Venture capital heavyweight Andreessen Horowitz (a16z) has formally warned U.S. senators that draft legislation intended to regulate digital assets contains dangerous loopholes, particularly surrounding the classification of “ancillary assets.” In a letter to the Senate Banking Committee, a16z argues that the legislation’s narrow approach could erode investor protections and contradict key principles of the Howey test.
Specifically, the firm expressed concern that redefining minor tokens as exempt from securities law may exempt them incorrectly, leaving investors at risk. a16z advocates for instead adopting a “digital commodity” framework aligned with models like the CLARITY Act, which would clearly distinguish tokens from securities based on their functions and issuance structure.
The firm also urged lawmakers to preserve the longstanding Howey test while clarifying its application to tokens asserting that rewriting the test could undermine established legal foundations. With multiple high profile crypto scandals behind us, investors now demand regulatory certainty and robust oversight, rather than ambiguous carve outs.
As Congress debates the digital asset bill, the involvement of major venture firms raises the stakes. The broader crypto community is watching whether regulators will incorporate these substantive critiques or move forward with a weakened framework that could impair protection across the emerging asset class.
