On July 9, the Hyperliquid Policy Center and Phantom asked the CFTC to draw a clear line for onchain markets: a protocol developer and an interface without control of customer assets should not become financial intermediaries solely because of their technical role.

The DeFi policy debate often folds four different jobs into one label: writing software, holding assets, handling and executing orders, and settling a trade. The joint filing makes that separation the regulatory question.

What happened

On June 16, the CFTC opened a request for information on rules and guidance that may impede fintech firms working with regulated financial institutions. The Hyperliquid Policy Center and Phantom responded on July 9.

Their submission makes three practical requests:

  • confirm that publishing onchain protocol software alone does not require registration as an exchange or clearing organization;
  • create a workable route for registered exchanges and intermediaries to use onchain infrastructure while keeping their existing obligations;
  • turn the CFTC’s March no-action relief for Phantom into a rule for similarly situated non-custodial interfaces.

Phantom’s case turns on the wallet’s design: it does not hold customer funds or control private keys. Obligations designed for a broker therefore need a separate basis connected to the participant’s actual market function.

How we read this

The intermediary test asks who has real control over the asset, order, or settlement, then attaches the regulatory obligation to that function.

A developer can publish a smart contract without taking customer assets, executing trades, or operating a customer account. A self-custodial wallet lets a user sign a transaction while the user keeps the key and the asset. An exchange, clearing organization, or broker performs another set of jobs: it handles orders, matches trades, manages collateral, or takes responsibility for settlement.

The Hyperliquid Policy Center and Phantom position still leaves room for strict rules where the function exists. Their second request specifically concerns registered firms that need a route to use onchain systems while retaining their supervisory duties. That makes the filing more useful than a broad claim about software freedom. It gives the regulator a way to map the market by role.

Why Eurasia should watch it

Central Asian and Caucasus regimes are still largely framed around licensing, residency, custody, exchange activity, and token issuance. Wallets, decentralized interfaces, and onchain settlement will make those categories overlap.

A licence defined only by a product label can capture an overly broad group of participants. A developer, an interface provider, and a company that controls customer money then sit in the same legal bucket. A function-based test is easier to verify: each obligation maps to a specific form of control or operation.

This matters most for teams connecting public blockchains with regulated payments or market infrastructure. They need three answers: who holds the asset, who can execute or stop a transaction, and who owes a duty to the customer. Those answers set a more durable responsibility perimeter than the word DeFi in a product description.

What this changes

For developers and wallet providers, the filing creates a practical review question: can they demonstrate that they lack control over assets and trade execution? A decentralization claim will not be enough. Architecture, key management, and operations need to support the role.

For licensed platforms, the request matters for a different reason. It asks the CFTC to recognize that execution, clearing, and settlement can use onchain infrastructure inside a regulated model. That would create a route to modernize existing markets without a separate regime for each technology.

For regional regulators, the practical lesson is to link obligations to observable functions. Custody, issuance, execution, and settlement each call for different rules, reporting, and oversight. A single duty for every participant touching code would create legal uncertainty for both market operators and supervisors.

What to watch

  • The CFTC’s response to the consultation: formal guidance would show whether it is prepared to carry the functional split into its rules.
  • The status of Phantom’s March letter: codification would create a repeatable path for non-custodial interfaces; a narrower outcome would leave it as a specific precedent.
  • Rules for registered platforms: permission to perform regulated functions through onchain systems would test whether traditional market infrastructure is ready for this technology.
  • Evidence of control in wallet architecture: the market will watch which technical facts the CFTC treats as sufficient to separate an interface from an intermediary.
  • Adoption of the functional approach in Eurasia: early local wallet and onchain-trading regimes will show whether they distinguish code, interface, and asset control.

The DeFi perimeter becomes durable when a regulator can name the action that creates an obligation and the participant that can actually perform it.

Silk DeFi is a research project on crypto, DeFi, AI, and regulation across Eurasia.

Part of its practical lens comes from RiskOS Labs’ work on risk, infrastructure, and projects at the intersection of regulation and technology.