# Regulatory Compliance As with most DeFi protocols, many aspects of Normal raise questions concerning regulatory risk and their implications. Below are the five most relevant regulatory frameworks (in the United States) and an explanation of how Normal operates within the limits of each ruleset. #### **Money Service Business (MSB) / Money Transmitter Licensing (MTL)** Normal does not conduct fiat-to-crypto transactions directly. Normal partners with regulated financial institutions and licensed providers (such as Coinbase, Stripe, and MoneyGram) to execute these services for its users. Normal also facilitates the exchange of one cryptocurrency for another through SoroSwap's automated market maker. The regulatory implications of non-custodial AMM interfaces are still being defined in cases like those levied against Uniswap. Similar non-custodial swap interfaces have operated for years and transacted significant volume without enforcement actions. #### **Securities Exchange Act of 1934** The most relevant question here is whether supplying USDC into Normal's savings account constitutes participation in a security. We believe it does not, based on the following Howey analysis: 1. Is the savings product a security? → **NO** 1. Investment of Money → **YES** 2. In a Common Enterprise → **NO** 3. With an Expectation of Profits → **YES** 4. To Be Derived from the Efforts of Others → **NO** The yield earned through Normal is generated by independent, permissionless DeFi protocols (DeFindex and Blend Capital). Normal does not generate, promise, or guarantee returns. Yield is a function of borrower demand on Blend's lending pools, not the managerial efforts of Normal Finance, Inc. #### **Commodity Exchange Act** Normal does not issue derivatives, synthetic assets, or any contracts whose value is derived from the price or performance of another underlying asset. USDC is a regulated, fully-reserved fiat-backed stablecoin issued by Circle. XLM is the native asset of the Stellar network. Neither asset is a derivative product issued by Normal. #### **Investment Company Act of 1940** Normal is **NOT** an investment company because it does not custody user assets, does not own more than 40% of its holdings in securities, and does not give investment advice. All assets remain in the user's own non-custodial Stellar wallet. Normal provides an interface to interact with on-chain protocols, not a managed investment vehicle. #### **Investment Advisers Act of 1940** Normal is **NOT** an investment advisor and does **NOT** need to register with the SEC as a Registered Investment Advisor (RIA) because Normal: * Does not give financial advice * Does not collect a commission on assets under management * Does not custody user assets Instead, Normal is a non-custodial interface that connects users to audited DeFi infrastructure. The protocol is permissionless: anyone can interact with DeFindex and Blend directly, with or without using Normal's interface. Normal earns revenue through transparent transaction-based fees, not through advisory commissions. #### **Geographic Restrictions** Access to Normal is restricted in jurisdictions sanctioned by the United States, the United Kingdom, or the European Union, as well as in countries where Normal's services are not currently supported. The full list of restricted territories is available in our [Terms of Service](/normal/other/legal/terms-of-service.md). KYC is not required to create an account or supply USDC. However, KYC is required to deposit or withdraw through Normal's regulated fiat partners. #### **Disclaimer** Normal Finance, Inc. and all contributors to Normal are completely open and supportive of active discussion with regulators and will make prompt adjustments as regulations are created and amended. The claims above are not from a lawyer nor have they been reviewed by a lawyer. These explanations are written by the team at Normal Finance, Inc., a Delaware corporation building software that connects users to Stellar-based DeFi infrastructure. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://normalfi.gitbook.io/normal/getting-started/protocol-and-security/regulatory-compliance.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.