The U.S. Securities and Exchange Commission (SEC), under the direction of Chairman Paul Atkins, is exploring potential changes to agency rules to accommodate decentralized finance (DeFi) platforms. Atkins has ordered SEC staff to initiate a nationwide investigation. First, he’d like to study the establishment of what he’s calling an “innovation exemption” to allow those under SEC jurisdiction to rapidly release on-chain products and services.
Atkins, a Republican member of the SEC commission, would like to see regulatory barriers cut for DeFi platforms. He and other SEC Republicans believe that software developers who build DeFi tools should not be held responsible for how others ultimately use them.
Atkins recently hosted a roundtable with DeFi experts. The focus of the discussion was on how the SEC could grant exemptive relief to DeFi platforms.
"We should not automatically fear the future." - Chairman Paul Atkins
This demand for regulatory clarity comes as DeFi is undergoing rapid changes. The SEC’s current framework is ill-suited to address the novel and unique characteristics inherent in decentralized finance. Atkins’ initiative offers a positive signal of openness to change and an encouragement to innovate, which the digital asset ecosystem desperately needs.
Atkins' focus on DeFi is not new. He was a member of SEC leadership under President Donald Trump.
The potential new “innovation exemption” is an indication that the Biden Administration may be moving toward a more flexible regulatory approach. This change could provide regulatory certainty for DeFi platforms to innovate and flourish without compromising investor protection.
As far back as last year, Commissioner Hester Peirce expressed similar concerns about regulatory overreach in the DeFi space.
"The SEC must not infringe on First Amendment rights by regulating someone who merely published code on the basis that others use that code to carry out activity that the SEC has traditionally regulated." - Commissioner Hester Peirce
Reactions from industry participants to the SEC’s shift in tone have been uplifting. Not surprisingly, Erik Voorhees, CEO of crypto exchange ShapeShift, one of the plaintiffs in the SEC lawsuit, was pleased to see the SEC reverse its position.
"I appreciate the change of tone and the change of stance for the commission." - Erik Voorhees
Additionally, the SEC is reportedly working to develop an “innovation exemption” for DeFi platforms. This decision constitutes a seismic change in the regulatory environment for digital assets. As the SEC continues its work, the industry will be watching closely to see how these changes will shape the future of DeFi in the United States.
"Many entrepreneurs are developing software applications that are designed to function without administration by any operator." - Chairman Paul Atkins
