Hi. Ed here.

When it comes to crypto, who’s in charge? 

The founders of a project that issues tokens? Or the software that makes a blockchain tick? 

This question has whirred at the heart of crypto ever since the marketplace started to truly scale in the early 2010s. 

Gary Gensler, the former chair of the US Securities and Exchange Commission, argued that people and companies are ultimately responsible for the issuance of instruments that can be traded in the marketplace. As a result, the securities laws should govern crypto. 

But industry leaders such as Coinbase’s Brian Armstrong and Ripple’s Brad Garlinghouse countered that blockchain technology’s automation renders the old securities rules obsolete for crypto.

Now Andreessen Horowitz, the venture capital firm known as a16z, has weighed in by dropping a 50-page policy prescription as part of the SEC’s solicitation of ideas for new crypto regulation, Andrew Flanagan reported. 

A top argument: decentralised systems such as Ethereum basically need no regulation because there is no one actually in control of the blockchain. 

Moreover, blockchains and smart contracts, the twin pillars of DeFi, should not be classified as business entities for the purposes of financial regulation, a16z said. 

These ideas have been central tenets of DeFi, and indeed all of crypto, for years. Permissionless systems, after all, are the raison d’etre of the entire proposition. 

But these tenets have yet to be codified in the US rulebook, and companies and investors will remain wary of regulatory risks until they are. 

There’s a lot at stake for a16z. 

The Silicon Valley firm founded by Marc Andreessen and Ben Horowitz has amassed $7.6 billion in funds for crypto startups, and as Pedro Solimano reported, the firm has been struggling to deploy the $4.5 billion raised in its fourth fund even in the midst of a bull market.

The reasons why: a16z is sitting on a mountain of dry powder and it’s hard to write big cheques for crypto startups that often have barely-there business plans let alone actual revenue. 

By arguing that decentralisation is about “dispersing ownership” and the elimination of control, a16z is hoping to persuade the SEC that DeFi should float largely outside existing rules. 

While critics may argue that’s been the status quo anyhow, now this understanding would become legally defined.

And that would be a watershed for the industry.

ICYMI

• Bitcoin miners accuse Arkansas of discriminating against Chinese operators

  On March 13, the Arkansas Cryptomining Association, which represents Bitcoin miners in the Natural State, accused Arkansas, its attorney general, and the head of its Oil and Gas Commission, of unlawfully discriminating against Chinese people and their US partners.

• Binance’s legal ordeal in Nigeria grinds on as $81bn case looms

  Binance’s legal morass in Nigeria is far from over. Last month, Nigeria’s government asked a federal judge to levy an $81 billion fine on Binance for allegedly harming the country’s economy. That’s in addition to two separate criminal cases ― one for money laundering and another for tax evasion ― brought against the crypto exchange last year.

• US removes Tornado Cash from sanctions list as token jumps 60%

  It’s been called “the dumbest idea ever.” It was so bad, Federal Reserve officials almost kicked people out of the room for suggesting it. But that hasn’t stopped President Donald Trump from pushing ahead with plans to build a US crypto reserve

Story of the Week

Thorchain watched Lazarus launder $900m in stolen crypto. That’s a big problem for DeFi

When it became apparent that North Korean hackers were using Thorchain to launder $1.4 billion stolen from crypto exchange Bybit last month, it triggered a clash among the platform’s operators.

One group was appalled and pushed to shut off the network until they had the situation under control.

But others who were dedicated to upholding the network’s decentralisation — a common aspiration for blockchain projects — wanted to keep it running, no matter who was using it, or for what purpose.

Comment of the Week

The SEC last week dropped an appeal of an adverse ruling in its long running lawsuit against Ripple, the payments processor that uses XRP. This prompted a surge in XRP’s value and relief from Ripple brass.

DL News is an independent news organisation that provides original, in-depth reporting on the largely misunderstood world of cryptocurrency and decentralised finance. From original stories to investigations, our journalism is accurate, honest and responsible.

Forwarded by a friend? Subscribe here.