DeFi Builders Aren't Running Exchanges
The Solana Policy Institute has formally urged the U.S. Securities and Exchange Commission to draw a clear line between centralized crypto exchanges and decentralized, non-custodial financial protocols. In a recent filing, the think tank emphasized that developers of DeFi applications do not act as intermediaries, as they neither hold user funds nor influence transaction execution.
Regulation Should Focus on Control, Not Code
The institute argues that applying Section 3b-16 of the Securities Exchange Act to open-source DeFi developers is legally unsound and technologically misguided. That provision was designed for platforms with custody and orderbook control—functions absent in truly decentralized systems.
- Code is publicly deployed, not operated for profit
- Users retain full control of assets at all times
- No single entity can alter or halt transactions
To foster innovation, the institute recommends the SEC issue formal guidance excluding non-custodial protocols from the definition of 'exchange' and revise its framework to focus on custody and operational control, ensuring regulation targets intermediaries, not software creators.