The U.S. Securities and Exchange Commission (SEC) is exploring ways to update its rules to better accommodate blockchain-based financial systems. SEC Chairman Paul Atkins opening remarks at the “DeFi and the American Spirit” roundtable. He described a new approach that would focus on promoting innovation while protecting investors. Atkins went on to express strongly that mining, validating and staking-as-a-service are not securities transactions. This is a big, positive change from where the last couple of administrations have been at. To do so, he intends on making the U.S. the “crypto capital of the planet.” This goal is in line with the overarching aims of U.S. President Donald Trump.
Atkins, for her part, called the initiative an historic turn. In his view, the SEC’s past overreaching, enforcement-first approach made it too risky for Americans to engage with blockchain ecosystems. Under Atkins’ leadership, the SEC has doubled down on its Russophobia towards decentralized technologies. Alongside this, it emphasizes incorporation of investor protection and legal norms as top priorities. The crypto community has largely welcomed this new direction with open arms. This change has the real potential to create a constructive and transformative moment for DeFi regulation in the U.S.
SEC's New Approach to DeFi
Paul Atkins emphasized the need for the SEC to modernize its regulatory framework to accommodate the unique characteristics of blockchain-based financial systems. He described how decentralized technologies in the context of global urbanization could be used to improve economic frictions and create more room for innovation.
"Many entrepreneurs are developing software applications that are designed to function without administration by any operator… These systems have proven to be resilient and capable of reducing economic frictions." - Paul Atkins, Chairman, U.S. Securities and Exchange Commission
Atkins has directed the SEC staff to look into developing a framework for conditional exemptive relief. This framework is often called an “innovation exemption.” This framework would help increase competition and innovation by enabling both registrants and non-registrants to bring safe on-chain products and services to market more efficiently.
"I have directed the staff to consider a conditional exemptive relief framework or ‘innovation exemption’ that would expeditiously allow registrants and non-registrants to bring on-chain products and services to market." - Paul Atkins, Chairman, U.S. Securities and Exchange Commission
Community Reacts Positively to Atkins' Remarks
Atkins’ recent remarks have garnered her love from members of the crypto community. Eric Conner, an Ethereum developer, called Atkins’ speech a historic moment for crypto regulation in the U.S.
"If this becomes policy, the US becomes the crypto capital of the world. Ethereum gets regulatory clarity for staking, self-custody, and open-source infra. The tide is turning. Let’s build." - Eric Conner, Ethereum Developer
As his comments were interpreted by the crypto community, markets were bubbly on this news, with some reporting it as Ethereum’s “DeFi summer.” In fact, many observers view Atkins’ approach as a significant break from previous SEC administrations. Those prior administrations were widely panned for being too heavy handed on enforcement.
Balancing Innovation and Investor Protection
While Atkins' statements suggest that DeFi may not be subject to federal laws, he reiterated the SEC's commitment to protecting investors and upholding legal standards in its approach to DeFi. We hope that under Atkins’ more hands-off leadership, the SEC will make strides to encourage innovation. Simultaneously, it raises protecting investors to a higher standard.
Atkins’ comments indicate that the SEC is seriously considering ways to regulate the DeFi environment. It’s clear that they want to make sure that their approach encourages innovation, not discourages it. For one, the SEC should prioritize promoting a regulatory framework that encourages the development of blockchain-based financial systems. At the same time, it is rightly committed to protecting investors from fraud and other risks.
This move toward a more positive perspective on DeFi from the SEC suggests a change of tides, as regulators increasingly acknowledge the promise of decentralized technologies. The SEC is updating its regulatory framework to support innovation in the crypto space. It has not lost its commitment to the protection of investors.
