The Solana Policy Institute, a non-profit blockchain policy research and advocacy organization, has formally requested the U.S. Securities and Exchange Commission (SEC) to create a clear regulatory distinction between centralized cryptocurrency exchanges and non-custodial decentralized finance (DeFi) software developers. In a letter submitted on March 15, 2025, the Institute argued that developers of open-source, non-custodial protocols should not be regulated as financial intermediaries like brokers or exchanges.
The Institute's proposal centers on three concrete regulatory actions. First, it requests the SEC to publish formal guidance separating non-custodial software tools from broker transactions. Second, it advocates for amending Exchange Act Rule 3b-16 to explicitly exclude open-source code from the definition of an "exchange." Third, it proposes the adoption of a custody and control-based framework to differentiate between intermediary and non-intermediary blockchain activities. The Institute contends that applying broker-dealer regulations to developers who do not hold user assets or control transactions is inappropriate and misunderstands the technical reality of DeFi.
The appeal responds to a December 17, 2025, request for public input from SEC Commissioner Hester Peirce and comes amid growing regulatory pressure and enforcement actions against developers. The Institute warns that forcing decentralized protocols to register as Alternative Trading Systems (ATS) would be "impractical and, in many cases, impossible," potentially forcing protocols to shut down or reintroduce centralized control, thereby undermining investor protections.
This regulatory debate is set against a backdrop of high-profile legal cases, including the prosecution of Tornado Cash co-founder Roman Storm. The Institute's position finds some alignment with recent remarks from SEC leadership. SEC Chairman Paul Atkins has criticized regulation by enforcement and stated that "engineers should not be subject to securities laws" simply for publishing code. Commissioner Peirce has similarly argued against imposing obligations on developers who do not custody assets.
The potential impacts of the SEC's decision are significant. Regulatory clarity could encourage DeFi innovation within the United States, while imposing broker regulations could stifle development and drive projects to jurisdictions with clearer frameworks. The issue is also being debated in Congress, with legislation like the CLARITY Act and a bill from Senators Cynthia Lummis and Ron Wyden aiming to shield non-custodial developers from certain regulations.
