The SEC has clarified that crypto wallet front-end interfaces are exempt from brokerage registration, as long as DeFi avoids these red lines.

The U.S. Securities and Exchange Commission (SEC) issued a new cryptocurrency policy announcement on Monday, clarifying that software interfaces or websites that provide users with self-custodied wallets for trading crypto securities do not constitute "broker-dealers," and developers are not required to register for regulatory purposes.

This is one of a series of recent announcements from the SEC regarding its crypto policy stance, aimed at providing the industry with clear guidance for the transition period before formal rules are in place.

What constitutes "safety"? The SEC provides a list of exemptions.

The SEC employee statement outlines compliance requirements for front-end interface developers. Meeting these requirements will prevent them from falling under brokerage regulation. Two core requirements are:

1. The interface states that it "does not actively recommend any specific cryptocurrency securities trading to investors";

2. "No comments or explanations will be provided on potential execution paths displayed to users."

This means that as long as the DeFi front-end interface provides neutral tools—purely displaying options, making no recommendations, and adding no comments—it can remain outside the regulatory line.

If you violate these rules, your exemption will immediately become invalid.

However, the SEC also drew a red line. If a front-end interface does any of the following, it will fall back under regulatory scrutiny:

Provide financing services, offer investment advice, safeguard or manage user assets, accept orders on behalf of users, or directly execute transactions on their behalf.

Once the interface transforms from a "tool" into a "service provider," the gears of regulation will engage.

Background to Trump's policies: A major shift in law enforcement stance

This announcement is a microcosm of the Trump administration's strong push for a "crypto-friendly regulatory" policy. Since Trump demanded that the administration remove barriers to the crypto industry, the SEC has issued several position statements covering issues such as which assets are not considered securities and which activities do not trigger regulations.

This direction has become even clearer since Paul Atkins took office as the current SEC chairman. He stated that the SEC is actively pushing forward with comprehensive rule development, and the relevant draft is nearing the proposal stage.

Meanwhile, the Senate is still considering the Clarity Act, which aims to formalize a regulatory framework for cryptocurrencies into law. Until the legislation is finalized, the SEC will continue to issue transitional announcements in an attempt to provide operational certainty to the market.

However, it is worth noting that such employee declarations do not have the legal force and permanence of formal rules, and the industry still needs to wait for the final rules to be implemented.