harmful—as a result of it seeks to rewrite Howey in a method that departs from settled legislation and undermines investor protections”:
“These modifications are usually not merely problematic—they’re incompatible with the broader structure of U.S. securities legislation.“
Insider gross sales must be restricted
A16z additionally mentioned that making use of securities legislation to main transactions and commodity rules for secondary transactions creates a loophole, permitting issuers to promote ancillary belongings to insiders underneath exemptions, after which resell within the public market with out falling underneath securities rules.
As an answer, the funding agency instructed requiring the initiatives to attain decentralization by eliminating mechanisms of management. Making use of switch restrictions by means of these means “can shut loopholes that might in any other case come up,” the letter states.
In line with a16z, this might additionally stop insider enrichment on the expense of public buyers and be certain that the excellence between the first and secondary markets stays significant:
“As soon as management is relinquished and the mission is decentralized, these restrictions ought to fall away, because the asset’s belief dependencies now resemble these of a commodity.“
Associated: Trump plans to select a16z head of coverage Brian Quintenz as CFTC chair: Report
A control-based decentralization framework
The agency means that regulators ought to undertake a control-based decentralization framework, which it says “is the suitable strategy to consider the evolution of an ancillary asset’s danger profile.”
The letter explains that this method “must be targeted on whether or not any celebration retains unilateral authority—operational, financial, or governance—over the blockchain system.” This, in accordance with the funding agency, must be thought-about when making use of the Howey take a look at:
“Howey shouldn’t be deserted. As a substitute, Congress ought to codify the rules underlying Howey for belongings underneath a control-based decentralization framework.”
Shield the plumbers, not the pipes
A16z additional says that the US Securities and Alternate Fee’s (SEC) previous deal with the “efforts of others” facet of the Howey take a look at “has created vital perverse incentives.”
It claims this results in decrease transparency, exposes customers to undisclosed dangers and stalls innovation. The letter additionally means that being concerned with the expertise on the foundation of crypto shouldn’t infringe on securities legislation.
“Laws ought to make clear that core expertise capabilities obligatory for the operation of decentralized blockchain programs — akin to working consensus algorithms, mining, staking, and executing good contracts — don’t, in and of themselves, represent regulated monetary exercise underneath U.S. securities or commodities legal guidelines,” the agency mentioned.
Journal: How crypto legal guidelines are altering internationally in 2025