Original Author: KarenZ, Foresight News

For a long time, whether the "front-end interface" in the cryptocurrency field constitutes brokerage activities has been a contentious issue.

On April 13, 2026, the U.S. Securities and Exchange Commission's (SEC) Division of Trading and Markets released an important staff statement, outlining clear regulatory boundaries for cryptocurrency asset trading interfaces: Providers of user interfaces such as DeFi front ends, browser plugins, and self-custody wallets that meet specific conditions can operate without registering as broker-dealers.

In the SEC's view, if an interface merely acts as a "translator," converting users' trading parameters (cryptocurrency type, price, quantity) into on-chain instructions while providing market data (such as Gas fees and execution paths), it is essentially more akin to a technical service rather than matchmaking trades.

Of course, this statement is not an official rule but reflects the current viewpoints of SEC staff and is valid for five years—unless the Commission takes subsequent action, it will automatically be withdrawn on April 13, 2031.

This five-year temporary guidance represents a significant concession from the SEC regarding cryptocurrency front-end businesses and sets ironclad rules for compliance practices during the explosive period of tokenized securities—neutrality, transparency, and full user control have become the three core principles of DeFi front-end compliance.

What Kind of Interface Can Be "Exempt"?

The core of this statement is to define the scope of "Covered User Interface" and provide clear exemption conditions, ending the industry's long-standing compliance anxiety regarding whether "software tools constitute brokerage behavior."

What is meant by "Covered User Interface":

• In form: Websites, browser plugins, mobile apps, software tools embedded within self-custody wallets;
• In function: Only assists users in preparing cryptocurrency asset securities trading—converting buy/sell directions, quantities, prices, etc., into blockchain executable code for users to sign and send to the chain with their self-custody wallet.
• Additional services: May provide market data such as prices, routing, Gas fees, etc., or trading education content, but must not execute, match trades, or hold assets.

The SEC clearly states that "cryptocurrency asset securities" include tokenized versions of stocks or debt securities. The key premise is pure self-custody—the interface provider has no control over users' private keys, does not hold, manage, or store assets. The statement particularly emphasizes that this does not apply to cases providing custody wallet services, limited to scenarios where users fully control private keys.

According to Section 15(a) of the Securities Exchange Act of 1934, institutions that induce or attempt to induce the buying and selling of securities, and execute transactions for another's account, must register as broker-dealers. However, SEC staff explicitly stated in the statement: interfaces that merely provide trading preparation tools, do not participate in execution, and do not control assets do not meet the definition of "brokers"—essentially being "software assistants for user-initiated trading," rather than financial intermediaries.

Twelve Compliance Red Lines: Neutrality is Key

SEC staff clearly pointed out that if interface providers wish to be exempt from broker registration, they must strictly adhere to 12 conditions. Summarizing their core logic, it mainly focuses on the following three dimensions:

1. Extreme neutrality and non-inducement

Interface providers are strictly prohibited from "promoting" specific securities to users. The interface must allow users to customize trading parameters (such as slippage, priority fees) and can only provide educational materials rather than investment advice. A critical point is that the system must not subjectively evaluate execution paths—cannot tell users which path is the "best price" or "most reliable."

Specifically, if the interface shows only one potential execution path, it must provide a way for users to view other paths; if multiple paths are shown, it must offer filtering or sorting tools based on objective factors (such as alphabetical order, lowest/highest price, speed, etc.). Additionally, when preparing user trade instructions and displaying market data, the interface can only use software based on pre-disclosed objective parameters, which must be independently verifiable.

Furthermore, if the trading venues the interface connects to or interacts with are created, provided, or operated by the provider or its affiliates, the user must be clearly informed of this relationship, and connections or interactions must be made under the same terms and conditions as with non-affiliated interfaces.

2. Separation of interest ties and payment for order flow

Charging models are strictly limited. Providers may only charge users a fixed fee (either a fixed amount or a fixed percentage of the transaction), and must maintain product neutrality, routing neutrality, and counterparty neutrality.

The SEC explicitly points out in a footnote that this means providers cannot receive compensation from anyone else based on transaction size, value, or occurrence—directly excluding "payments for order flow."

In other words, interface providers cannot "sell" user orders to a DEX, market maker, or liquidity pool and then receive a rebate from the other side.

In simple terms: if you operate an interface, you can only charge users a fixed fee—you may charge a fixed fee per transaction, but this fee must be objective, consistent, and treat all assets, all execution paths, and all counterparties equally. You cannot earn more just by routing an order to a specific protocol, nor can you take bonuses from back-end backers due to high transaction volumes. This "de-linking of interests" charging logic is a key firewall against conflicts of interest.

3. Strengthen information disclosure and audit responsibility

You must loudly inform users: "I am not registered with the SEC, I am not regulated," and disclose all conflicts of interest and audit processes in detail. Compliance is no longer "once and for all." Providers will elevate their disclosure obligations to unprecedented heights: from software parameter logic, risks of default settings, to cybersecurity policies, MEV (Maximum Extractable Value) prevention mechanisms, and even interaction terms with affiliated liquidity pools, all must be prominently disclosed.

In short, the interface can only act as an "information transporter" and "instruction translator," and must not overstep to become an invisible market maker, order router, or investment advisor.

The statement also explicitly delineates forbidden zones: interface providers are prohibited from negotiating transaction terms, recommending specific cryptocurrency asset securities transactions, providing investment advice, arranging financing, handling transaction documents, conducting independent asset valuations, holding or accessing user funds, securities, or stablecoins, executing or settling trades, or taking or routing orders. Any breach of these rules results in the immediate loss of exemption eligibility.

The Real Impact on DeFi Front Ends

This statement is both a straitjacket and a protective charm for front-end operators.

In recent years, the cryptocurrency market has been experiencing a transformation from "wild growth" to "institutional construction." With the expansion of tokenized securities, a large volume of traditional debt and equity has been brought on-chain, and front-end interfaces have effectively become gateways to capital markets. The SEC's move essentially acknowledges the separation of "technical front ends" and "trading back ends": technology can remain neutral but must operate without encroaching on the core functions of financial intermediation.

Following the implementation of this statement, the industry must reassess existing monetization models:

• Allowed: Fixed Gas fees directly paid by users, objective percentage fees (as long as they treat all transactions equally).
• Prohibited: Any third-party rebates, revenue-sharing agreements, or cooperative fees settled based on TVL or trading volume.

It is worth noting that SEC staff consider MEV to be an inherent structural risk in the on-chain trading architecture. The focus of regulation is on "transparency" and "user rights to information": front-end interfaces must truthfully inform users of the execution deviations and information leakage risks that MEV may bring, and implement objectively verifiable internal control mechanisms to reduce asymmetrical exploitation.

For cryptocurrency developers, the current task is very clear: check code logic, eliminate any algorithms with subjective preferences, fulfill the twelve compliance disclosures, and establish comprehensive audit processes. The SEC also suggests that providers establish, maintain, and enforce policies and procedures related to the operation of the interface, as well as keep books and records (such as utilizing publicly available distributed ledger technology trading records in conjunction with internal non-public ledger recordings). Compliance is no longer optional, but a prerequisite for large-scale applications.

Of course, the SEC has clearly stated in the announcement that this is the "staff's view," and not the Commission's formal rule; the five-year validity period also reflects the regulators' cautious attitude towards rapidly evolving technology. They have given the industry five years to prove whether technological neutrality can truly protect investors in the absence of intermediaries. The outcome of this experiment will determine the direction of crypto finance for the next five years.

The regulatory fog is beginning to clear, and the time left for "gray areas" is running out.

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