The U.S. Securities and Exchange Commission (SEC) for the first time provided detailed guidance on the conditions under which crypto services that don’t manage client funds can operate without a broker license, potentially easing the development of DeFi solutions in the country.
The SEC’s Division of Trading and Markets explained when developers of user interfaces (Covered User Interfaces) for crypto-asset transactions aren’t required to register as brokers. The guidance is temporary and will remain in effect until April 2031.
The focus is on regulating software solutions that don’t custody users’ crypto-assets but instead facilitate transactions via blockchain technologies. Covered User Interfaces include websites, mobile apps, or browser extensions that connect to non-custodial wallets and translate transaction parameters into executable commands. These interfaces may also display market data such as asset prices, execution routes, and fees, including network costs.
The SEC stated that operators of such interfaces may be exempt from broker registration under the Securities Exchange Act, provided they strictly meet several conditions. Specifically, the interface must not:
- promote specific transactions;
- participate in trade execution;
- provide investment advice.
Users must independently set transaction parameters, while the system serves only a technical function in executing them.
Additional key requirements include:
- no control over user funds;
- use of transparent and verifiable algorithms;
- a fixed fee structure (e.g., a percentage of the transaction or a predetermined charge);
- full disclosure of fees, risks, and potential conflicts of interest.
Interfaces for crypto services are also prohibited from claiming that any transaction method is “the best” or “the most reliable.”
It’s further emphasized that developers must implement procedures to evaluate trading platforms and protocols integrated into the interface based on objective criteria such as liquidity, speed, security, and transparency. They’re also required to disclose cybersecurity measures and risks related to trading data, including potential manipulation associated with so-called maximal extractable value (MEV).
The SEC clarified that this document reflects staff views rather than formal regulation and doesn’t create new legal obligations. The agency continues to work on comprehensive crypto market regulation and is accepting public comments on the matter.
