A16z calls on DOJ to stop holding DeFi protocols accountable for user actions

Venture capital firm a16z has called on prosecutors from the US Department of Justice to cease targeting decentralized finance (DeFi) protocols for users’ mistakes, as the protocols lack control over users’ actions.

The firm warned through a blog post that holding people responsible for systems and actions over which they don’t have jurisdiction leads to obstructive outcomes.

Part of the statement read:

Unfortunately, the Department of Justice (DOJ) has ignored this distinction and is attempting to do just that by holding software developers responsible for the actions of third parties that use neutral tools the developers created but no longer control.

A16z

Trump’s biggest policy priority should be decoding the legally correct meaning of control

A16z further asked the new administration to prioritize “codifying the proper and legally correct understanding of ‘control’ in law” as it would help users, DOJ, and software developers understand control in a legal context.

In past legal actions, US prosecutors have targeted cryptocurrency developers for activities conducted on their platforms by others. A16z compared this to holding a car manufacturer accountable for actions by a careless driver that led to a crash. 

They pointed out that the action doesn’t make sense: You can’t blame the carmaker for the accident when someone crashes a car he bought from them. That analogy is quite obvious for vehicles, but cryptocurrency handles it differently.

In recent cases like United States v. Storm and Rodriguez, the DOJ has prosecuted the blockchain developers and compared them to unlicensed money transmitters. Critics counter that this approach misunderstands the fundamental nature of control in decentralized systems since developers typically have no direct control over the software once it has been deployed.

The move to unpack “control” is critical to determining whether crypto firms qualify as money-transmitting entities guided by specific rules and regulations.

According to its website, A16z’s portfolio of venture investments includes over 100 crypto companies, including decentralized exchanges (DEXs) such as Uniswap.

Fed’s stance on crypto is bound to change during Trump’s administration

During the tenure of former President of the United States Joe Biden, federal agencies were very strict with crypto cases. The Securities and Exchange Commission, the financial regulator, has opened more than 100 cases against companies and people who have raised money through crypto, claiming they broke US laws.

However, things are expected to change during President Trump’s administration. The president seems accommodating toward crypto and promised to make the US the world’s crypto capital. So far, Trump has replaced SEC leadership with more crypto-friendly appointees.

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