We Need Regulatory Clarity to Keep Crypto Exchanges Onshore and DeFi Permissionless

Therefore, our framework calls for strictly voluntary, not mandatory, DEX registration to embrace the competitive benefits of rapid DEX development without prior restraint. DEXs that want to signal their compliance with the same standards as CEXs – for example, through automated controls – can do so with voluntary registration. But making registration optional allows for greater experimentation in consumer protections, as DEXs need not seek pre-approval from inherently risk-averse regulators before launching novel technical safeguards. In addition, voluntary registration avoids creating adverse selection, where low natural barriers to entry in an open-source software ecosystem could allow rogue DEXs to gain first mover advantages while compliance-oriented projects are stalled by a regulatory approval process.