The U.S. Securities and Exchange Commission (SEC) issued new guidance on April 13, stating that software providing a trading interface for crypto assets—including websites, mobile apps, and browser extensions—does not need to register as a broker-dealer if the user executes trades through their own wallet and retains control of the assets at all times. This is a major positive development for DeFi front-end interfaces.
Definition of a “Covered User Interface”
The SEC refers to this type of software as a “Covered User Interface.” Its function is to let users choose to buy or sell crypto assets, set quantities and prices, convert this information into code that can be understood by the blockchain, and then send the transactions through the user’s own wallet. The key point is that the user retains control of the assets at all times, and the interface itself does not touch the funds.
The four conditions for exemption
To qualify for an exemption, the interface must satisfy all of the following conditions:
It does not actively solicit users (no solicitation)
It does not recommend or prioritize specific trades
It does not provide investment advice or suggest specific trades
It avoids using language that implies a temporary execution advantage (such as “best price”)
Conversely, if the interface custody users’ assets, arranges financing, guides users toward a specific execution path, or uses a non-neutral routing mechanism, it may need to register as a broker-dealer.
Significance for the DeFi industry
Although this guidance is not formally binding like a regulation, it provides important legal clarity for DeFi front-end interfaces (such as the web front ends of decentralized exchanges like Uniswap, SushiSwap, etc.). In the past, whether these interfaces needed to register as broker-dealers has remained a gray area.
This guidance echoes a recent piece of legislation related to the Clarity Act that addresses crypto market structure—both of which are trying to clarify the regulatory boundaries for crypto assets, so that compliant businesses are no longer in a situation where they “don’t know whether what they’re doing is illegal.”
This article, issued by the SEC, clarifies that crypto wallet interfaces are not the same as broker-dealers, and DeFi front ends may be exempt from registration. First appeared on Chain News ABMedia.
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