Since Donald Trump’s election as president in November, venture capital giant Andreessen Horowitz has become a force in US politics.

The latest example: A 50-page policy recommendation outlining crypto regulation goals for the Security and Exchange Commission.

The letter is in response to an invitation from SEC’s Commissioner and Crypto Task Force Chair Hester Peirce, who in February invited stakeholders for their recommendations on forming crypto policies.

A16z said its approach would provide “a way out of the quagmire created by the collision of blockchain technology and federal securities laws.”

It’s not unusual for companies to submit recommendations to regulators.

But what is notable, said Sean Tuffy, a regulation expert and former Citigroup executive: “There are basically no crypto rules now, so firms can lobby for the future they want,” he told Inside Solana.

“It’s because it’s so wide open that it seems more remarkable,” Tuffy continued. “As opposed to responding to questions about tweaking” one specific regulatory premise.

Versions of control

Miles Jennings, a16z’s general counsel and head of policy, said the letter addresses “the most significant and complex crypto issues with a simple, powerful principle that fits in a single sentence.”

That sentence establishes a regulatory line in the sand around decentralisation and whether the protocol or company in question operates autonomously:

“When control is eliminated, the application of securities laws should be limited; When control is present, traditional, but modernised, approaches should be used.”

Here, a16z is arguing that decentralized systems, like Ethereum, operate in a way that requires little regulatory oversight in part because there is no one to oversee.

Jennings went into more detail for the company’s blog, explaining: “The presence of control means Amazon can simply stop operating AWS, unilaterally changing the risk profile of the hypothetical AWS token.”

The VC firm, which oversees $74 billion in assets under management, argues that neither blockchains nor smart contract protocols are business entities.

Because of this, the so-called Howey test is a limited tool when it comes to the question of crypto and securities, a16z said.

Previous SEC enforcement, of the Howey test and more broadly, was unpredictable and “has fuelled the rise of assets without intrinsic value, like memecoins” and has prevented innovation and harmed investors, they wrote.

The letter will likely find a sympathetic ear with Commissioner Peirce, who has espoused looser regulations for crypto and doesn’t consider the majority of tokens to be securities.

Growing influence

It’s also a testament to a16z’s growing policy leadership role in the crypto community.

In November, Marc Andressen, the firm’s co-founder, reignited discussion of the alleged “debanking” of crypto firms when he appeared on Joe Rogan’s podcast.

A16z’s influence outside of crypto also seems to be growing.

Trump tapped Brian Quintenz, the head of policy at a16z’s crypto investment arm, to become the next chair of the Commodity Futures Trading Commission, which regulates the vast commodities and derivatives markets.

The letter also comes as a16z struggles to deploy the $7.6 billion it raised during the last bull market, as Inside Solana reported earlier last week.

With ample dry powder, it is under pressure from limited partners to invest in the next Solana or Ripple sooner rather than later.

The company has previously invested in around 114 crypto companies including Solana, Coinbase, Uniswap, OpenSea, Optimism, Eigenlayer and more.

Most notably, a16z’s note attempts to establish a “safe harbour” around airdropped tokens.

They suggest and define a five-part test through which airdrops would qualify for safe harbour, i.e. be protected from securities regulations.

The recommendations are, in sum, that the airdrop: be of a network token — for example, Ether or Arb, not a company-controlled token like FTX’s FTT; the network be “functional;” distribution of the airdrop is broad, available for free or otherwise for “limited consideration;” and that team members have tokens locked up for a period of time that allows for the network token to find its price equilibrium.

The note is one of 28 so far submitted to the SEC’s Crypto Task Force for consideration alongside Robinhood, Consensys, George Washington University Law School and others.

Andrew Flanagan is a markets correspondent with Inside Solana. Have a tip? Reach out to aflanagan@dlnews.com.