Decentralization
Decentralized blockchain infrastructure is the next evolution of internet and telecommunications technology. As such, it should follow the same regulatory principles and self-governance standards as the open internet.
Blockchains and digital assets aren’t just financial tools, the use cases are much broader. Forcing this industry into outdated, narrow regulation harms innovation, stunts economic growth, and blocks new paths to capital formation. The lack of clear regulation for blockchain has led to misguided enforcement acting as permanent rules.
Blockchain technology needs modern regulations, not outdated securities laws from before the digital age. Clear, tailored rules will support innovation, protect consumers, and ensure the industry thrives safely in the U.S.
The Policy Issues
Utility Tokens & Infrastructure
Blockchains are decentralized computer systems. Cryptocurrency, or native tokens, are used as rewards to decentralized actors running the network. While these cryptocurrencies are valuable and their value may increase over time, they are not inherently securities.
Current SEC enforcement actions treat them as such, and don’t allow these networks to function as intended. This misclassification results in criminal and civil lawsuits by the regulator, pushing blockchain companies, projects, and developers overseas.
DePIN
Decentralized physical infrastructure (DePIN) combines Internet of Things (IoT) devices with decentralized blockchain networks. While financial regulators think the inclusion of blockchains in any sector gives them regulatory authority, that’s untrue. Especially since DePIN networks are used for inherently non-financial use cases, like providing cell and internet service, cloud storage solutions, or accessing computing marketplaces.
These activities and the companies behind them shouldn’t be forced to follow ill-fitting regulations meant for securities issuers and exchanges. Policymakers should focus on the activity rather than the technology itself when considering potential regulations.
DeAI
Artificial Intelligence is rapidly becoming dominated by a few large players, with centralized models that are often opaque, difficult to explain, proprietary, and prone to inaccuracies. The explosion of companies and apps using black-box AI models presents a problem—a handful of AI companies are becoming critical to internet infrastructure and the global economy. The solution: decentralized, blockchain-based AI.
These models offer transparency, auditability, and public oversight capabilities by leveraging public blockchains. AI policy and regulation must take these decentralized and open-source models into account when drafting policy to ensure that the US can capitalize on this new technology and mitigate risk.
DeFi
The future of finance lives within smart contracts. DeFi (Decentralized Finance) utilizes automated contracts allowing people to make transactions directly, without relying on banks or other intermediaries. Not only does this model reduce costs imposed by middlemen, it also empowers users to have more control over their finances.
However, the current financial regulatory framework focuses on traditional intermediaries and doesn’t accommodate DeFi. While the technology behind DeFi can achieve the same goals as existing regulations, it can’t meet compliance requirements as they are currently written. Updated rules and laws are needed to ensure DeFi continues to exist not only overall, but safely.
Our Impact
Our mission is to help shape the future of decentralization by promoting policies that support infrastructure that fosters innovation, protects users, and strengthens the digital economy.
Congressional Responses
Our upcoming response to the Bipartisan House Task Force’s Report on Artificial Intelligence will outline types of decentralization and analyze the benefits of decentralized and open-source AI models over closed models. We also include policy recommendations drawing from our analysis to support the development, use, and funding of decentralized AI models.
Legislative Reports
We are contributing to the report on Utility Tokens within the Commodity Futures Trading Commission’s Global Markets Advisory Committee and ensuring this definition and its associated protections are included in upcoming legislation.
Creating Solutions
At our 119th Congress fly-in and education day January 2025 we met with bipartisan lawmakers to educate and advocate for legislation that accounts for decentralized blockchain projects and the non-financial use cases of digital assets.
