US DeFi organizations urge UK FCA not to treat non-custodial protocol developers as intermediaries

According to Odaily, the US DeFi organization DeFi Education Fund (DEF) has advised the FCA to adopt a functional definition of "control" when formulating new regulations for crypto assets. DEF suggests that regulatory responsibilities should be limited to entities with unilateral control over user funds or transactions, rather than those merely involved in developing or contributing to decentralized protocols. DEF emphasized that regulation should focus on specific operational capabilities, such as initiating or blocking transactions, modifying protocol parameters, or excluding users. Otherwise, software developers might be mistakenly subjected to intermediary obligations. DEF also pointed out that it is inappropriate to apply prudential, reporting, and access requirements designed for centralized trading platforms to non-custodial automated protocols, and stated that decentralized protocols have advantages in transparency and combating illicit financial activities. This recommendation was made in response to the UK Financial Conduct Authority (FCA)'s consultation on how DeFi should be incorporated into its digital asset framework. DEF supports a control-based principle but stresses that it must be linked to actual operational authority.