The leading venture capital fund in the cryptocurrency sector, a16z Crypto, has made a significant strategic move by sending a letter of petition to the U.S. Department of the Treasury. The content of the letter focuses on requesting clarification of the regulatory scope of the GENIUS Act, a law that has the potential to completely reshape the legal framework for stablecoins in the U.S. The core issue that a16z wants to emphasize is the necessity to exempt fully decentralized stablecoins, such as #LUSD , from the direct oversight currently being applied to centralized competitors like $USDC or USDT.
a16z's argument does not stop at protecting certain specific projects; it is a warning about the negative impact on the technology innovation process. From the fund's perspective, if regulations designed to control centralized financial intermediaries, with clear organizational structures and management, are rigidly applied to decentralized protocols that operate based on open-source code and automated mechanisms, this will significantly stifle the pace of development and creativity. Furthermore, it distorts the core nature of blockchain technology, which is built on the principles of decentralization and does not require trust in third parties.
To systematically address this issue, #a16z has proposed a clear decentralized legal framework based on the level of control and human intervention in the system. They want to use the Digital Asset Market Clarity Act 2025 as a foundation, establishing clear boundaries regarding legal liability. Specifically, this framework will exempt infrastructure and non-custodial activities from the strict regulatory scope reserved for traditional financial intermediaries. Activities such as operating nodes, validating transactions on the network, or developing non-custodial cryptocurrency wallets—where users control their private keys—are considered technical activities and should not be regarded as financial services requiring licensing. This aims to ensure that those contributing to the development of the protocol do not face excessive legal burdens.
In addition to classifying assets, a16z also does not shy away from compliance issues. The fund calls for comprehensive reform of Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. The goal is to create a level playing field where stablecoin issuers can effectively prevent money laundering while not falling behind technologically compared to other countries. a16z recognizes that traditional KYC/AML methods are not suitable for the decentralized space, where anonymity is valued.
Therefore, they have proposed a groundbreaking initiative: implementing a decentralized digital identity system. This system will leverage the power of zero-knowledge proofs and multi-party computation. Essentially, this allows parties to verify the identity and necessary legal attributes of users without disclosing any sensitive personal information. In this way, the system meets the regulatory requirement for secure verification while ensuring user privacy—a delicate balance between compliance and protecting the core values of the digital asset space. a16z Crypto's letter is a clear declaration: the future of stablecoins in the U.S. must be built on a deep understanding of the differences between operational models to promote innovation rather than hinder it. #anh_ba_cong
