When SEC Commissioner Hester Peirce launched her assertion on February 21, 2025, titled “There Should Be Some Approach Out of Right here,” it didn’t learn like a typical piece of regulatory commentary. The title, a nod to Bob Dylan’s “All Alongside the Watchtower,” set the tone: frustration, urgency, and possibly even a quiet plea for readability.
The SEC revealed a proper Request for Data — an open name for public enter on the way to decide whether or not crypto belongings must be categorised and controlled as securities. It was the primary actual invitation in years for the broader crypto ecosystem to assist form the principles.
In response, on March 13, enterprise capital large Andreessen Horowitz (A16z) submitted a proposal constructed round what it calls a “control-based decentralization framework.” The concept is that this: if a blockchain community is open, autonomous, and now not beneath the management of a central group, then the tokens working on it shouldn’t be handled as securities.
It’s a neat idea — clear, structured, and seemingly grounded in logic. However as I dug into the small print and spoke with consultants, together with Alice Frei, Head of Safety and Compliance at Outset PR, a extra difficult image started to emerge.
As a result of whereas the proposal provides a possible “means out,” not everyone seems to be satisfied it leads wherever good.
The Promise — and Downside — of Know-how-Impartial Regulation
One of many pillars of A16z’s framework is the concept crypto regulation must be each “merit-neutral” and “technology-neutral.” If a crypto token features like a standard asset — say, a share or bond — it must be handled the identical means beneath the legislation.
However Frei sees a disconnect.
“A technology-neutral strategy sounds truthful in idea. Nevertheless it simply doesn’t apply cleanly to blockchain. Crypto isn’t a re-skin of the standard monetary system — it’s one thing essentially completely different. It continuously redefines its personal financial and purposeful properties.”
She identified how every main innovation in crypto launched completely new financial behaviors: Bitcoin with decentralized digital shortage, Ethereum with programmable governance, DAOs with collective decision-making, NFTs with digital possession, and DeFi with permissionless monetary markets.
“These aren’t simply new wrappers for outdated belongings. They arrive with completely completely different threat fashions, incentive buildings, and governance challenges. Ignoring that within the title of ‘neutrality’ means we’re regulating what crypto appears to be like like — not what it’s.”
Code Isn’t the Solely Pressure Driving Markets
One other key argument in A16z’s proposal is that if a token’s design is totally embedded in code — which means its financial logic is pre-programmed and autonomous — then its worth shouldn’t be seen as counting on third-party efforts. And if that’s true, it wouldn’t move the Howey take a look at.
However in keeping with Frei, that logic doesn’t maintain up in at present’s markets.
“Simply because staking rewards or token burns are automated doesn’t imply the market is… Valuations in crypto are pushed by way more than code. Hypothesis, sentiment, macro occasions — these issues transfer costs simply as a lot, if no more.”
She pointed to Bitcoin’s worth actions for instance. Its code could also be predictable — fastened provide, halving cycles — however its valuation fluctuates wildly based mostly on rates of interest, institutional adoption, and even viral tweets.
“Take a look at Terra. Its entire worth proposition was a self-correcting, algorithmic stablecoin — a system designed to take care of its peg to the U.S. greenback by means of code-based incentives and automatic provide changes. However even that couldn’t stand up to a speculative run. As soon as confidence cracked, the algorithm spiraled uncontrolled. Billions had been worn out in days. Code didn’t put it aside.”
The Contradiction of ‘Management-Primarily based Decentralization’
One of many extra debated elements of A16z’s proposal is the phrase itself: control-based decentralization. Based on the framework, if operational, financial, and governance management have been sufficiently subtle, the community must be thought-about decentralized — and due to this fact outdoors the SEC’s jurisdiction.
However Frei challenged the concept decentralization will be so cleanly measured.
“Framing decentralization across the absence of management is already tough. However while you begin constructing checklists to outline it, you threat mistaking surface-level decentralization for actual autonomy.”
In apply, she defined, most so-called decentralized techniques nonetheless contain central factors of affect. Builders retain management over upgrades. Governance tokens typically focus energy within the arms of early buyers. And infrastructure like exchanges and custodians stay centralized chokepoints.
“True decentralization is a spectrum,” she stated. “It’s not a yes-or-no checkbox. And pretending it’s opens the door to performative decentralization that appears good on paper however doesn’t maintain up in actuality.”
A Potential Regulatory Loophole
The larger concern, Frei warned, is how simply A16z’s proposed framework might be exploited — particularly with out rigorous enforcement requirements.
“You might have a undertaking that appears decentralized from the surface, however nonetheless has insiders pulling the strings.”
That may imply token distributions that seem broad however are tightly coordinated behind the scenes. Or governance buildings that appear democratic however are designed to funnel decision-making to some wallets. Or protocols that shift management simply lengthy sufficient to move a regulatory take a look at, solely to re-centralize later beneath completely different names.
“If we’re not cautious,” she stated, “this turns into a guidebook for regulatory arbitrage. Not for transparency.”
The place Do We Go From Right here?
To be clear, Frei doesn’t dismiss the hassle behind A16z’s proposal. Like many within the business, she welcomes the dialogue and agrees that regulatory readability is urgently wanted. However she’s skeptical {that a} framework based mostly on inflexible decentralization checklists can really mirror the complexity of at present’s crypto panorama.
“We want a mannequin that respects the innovation taking place on this area,” she stated, “however doesn’t ignore the human, financial, and governance dynamics driving it.”
Which means acknowledging that know-how isn’t impartial — it modifications how belongings behave. It means recognizing that markets are emotional, not mechanical. And it means treating decentralization as a transferring goal, not a field to tick.
As for the SEC, it now faces the troublesome job of turning all this suggestions into actionable coverage. Whether or not or not A16z’s framework makes it into the ultimate image, one factor is obvious: the dialog has solely simply begun.
“The purpose isn’t simply to manage crypto,” Frei informed me as we wrapped up. “It’s to do it in a means that protects folks — with out pretending this area is one thing it’s not.”
And possibly, simply possibly, there’s a means out of right here — however provided that we’re sincere about the place we’re ranging from.
