Andreessen Horowitz’s latest crypto regulation proposal offers a vision for decentralization and autonomy in blockchain—but experts warn it may be more illusion than solution. As the SEC calls for public input, debates emerge over whether this framework is a pathway to progress or a roadmap to regulatory evasion.

The Context: SEC’s Open Call and A16z’s Response

A rare regulatory invitation sparks a bold proposal from a crypto heavyweight.

In February 2025, SEC Commissioner Hester Peirce issued a statement titled “There Must Be Some Way Out of Here,” signaling a turning point in the crypto regulation debate. The SEC’s Request for Information aimed to solicit public feedback on whether and how crypto assets should be classified as securities. Just weeks later, A16z responded with a comprehensive proposal centered around “control-based decentralization.”

The premise is simple: if a blockchain is truly autonomous and no longer controlled by a central group, then its tokens shouldn’t be considered securities. But simplicity doesn’t mean consensus. The crypto community remains divided on whether this model genuinely advances clarity—or cleverly sidesteps oversight.

Technology-Neutral Regulation: A Double-Edged Sword

A16z promotes fairness, but experts say crypto is too unique for equal treatment.

A16z’s proposal champions technology-neutral regulation—arguing that if a crypto asset acts like a traditional financial product, it should be regulated like one. Yet critics, including Alice Frei of Outset PR, caution that crypto’s distinct structure defies traditional comparisons. Blockchain introduces new economic behaviors, from decentralized governance to tokenized ownership models, that have no historical parallel.

Frei contends that regulating crypto like existing assets overlooks fundamental innovations. Bitcoin’s digital scarcity, Ethereum’s smart contracts, and DeFi’s permissionless design all challenge the very categories that current regulations are built upon.

Code vs Market Forces: The Illusion of Predictability

Automation doesn't insulate crypto from volatility or speculation.

Another A16z claim is that if economic logic is embedded in code, the asset should be considered independent of human-driven effort—potentially exempting it from the Howey test. Frei disagrees. She argues that code may define mechanics, but market behavior is driven by sentiment, speculation, and macroeconomic variables.

Examples like Bitcoin and Terra highlight this gap. Both relied on algorithmic designs, yet their prices fluctuated wildly due to external events. Terra’s algorithmic stablecoin model failed catastrophically when market confidence collapsed—proving that even the most automated systems are still vulnerable to human emotion.

The Decentralization Dilemma

Measuring decentralization may be more performative than practical.

A16z’s framework leans heavily on the idea of “control-based decentralization”—using operational metrics to determine whether a network qualifies as autonomous. But Frei cautions that real decentralization is not binary. Governance token distribution, protocol upgrades, and backend infrastructure often remain concentrated, even when surface-level indicators suggest openness.

This raises a critical concern: the potential for projects to appear decentralized while retaining significant centralized control. Frei fears that without clear enforcement standards, the framework could be exploited by bad actors masking manipulation as autonomy.

Transparency vs Regulatory Arbitrage

The risk: turning a regulatory proposal into a loophole guide.

The most serious critique of A16z’s approach is its potential to enable regulatory arbitrage. Projects could temporarily decentralize—or simulate decentralization—just enough to pass a legal test, then reconsolidate power post-approval. Frei warns this could erode trust and hurt retail investors who assume protections are in place.

While Frei acknowledges the value in seeking clarity, she believes any regulation must also account for crypto’s emotional and economic dynamics—not just its technical design.