This is a great article about the emerging DeFi landscape of decentralized exchanges (DEXes) and the various US regulators:
So, at least with respect to financial surveillance regulations, if software facilitating a decentralized exchange is designed—as the name implies—to never give some third party custody over the cryptocurrency, and to simply match persons who will settle trades peer-to-peer, then the developers of that software are not regulated under the BSA. Neither are the users of that software regulated under the BSA if they are simply trading on their own behalf, as FinCEN has stated in guidance as early as 2013
For more information, see the links in the article.
If a developer is creating and releasing versions of decentralized exchange software to the general public, and if that developer is not also advocating the illegal usage of that software, collecting fees from person’s use of the software, or maintaining a website through which people might access and use the software, then there is a strong case that this software publishing activity alone is constitutionally protected expression.
That doesn’t necessarily mean that the government can never regulate that activity. But it does mean that any regulation curtailing the otherwise free expression will face strict scrutiny from the courts, which means that the government will have to prove both that (a) the regulation furthers a compelling state interest, and (b) that no less-speech-restrictive means could achieve that interest. In practice this level of scrutiny forbids the state from passing laws that would ban the publication based on content or viewpoint.
Open-source decentralized exchange software is a particular type of content that advocates a strongly held political viewpoint: that we should be able to engage in payments and transactions free of middlemen and censorship. In practice, strict scrutiny forbids the state from passing laws that create a “prior restraint” on speech, that is to say a ban on speech that is in place before the speech is actually made. In other words a punishment for saying something defamatory after the fact is not a prior restraint, but a law that says “no one shall be allowed to say anything untrue about the President’s character” is a prior restraint. Any law that attempts to ban the publication of decentralized exchange software or make publication illegal without a license or some other precondition would be a prior restraint. In practice, courts always find these forms of regulation to be unconstitutional.
There was an interesting history of crypto being regulated as “munitions” and banned for export but eventually published and exported in a book, being covered by the free speech protections of the first amendment. It’s worth getting familiar with what happened back then, because it is relevant today: