The new SEC chairman issues multiple "get out of jail free" cards, is another spring for DeFi coming?

Author: Azuma, Odaily

Last night, the U.S. Securities and Exchange Commission (SEC) held a roundtable meeting themed "DeFi and the American Spirit."

Prior to this meeting, the SEC had held four roundtable discussions on cryptocurrency, but perhaps due to the progress of new SEC Chairman Paul Atkins, not much concrete and clear policy guidance had emerged from the previous meetings.

However, last night's meeting was entirely different. Paul Atkins dropped several bombshells during his speech, almost granting DeFi a series of "get out of jail free" cards in a stacked manner.

As a result of this positive news, the DeFi sector experienced a long-awaited surge. As of today at 11:20, the performance of major DeFi tokens is as follows:

• AAVE is currently at 289.15 USDT, with a 24-hour increase of 15.54%;
• UNI is currently at 7.045 USDT, with a 24-hour increase of 12.85%;
• HYPE is currently at 39.15 USDT, with a 24-hour increase of 11.2%;
• PENDLE is currently at 4.355 USDT, with a 24-hour increase of 14.2%;
• MKR is currently at 1980 USDT, with a 24-hour increase of 13.66%;

Full Text of Paul Atkins' Speech

Thank you all, good afternoon. It is a great honor to gather with you today. First, I would like to thank Commissioner Peirce and the cryptocurrency working group for organizing this event, and I also appreciate the participation of Commissioners Crenshaw and Uyeda. Of course, I want to especially thank the roundtable guests and moderator Troy Parades for their time and wisdom contributed to this discussion.

The theme of today's roundtable is "DeFi and the American Spirit." This title is apt, because the core American values of economic freedom, private property rights, and innovation are the inherent genes of the decentralized finance (DeFi) movement.

Blockchain is undoubtedly a highly creative and potentially revolutionary innovation that prompts us to rethink the ownership and transfer proof of intellectual property and economic property rights. As a shared database, blockchain allows individuals to own digital assets known as crypto assets without relying on intermediaries. These peer-to-peer networks encourage participants to verify and maintain the database according to network rules through economic incentives. This is a true free market system—users pay network participants service fees based on demand, incorporating their transactions into the so-called "blocks" with limited storage capacity.

The previous U.S. government claimed through litigation, speeches, regulation, and regulatory threats that participants and staking service providers might be involved in securities trading, thereby hindering Americans from participating in these market-based systems. I am grateful that my colleagues in the corporate finance division clarified their position: Voluntarily participating as "miners," "validators," or "staking service providers" in proof-of-work (PoW) or proof-of-stake (PoS) networks is not subject to federal securities law jurisdiction. While I am pleased with this progress, it is still not a formally promulgated rule with legal effect, so we must continue to work hard. The SEC must formulate corresponding regulations based on the powers granted by Congress.

Another core feature of blockchain technology is that it allows individuals to self-custody crypto assets through digital wallets. The right to self-custody private property is a fundamental American value and should not disappear simply because one logs onto the internet. I support granting market participants more flexibility in self-custodying crypto assets, especially in cases where intermediaries may incur unnecessary transaction costs or restrict on-chain staking activities.

The previous government claimed through regulatory actions that developers of on-chain technologies such as self-custody digital wallets might be engaging in brokerage activities, which severely harmed relevant innovations. It is unreasonable for engineers to be bound by federal securities law simply for releasing such software code. As one court ruling stated (here quoting the original ruling): "It is absurd to hold autonomous vehicle developers liable for third parties using vehicles to violate traffic laws or rob banks. In such cases, people would not sue the car company for aiding and abetting a crime, but would sue the individuals committing the crime."

Many entrepreneurs are developing software applications that do not require operator management. This self-executing code, which is available to everyone, uncontrolled, and supports private peer-to-peer transactions, may sound like science fiction. But blockchain technology has indeed spawned a new class of software that can achieve these functions without intermediaries. We should not let a century-old regulatory framework stifle potentially disruptive—more importantly, innovative—technological advancements that improve and advance the current traditional intermediary model. We need not fear the future that will naturally emerge.

It has been proven that these on-chain self-executing software systems demonstrate strong resilience in times of crisis. While centralized platforms have shaken and collapsed under recent pressures, many on-chain systems continue to operate according to the design of open-source code.

Current securities regulations are primarily based on the regulation of issuers and intermediaries (such as broker-dealers, advisors, exchanges, and clearinghouses). The creators of these rules may not have envisioned that self-executing code would replace these entities. I have asked the commission staff to study whether further guidance or legislation is needed to allow registered entities to legally and compliantly trade with these software systems.

I am equally excited about issuers and intermediaries using on-chain software systems to eliminate economic friction, enhance capital efficiency, innovate financial products, and increase liquidity. Current securities regulations have considered the use of new technologies by issuers and intermediaries, but I still ask the staff to evaluate whether the commission's rules need to be revised to better support those operating on-chain financial systems.

While the commission and its staff develop regulatory rules suitable for on-chain financial markets, I have instructed the staff to consider establishing a conditional exemption framework or "innovation exemption" mechanism that allows both registered and non-registered entities to quickly launch on-chain products and services. By encouraging developers, entrepreneurs, and other businesses willing to comply with specific conditions to innovate on-chain technology in the U.S., this exemption mechanism helps realize President Trump's vision of making the U.S. the "global cryptocurrency capital."

Thank you all for listening, and I look forward to the upcoming discussion.

Detailed Analysis

"The core American values of economic freedom, private property rights, and innovation are the inherent genes of the decentralized finance (DeFi) movement."

This sentence is a summary that directly elevates DeFi, emphasizing that its development aligns with America's core values.

Voluntarily participating as "miners," "validators," or "staking service providers" in proof-of-work (PoW) or proof-of-stake (PoS) networks is not subject to federal securities law jurisdiction.

This can be seen as the first "get out of jail free" card, benefiting a multitude of projects in the mining and staking service industries, and indirectly helping to stabilize all PoW and PoS networks.

The previous SEC, led by Gary Gensler, had repeatedly targeted the staking sector, such as naming Lido and Rocket Pool's liquid staking derivative tokens stETH and rETH as unregistered securities, while Paul Atkins' statement clearly indicates that the SEC will no longer trouble these projects for securities violations.

I support granting market participants more flexibility in self-custodying crypto assets, especially in cases where intermediaries may incur unnecessary transaction costs or restrict on-chain staking activities… The previous government claimed through regulatory actions that developers of on-chain technologies such as self-custody digital wallets might be engaging in brokerage activities, which severely harmed relevant innovations…

This is a correction to the stifled innovation in the self-custody space under the previous SEC's excessive regulation.

Paul Atkins used the analogy that "automobile developers should not be held liable for third parties hijacking cars to commit crimes" to emphasize that the development of on-chain technologies such as self-custody digital wallets should not be conflated with financial brokerage activities, and thus developers should not be bound by federal securities law simply for releasing such software code.

It is hard not to think of the highly controversial case of the TornadoCash developers…

Current securities regulations are primarily based on the regulation of issuers and intermediaries (such as broker-dealers, advisors, exchanges, and clearinghouses). The creators of these rules may not have envisioned that self-executing code would replace these entities.

I personally find this sentence very critical, because it implies that Paul Atkins has clearly recognized the essential difference between on-chain financial products and traditional financial services—relying on code to achieve automated services, which may represent a different perspective the SEC will take in evaluating on-chain financial issues in the future.

While the commission and its staff develop regulatory rules suitable for on-chain financial markets, I have instructed the staff to consider establishing a conditional exemption framework or "innovation exemption" mechanism that allows both registered and non-registered entities to quickly launch on-chain products and services.

This is undoubtedly the most significant sentence in the entire text—this will provide clear legal guidance for the launch and operation of DeFi projects during the period when new rules are finalized, and can be seen as a regulatory easing for the entire DeFi industry.

Paul Atkins has previously emphasized the desire to shift the SEC's approach from the previous administration's "punishment after the fact" to "guidance before the fact," and this is the specific strategy he has provided.

In summary, from the perspective of the entire DeFi sector, last night's roundtable meeting can almost be regarded as a milestone, representing the SEC finally providing concrete and clear regulatory guidelines for this sub-sector. For DeFi, which has long been viewed as the most vibrant yet heavily regulated sector, this may be the beginning of another spring.