Law & Policy

Solopreneur. Creating U.S. crypto policy content. Carter & Jack’s dad 🙏 Prev. Sen. Cornyn; Litigation @ Milbank. https://www.caphillcrypto.com/about 


Thanks @caphillcrypto for the excellent summary of the DeFi broker regulations in your newsletter today. I only had a couple of minor nits to pick with your explanation of the rules. Details to follow:

My second nit is with your statement that the broker definition excludes persons who are solely involved in providing validation services or unhosted wallets that only store keys. Treasury agreed with taxpayer comments that this creates a cliff effect that would disqualify a person from the exception if they were to provide even a de minimis amount of effectuating services. Therefore, the reference to “solely” was dropped from the final regulations, and (as you noted in your newsletter) two examples were added to §1.6045-1(b) to clarify that a validator or unhosted wallet provider that also provides trading front-end services is only considered a broker with respect to the trading front-end services and is not considered a broker with respect to validation or wallet services that otherwise qualify for the exception. In practice, these exception may be difficult to apply to real-world situations, particularly for unhosted wallet providers.