Update: Solana Policy Institute Urges Sec To Exempt Defi Developers From...

The Solana Policy Institute urged the SEC to distinguish non-custodial DeFi code from exchanges, warning that current rules could chill innovation.

Update (Jan. 13, 2026, 9.45 a.m. UTC): This article was updated to clarify the legal status and jurisdictions of recent cases involving Tornado Cash developers.

The Solana Policy Institute, a nonprofit focused on blockchain policy, urged the US Securities and Exchange Commission (SEC) to clearly distinguish between centralized crypto exchanges and non-custodial decentralized finance (DeFi) software, arguing that developers who publish open-source code should not be regulated as market intermediaries.

In a Friday letter to the agency, the institute said developing and deploying non-custodial smart-contract software is fundamentally different from operating an exchange, as developers do not custody user assets, control transaction execution or exercise discretion over funds.

The letter argued that applying Rule 3b-16 under the Securities Exchange Act — which defines what constitutes an “exchange” — to non-custodial DeFi protocols would be inappropriate, as the rule is intended to cover platforms that custody assets, intermediate trades or control execution flow.

The institute called on the SEC to issue guidance on differentiating between non-custodial software tools and exchanges with brokers.

It also urged the agency to amend Act 3b-16 to exclude open-source code from the “exchange” definition and adopt a custody-and-control-based framework to draw lines between intermediated and disintermediated blockchain activity.

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The letter further argued that treating DeFi code in the same manner as centralized trading platforms risks “discouraging innovation” and pushing activity offshore to “unregulated channels,” thereby reducing the competitiveness of the US.

To protect DeFi developers and onshore activity, the SEC should establish “clear, durable lines between software tools and actual intermediaries that exercise custody, discretion, or control over funds or transactions,” the letter added.

Source: CoinTelegraph