When SEC Commissioner Hester Peirce launched her assertion on February 21, 2025, titled “There Should Be Some Method 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 perhaps even a quiet plea for readability.
The SEC printed a proper Request for Info — an open name for public enter on find out how to decide whether or not crypto property needs to be categorized and controlled as securities. It was the primary actual invitation in years for the broader crypto ecosystem to assist form the foundations.
In response, on March 13, enterprise capital big Andreessen Horowitz (A16z) submitted a proposal constructed round what it calls a “control-based decentralization framework.” The thought is that this: if a blockchain community is open, autonomous, and not below 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 presents a possible “method 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 needs to be each “merit-neutral” and “technology-neutral.” If a crypto token features like a standard asset — say, a share or bond — it needs to be handled the identical method below the legislation.
However Frei sees a disconnect.
“A technology-neutral strategy sounds truthful in concept. However 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 totally 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 previous property. They arrive with totally completely different danger fashions, incentive buildings, and governance challenges. Ignoring that within the title of ‘neutrality’ means we’re regulating what crypto seems to be like — not what it’s.”
Code Isn’t the Solely Drive Driving Markets
One other key argument in A16z’s proposal is that if a token’s design is absolutely 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 go the Howey take a look at.
However in accordance with Frei, that logic doesn’t maintain up in at the moment’s markets.
“Simply because staking rewards or token burns are automated doesn’t imply the market is… Valuations in crypto are pushed by far more than code. Hypothesis, sentiment, macro occasions — these issues transfer costs simply as a lot, if no more.”
She pointed to Bitcoin’s value 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.
“Have a look at Terra. Its complete worth proposition was a self-correcting, algorithmic stablecoin — a system designed to take care of its peg to the U.S. greenback via 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 have been worn out in days. Code didn’t put it aside.”
The Contradiction of ‘Management-Primarily based Decentralization’
One of many extra debated components of A16z’s proposal is the phrase itself: control-based decentralization. In line with the framework, if operational, financial, and governance management have been sufficiently subtle, the community needs to be thought-about decentralized — and subsequently outdoors the SEC’s jurisdiction.
However Frei challenged the concept decentralization may be so cleanly measured.
“Framing decentralization across the absence of management is already difficult. However while you begin constructing checklists to outline it, you danger mistaking surface-level decentralization for actual autonomy.”
In observe, she defined, most so-called decentralized methods nonetheless contain central factors of affect. Builders retain management over upgrades. Governance tokens typically focus energy within the palms 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 could possibly have a mission that appears decentralized from the skin, 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 go a regulatory take a look at, solely to re-centralize later below 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 trade, 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 actually mirror the complexity of at the moment’s crypto panorama.
“We’d like a mannequin that respects the innovation taking place on this house,” she stated, “however doesn’t ignore the human, financial, and governance dynamics driving it.”
Which means acknowledging that know-how will not be impartial — it adjustments how property 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 tough activity 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 aim isn’t simply to manage crypto,” Frei advised me as we wrapped up. “It’s to do it in a method that protects folks — with out pretending this house is one thing it’s not.”
And perhaps, simply perhaps, there’s a method out of right here — however provided that we’re sincere about the place we’re ranging from.
