Venture capital firm Andreessen Horowitz (a16z) has called on the U.S. Department of Justice (DOJ) to stop prosecuting decentralized finance (DeFi) protocol developers for the actions of their users. In a recent blog post, a16z warned that holding developers responsible for user-driven activities is legally flawed and could obstruct innovation in the crypto space.
A16z’s Argument: Who Controls DeFi?
- The firm emphasized that DeFi protocols are decentralized, meaning developers don’t have control over how users interact with the software once it’s deployed.
- Comparing DeFi developers to car manufacturers, a16z argued that blaming developers for user actions is like holding carmakers responsible for reckless drivers.
- The firm pointed to cases like United States v. Storm and Rodriguez, where prosecutors likened DeFi developers to unlicensed money transmitters, despite their lack of direct control.
The Legal Debate Over “Control” in Crypto
A16z is urging the Trump administration to legally define “control” in the context of DeFi and blockchain protocols. This distinction is crucial for determining:
- Whether DeFi developers should be classified as money transmitters under U.S. law.
- If DeFi platforms should be held liable for illicit activity conducted by third-party users.
- How future DOJ and SEC enforcement actions should be framed regarding crypto regulations.
Trump’s Crypto-Friendly Administration Could Shift Policy
Under President Biden, the SEC and DOJ aggressively pursued crypto cases, filing over 100 lawsuits against blockchain companies. However, under Trump’s administration, the regulatory landscape appears to be shifting:
- Trump has appointed more crypto-friendly regulators to lead the SEC.
- He has publicly stated his goal to make the U.S. the world’s crypto capital.
- A newly formed crypto working group is expected to reevaluate past policies, potentially redefining legal standards for DeFi.
What’s Next for DeFi Regulations?
The battle over how DeFi is classified in the legal system will be a defining issue for crypto regulation in 2025. If a16z’s recommendations are adopted, it could:
- Prevent developers from facing legal liability for user-driven transactions.
- Encourage further DeFi innovation within the U.S. rather than driving projects offshore.
- Set clearer guidelines for DOJ enforcement actions moving forward.
As Trump’s administration continues reshaping crypto policy, the future of DeFi regulation hangs in the balance.
While a16z’s push focuses on defining control in DeFi, the broader strategy is to influence the DOJ and SEC under Trump’s administration. If successful, this could set a precedent shielding blockchain developers from liability, paving the way for more aggressive DeFi expansion in the U.S. without regulatory fear.