Andreessen Horowitz (A16Z) urges American legislators to revisit and revise a bill on cryptography regulations, warning that the current proposal could open legal gaps and weaken investors’ protections.
The main dishes to remember:
- A16Z warns that the Crypto bill bill creates legal shortcomings around auxiliary assets.
- The firm says that the redefinition of titles could weaken the protections and contradict the Howey test.
- He urges the legislators to link the exemptions in tokens to eliminate decentralization milestones.
The venture capital company raised its concerns in an official letter sent Thursday to the Senate Banking Committee.
The letter responds to a recent discussion project to shape the 21st century financial and technology law, also known as Clarity Act.
A16Z warns the Crypto bill on auxiliary assets
While the project aims to clarify the regulatory landscape of digital assets, A16Z maintains that the framework as legal and structural risk, in particular around the treatment of “auxiliary assets”.
Auxiliary assets refer to the digital tokens sold alongside investment contracts, generally without providing equity buyers, dividends or governance rights.
A16Z said that the use of this category as a basis for new legislation “without significant modifications” is problematic.
The cabinet considers that this structure contradicts the Howey test, which is the long -standing legal standard to determine whether an asset is considered security under American law.
“Rewrite Howey,” said the letter, “would deviate from the established law and endanger the protections of investors”.
Instead, A16Z supports the closer definition of the Clarity Act of “digital products” and recommends codifying a control model based on control.
This would evaluate if a part retains a unilateral, operational, financial or governance control, on a blockchain system.
According to the company, decentralization should mark the point where an asset goes from security to merchandise.
The firm also criticized the distinction proposed by the bill between primary and secondary markets.
He argued that the authorization of regulations on raw materials to govern the secondary trade could allow issuers to unload tokens to initiates under exemptions, who could then resell them publicly without regulatory supervision.
A16Z proposed that decentralization milestones are necessary before such exemptions apply, ensuring that investors’ protections remain intact.
A16Z requests transfer limits until full decentralization
To fill this gap, the letter recommends imposing transfer restrictions which only rise after a project has reached real decentralization.
“Once the control has been abandoned,” wrote the company, “these restrictions should fall, because the dependencies of the confidence of the assets now resemble those of a commodity.”
The letter also discussed the previous application of the dry of the Howey test, in particular the emphasis on the “efforts of others” aspect.
A16Z claims that this approach has discouraged transparency and embarrassed innovation by pushing the developers to distant projects to avoid legal risks.
Last month, the Genius Act, or the law of guide and establishment of national innovation for the Stablescoins Act, adopted the Chamber with bipartite support, including votes of more than 100 Democrats.
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