The Defi Education Fund (Def) submitted a letter to the Securities and Exchange Commission (SEC) on 18 April and presented five core principles for creating a “token -safe port” Framework to support decentralized financial initiatives, while broad regulatory legislation is pending.
The recommendations are intended to help the SEC structure a time limited exemption for token projects that develop in the direction of decentralization, and offer a regulatory environment that makes disclosure possible without classifying assets as effects.
Technology-Magnostic regulations
The Def emphasized that every safe haven should use a technology-agent approach. The framework must tackle the risks of activities instead of prescribing rules for specific blockchain models or technical implementations.
The letter warned of anchoring certain technologies and stated that innovation could suppress if the SEC unintentionally promotes specific consensus mechanisms or architectural designs.
With regard to suitability, Def argued that the Safe Harbor should be open to a wide range of projects that are planning to decentralize. Instead of only evaluating the status of a token in his Genesis, the SEC must allow the already divided tokens to qualify, provided they achieve decentralization goals.
It argued that criteria for broad eligible eligibility are needed to ensure the recording of projects launched before a clear regulatory framework for future compliance routes is set up.
With regard to the disclosure requirements, the Def argued for carefully calibrated obligations that are balanced with the realities that the development teams are confronted at an early stage.
The group suggested that the disclosures focused on transparency of source code, token economy, administrative structures, team and insider activities, cyber security -audits and development route maps.
The Def also proposed periodic disclosures during the Safe Harbor period, with a consideration of streamlining compliance by API connectivity and blockchain automation. Additional compliance measures, such as locking periods for insiders, can help to coordinate incentives in the direction of decentralization without overloading projects.
Clear exit criteria
The letter emphasized the importance of setting up a clear “exit test” that defines when a project is sufficiently decentralized to no longer be considered safety under American legislation.
The most important criteria for completing the exit test would include maximum transparency, permissionless participation, user guardianship of assets, lack of centralized control, fully automated transaction processes and the absence of retained economic authority by a single group.
The Def ordered a realistic time frame for projects to meet these benchmarks, such as three to four years. Projects that do not meet the criteria within the original window can request an extended safe port period, provided that they demonstrate the efforts of good faith to the decentralized.
A critical part of the proposal of the DEF protection includes protection for secondary market participants.
While a token remains within the safe haven, intermediaries who support his trade, such as digital asset exchanges and market makers, may not be registered to register as stock exchanges or stock exchanges.
Extensive framework needed
The Def noted that the exemption of infrastructure providers from traditional securities instructions would reduce legal uncertainty and promote broader participation in decentralized markets.
While he supports the establishment of a token -safe port, the Def ultimately called on the congress to develop an extensive legislative framework for digital assets.
The organization stated that sustainable legal clarity of status should come instead of temporary legal carve-outs. Nevertheless, well -structured safe haven could protect investors and developers, while the longer legislative process unfolds.
The Def concluded his letter by committing itself to continuous involvement in the SEC and the broader crypto community. The organization also indicated that it would publicly publish its recommendations to request further feedback.