The DeFi Debrief

Week of April 21, 2025: DEF Submits Principles for a Token Safe Harbor; DEF Drops "Broker" Rulemaking Suit; DEF Publishes New Blog on Tornado Cash

DeFi Education Fund Submits Guiding Principles for Token Safe Harbor to SEC Crypto Task Force

On Friday, April 18th, 2025, DeFi Education Fund (DEF) submitted Guiding Principles for a Token Safe Harbor Framework to the Securities and Exchange Commission (SEC) Crypto Task Force. A safe harbor is a legal framework that shields good-faith actors from certain liability or penalties under defined conditions, offering regulatory clarity and peace of mind to market participants.

As background, in February 2025, SEC Commissioner Hester Peirce issued a request for comment: “There Must Be Some Way out of Here.” In the request for information, Commissioner Peirce requested public feedback on a potential safe harbor from registration under the Securities Act of 1933. Back in 2021, Commissioner Peirce proposed that the Commission put in place a non-exclusive safe harbor to provide a time-limited exemption from the registration requirements under the Securities Act of 1933 for offers and sales of tokens during the development of a functional or decentralized blockchain network. 

DEF supports the Commission’s articulated goal of promoting a “regulatory environment that protects investors, facilitates capital formation, fosters market integrity, and supports innovation.” A thoughtfully calibrated safe harbor—appropriately tailored to the realities, risks and opportunities of digital assets and blockchain technologies—will provide important clarity to the public, token holders, and projects building in this space while the longer-term legislative and regulatory policymaking processes play out. 

DEF submitted five guiding principles for inclusion in the Token Safe Harbor, which are described in detail in our letter: (1) technology-agnostic rules and policies, (2) broad and inclusive eligibility criteria for the Safe Harbor, (3) appropriately calibrated disclosure and compliance considerations, (4) clear and well-defined exit criteria, and (5) appropriate treatment of secondary market activity. 

DEF is deeply appreciative of the work of the Task Force for providing an opportunity to provide feedback to the Task Force and for working to provide regulatory clarity for digital asset market participants.

DEF is seeking feedback on our guiding principles from builders in the DeFi ecosystem. If you are interested in commenting on the guiding principles, please provide feedback via the form found here: https://www.defieducationfund.org/post/defi-education-fund-submits-guiding-principles-for-token-safe-harbor-to-sec-crypto-task-force. 

DeFi Education Fund Drops Lawsuit Against Treasury Department on DeFi-Killing “Broker” Rule

Last week, we at DEF and our co-plaintiffs, Blockchain Association and Texas Blockchain Council, were pleased to drop our lawsuit challenging the Treasury Department’s Internal Revenue Service (IRS) DeFi-killing “broker” rule. DEF’s lawsuit was mooted by President Trump’s signature of the DeFi “Broker” Congressional Review Act (CRA) Resolution, officially disapproving and voiding the flawed rulemaking.    

DEF’s Executive Director & Chief Legal Officer Amanda Tuminelli stated, "Today's decision to drop our lawsuit against the Treasury and the IRS marks the successful end point in our advocacy for the DeFi community against regulatory overreach by the prior administration's IRS. Though DeFi technology presents a new set of considerations for policymakers and regulators to understand and navigate, recent actions like the CRA demonstrate the power of collaborative advocacy and public-private partnerships.” 

Congress' protection of DeFi technology is a bipartisan victory and a signal of progress for the DeFi industry. DEF commends the members of Congress that stood up for financial freedom and remain committed to advocating for fair and forward-thinking digital asset policies. DEF is also grateful to work with our co-plaintiffs Blockchain Association and Texas Blockchain Council to protect DeFi developers and users. 

The DeFi “Broker” rule is officially nullified and voided. For more background on the rule and the implications of the repeal, read DEF’s blog here. 

DeFi Education Fund Publishes Analysis on Treasury’s Tornado Cash Sanctions Removal 

Last week, DeFi Education Fund released an in-depth analysis on the recent removal of the Tornado Cash smart contracts from the SDN list. As a reminder, OFAC recently announced it delisted Tornado Cash from its Specially Designated Nationals (SDN) and Blocked Persons List. As DEF wrote at the time, while this is a very positive development, “more hard work remains to be done.” 

DEF dives into the implications of the delisting, the most important being that the “Treasury has indicated that it does not intend to surrender so easily.” This is illustrated in Treasury’s response to the plaintiffs’ motion for final judgment, where the Treasury explicitly challenged the Fifth Circuit’s ruling regarding whether an “entity” exists as related to a DeFi protocol and asserted that “mutable” smart contracts remain susceptible to sanctions. Given its opposition to a full vacatur, there’s reason to suggest that the Treasury fears rolling back the entire District Court’s ruling and setting a precedent that would limit its perceived sanctions authority. 

The blog also takes a closer look at the continued designation of Roman Semenov, maintained after the delisting of Tornado Cash’s smart contracts. Continuing the designations on Semenov, a Tornado Cash developer, raises serious questions about the U.S. government’s evolving stance on software developers and their liability for third parties’ use of decentralized, immutable software. If the protocol itself is no longer sanctioned, what is the continuing basis for pursuing individual developers - especially when they lack control over the code’s ongoing operation?

Ultimately, while there’s reason to celebrate the delisting of Tornado Cash smart contracts, the Treasury has made its stance clear: developing a permissionless DeFi protocol may still subject you to sanctions liability for a sanctioned entity’s use of that protocol.

Read the full blog here.