a16z says compliance does not require financial institutions to avoid permissionless blockchains

News Editor

2026-09-10 12:52:39

a16z Crypto said financial institutions can use and participate in permissionless blockchain networks under existing legal frameworks, arguing that compliance obligations do not force banks, broker-dealers, or asset managers onto institution-controlled permissioned chains. The firm said some traditional finance players favor permissioned systems because they worry about anonymous participants, validators, and exposure to sanctions or illicit finance risk on public networks. In its view, U.S. Bank Secrecy Act and sanctions rules require risk-based controls rather than the elimination of all risk. That means firms can place KYC, wallet and transaction monitoring, and sanctions screening at the application layer they directly control. a16z also pointed to prior guidance from the Office of the Comptroller of the Currency, which confirmed that banks may pay network fees on blockchain networks and hold crypto assets used for those fees. It added that technologies such as zero-knowledge proofs, private transactions, and proof of provenance can help institutions meet regulatory requirements without exposing client positions, counterparties, or trading strategies. The firm said institutions should build risk-based compliance systems for permissionless networks instead of walking away from the infrastructure because of a misreading of current law.

On Sept. 10, a16z Crypto said financial institutions can use and participate in permissionless blockchain networks under existing legal frameworks, and that compliance requirements do not mean banks, broker-dealers, and asset managers must move to permissioned chains controlled by specific institutions.

According to a16z, some traditional financial institutions currently prefer permissioned chains because of concerns about anonymous participants and validators on permissionless networks, as well as potential sanctions or illicit finance risks.

Compliance controls can sit at the application layer

a16z said the U.S. Bank Secrecy Act, or BSA, and sanctions rules call for risk-based controls, not the complete elimination of all risk. Financial institutions can deploy KYC, wallet and transaction monitoring, and sanctions screening at the application layer they actually control.

The firm compared permissionless networks to open infrastructure such as the internet and said financial institutions do not need to identify or screen every participant in the network.

OCC guidance and privacy tools were part of the case

a16z also said the Office of the Comptroller of the Currency, or OCC, had previously confirmed that banks may pay network fees on blockchain networks and hold the crypto assets needed to pay those fees.

It added that as technologies such as zero-knowledge proofs, private transactions, and proof of provenance develop, financial institutions can meet regulatory requirements without disclosing client holdings, counterparties, or trading strategies. In a16z's view, compliance and privacy are not unavoidable barriers to using permissionless blockchain networks.

Traditional finance firms are already using public chains

a16z said traditional financial institutions including Franklin Templeton, BlackRock, and Apollo have already issued or offered tokenized financial products on permissionless blockchains such as Ethereum and Solana.

The firm said financial institutions should participate in permissionless networks by building risk-based compliance systems, rather than abandoning the infrastructure because of a misreading of current law.

This article was originally published by Bit.Fan. For more cryptocurrency news and market insights, visit www.bit.fan.

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