Venture capital firm a16z has called on the US Department of Justice to refrain from holding decentralized finance (DeFi) protocols accountable for actions they did not initiate and cannot control. In a blog post on February 4, a16z stated that “holding people responsible for systems and activities over which they exercise no agency or control leads to perverse outcomes.” The firm criticized the Department of Justice for attempting to hold software developers responsible for the actions of third parties who utilize the developers’ originally created but no longer controlled tools. a16z argued that the new US presidential administration should prioritize legally defining the concept of “control” in relation to crypto. This is particularly relevant in determining whether crypto companies are classified as “money transmitting businesses” and therefore subject to specific regulations and obligations. a16z’s portfolio includes over 100 crypto companies, including decentralized exchanges like Uniswap.
The stance on crypto regulation in the US has changed under the new administration of President Joe Biden. Federal agencies have taken a more aggressive regulatory approach towards crypto, with the Securities and Exchange Commission initiating over 100 regulatory actions against industry companies. However, former President Donald Trump had expressed intentions to make America the “crypto capital of the world” and to appoint industry-friendly heads of agencies. Past legal actions saw US prosecutors holding cryptocurrency developers accountable for activities conducted on their platforms by others. a16z compared this to holding car manufacturers responsible for the actions of negligent drivers that result in accidents. The firm emphasized the importance of understanding the distinction between centralized exchanges and DEXs like Uniswap, stating that DEXs do not have control over the protocol or the ability to control how third parties use it. a16z believes that establishing a clear and fair foundation for crypto entrepreneurs and developers to build in the United States depends on recognizing this distinction.