Appeal to the SEC
The DeFi Education Fund and the Uniswap Foundation, both significant voices in the cryptocurrency realm, have officially appealed to the Securities and Exchange Commission (SEC) to refrain from imposing stringent regulations on decentralized autonomous organizations (DAOs).
DAOs and the Howey Test
In a letter dated May 27, addressed to Hester Peirce, who leads the SEC’s Crypto Task Force, they emphasized that DAOs, if sufficiently decentralized, should not fall under the Howey test that typically defines securities. According to their argument, DAOs lack identifiable control and coordination, which sets them apart from traditional securities frameworks.
Key Arguments
The advocacy groups contend that DAOs should be regarded as individual entities or aggregates of individuals unless proven otherwise. They noted:
“When a DAO consists of a wide array of tokenholders who can actively engage in and direct its activities, it achieves a level of decentralization that excludes its network token and associated transactions from being classified as securities.”
Context and Political Dynamics
This letter emerges as a direct response to Peirce’s earlier statement on February 21, which sought feedback on the evolving landscape of cryptocurrency regulation.
Amid shifting political dynamics, the SEC has adjusted its stance on crypto regulation, particularly during Paul Atkins‘ leadership, who was instated under the Trump administration. As a former crypto lobbyist, Atkins has articulated that blockchain could bring about innovative market practices and has criticized the current Biden administration’s regulatory strategy as stifling progress.
Future of Crypto Regulation
Atkins announced during a May 20 SEC oversight hearing that the first report from the Crypto Task Force is expected soon. Additionally, the Task Force is engaging in multiple roundtable discussions with industry stakeholders, signaling a more collaborative approach moving forward, contrasting earlier enforcement actions.
