SEC's new chair eases restrictions for DeFi developers—how to seize the biggest regulatory windfall in Web3 history?
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SEC's new chair eases restrictions for DeFi developers—how to seize the biggest regulatory windfall in Web3 history?
Chairman Atkins' speech marks a historic turning point for the Web3 industry's shift from "unregulated growth" to "compliant development."
Navigating Web3 tides with focused insightsBy Magic Tony
On June 9, 2025, Washington witnessed not just an ordinary roundtable, but potentially a "paradigm shift" in U.S. financial regulatory history. The remarks by newly appointed SEC Chair Paul Atkins rang like a crack through thick ice, signaling a transformation in America’s regulatory philosophy toward decentralized finance (DeFi)—shifting from “containment” to “channeling.” This is not only major positive news for the Web3 industry, but could also trigger a global regulatory race around financial innovation. This article offers an in-depth analysis of the speech’s core implications, combining Chinese context with a global perspective to provide strategic foresight for industry practitioners.
1. The Three Pillars of Atkins’ New Policy: Removing Key Barriers to DeFi Development
Chairman Atkins’ speech effectively dismantled three “swords of Damocles” hanging over DeFi, forming the three pillars of his new regulatory framework.
Pillar One: Legitimizing Infrastructure Participants—“Staking Is Not a Security”
Quote: “I am grateful to the Division of Corporation Finance staff for clarifying its view that voluntary participation in a proof-of-work or proof-of-stake network as a ‘miner,’ ‘validator,’ or ‘staking-as-a-service’ provider is not within the scope of the federal securities laws.”
Interpretation: “I thank the Division of Corporation Finance staff for clarifying their position that voluntarily participating in a proof-of-work or proof-of-stake network as a ‘miner,’ ‘validator,’ or ‘staking-as-a-service’ provider falls outside the scope of federal securities laws.”
This statement carries profound legal significance. It clearly distinguishes between the “technical service” of maintaining blockchain security and consensus, and the financial act of issuing an “investment contract.” Previously, the SEC fined platforms like Kraken for offering staking services, arguing that staking creates an expectation of return—meeting the “expectation of profits from the efforts of others” prong of the Howey Test—and thus constitutes a security. Atkins’ clarification effectively grants a regulatory “safe harbor” to those maintaining blockchain infrastructure.
We believe this will directly benefit all major PoS (Proof-of-Stake) public chain ecosystems. Ethereum: As the largest PoS network, its ecosystem—including liquid staking protocols such as Lido and Rocket Pool, and centralized exchange staking services—will see significantly reduced compliance uncertainty in the U.S. Solana, Cardano, Polygon, and others: These chains, which rely on staking for network security, will now attract more confident participation from U.S.-based validators, delegators, capital, and developers.
Pillar Two: Upholding Technological Neutrality—“Code Is Not a Crime”
Quote: “Engineers should not be subject to the federal securities laws solely for publishing this type of software code… it would be irrational to hold the developer of a self-driving car liable… for a third-party’s use of the car to commit a traffic violation or to rob a bank.”
Interpretation: “Engineers should not face liability under federal securities laws merely for publishing this kind of software code… Holding a self-driving car developer responsible when a third party uses the vehicle to break traffic laws or rob a bank would be unreasonable.”
Deep Analysis: This is a powerful reaffirmation of the principle of “technological neutrality” in the digital age. The arrest of Tornado Cash developers sent shockwaves through the open-source community. By using the analogy of a self-driving car, Atkins makes his stance clear: the law should punish actions, not tools. Developing a decentralized exchange (DEX) or a coin mixer should not in itself constitute operating a securities business or money laundering, unless the developer actively participates in illegal activities.
Pillar Three: Opening the Door to Compliant Innovation—The “Innovation Exemption”
Quote: “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.”
Interpretation: “I have instructed the staff to explore a conditional exemptive relief framework, or ‘innovation exemption,’ which would swiftly enable both registered and unregistered entities to launch on-chain products and services.”
This is the most forward-looking and disruptive element of the entire speech. Establishing an “innovation exemption”—essentially a regulatory sandbox—marks a fundamental shift in the SEC’s role: from a “post-hoc enforcer” to a “pre-market facilitator.”
This move places immense competitive pressure on other financial centers. Jurisdictions like the UK, Singapore, the UAE, and the EU, which have already established or are developing similar frameworks, may now accelerate and refine their policies to compete for global Web3 capital, projects, and talent. A global race on “how best to regulate innovation” has officially begun.
China’s financial regulatory system operates under the paramount principle of “stability above all,” making direct adoption of the U.S.-style “innovation exemption” unlikely in the short term. However, this development will strongly incentivize and advance Hong Kong’s Web3 policies. As China’s “special innovation zone,” Hong Kong’s openness and flexibility in virtual asset regulation will become critical in competing with the U.S. Meanwhile, mainland China can maintain strict financial risk controls while indirectly engaging with the global Web3 innovation wave through Hong Kong as an open window.
2. Special Focus: How Would the Tornado Cash Case Be Viewed Under Chinese Law?
While Atkins defended developers, the shadow of Tornado Cash remains. What would happen to such developers if the case occurred in China?
Under China’s Criminal Law, developing and operating a tool like Tornado Cash would most likely fall under Article 287-2: the crime of “aiding information network criminal activities” (“Helping-in-Crime” or “Bangxin罪”).
The key element of this offense is “knowingly providing technical support—such as internet access, server hosting, cloud storage, or communications transmission—or other assistance (e.g., advertising, payment settlement) for others’ cybercrimes.”
The crux of legal analysis lies in proving “knowledge”:
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Pure Technologists: If a developer merely writes and open-sources a mixing protocol without involvement in operations or revenue tied to illicit fund volumes, proving “knowledge” of specific users employing the code for money laundering would be legally challenging. They could argue they simply created a privacy-enhancing “technical tool.”
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Operators/Profit-Takers: However, if the developer earns transaction fees or issues governance tokens with profit-sharing mechanisms, and there is evidence they were indifferent to widespread money laundering on the platform—or even promoted it to attract illicit funds—the risk of being deemed “knowing” increases dramatically.
In China’s stringent judicial practice, even pure developers face far greater legal risks than in the U.S. once their tools are widely used in criminal activities. Chinese law emphasizes outcomes and social order preservation, leaving little room for the doctrine of “technological neutrality.”
3. Inside the Roundtable: Washington’s Web3 Elite and Their “Gossip”
The guest list itself was a star-studded lineup—each participant a heavyweight in the industry.
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Erik Voorhees (Venice AI): A legendary figure in Web3 and staunch libertarian. His early venture, ShapeShift, famously resisted KYC requirements and clashed with regulators for years. His presence signals the SEC’s willingness to engage even the most radical voices.
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Peter Van Valkenburgh (Coin Center): Washington’s calm, articulate “crypto evangelist.” Known for his professorial demeanor, he has patiently educated U.S. lawmakers on Bitcoin and crypto fundamentals during congressional hearings. He serves as one of the most rational bridges between industry and regulators.
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Michael Mosier (Arktouros): A true “cross-domain master,” formerly Acting Director at FinCEN (U.S. Treasury’s Financial Crimes Enforcement Network), later serving in legal roles at Chainalysis and Espresso Systems. He speaks both regulatory enforcement and industry innovation fluently—making him ideal for mediating between the two worlds.
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Rebecca Rettig (Jito Labs): A leading legal mind in DeFi, former Chief Legal Officer at top projects including Aave and Polygon. She brings deep practical experience in designing compliant legal architectures for decentralized protocols.
This lineup demonstrates that the SEC came prepared, inviting the sharpest minds across technology, law, finance, and regulation to collaboratively seek solutions.
4. Divergent Paths: Strategic Contrasts in U.S. and Chinese DeFi Regulation
A comparison of U.S. and Chinese approaches reveals two fundamentally different strategic trajectories.
The U.S. aims to seize the future high ground of finance. It views DeFi as an innovation wave comparable to the early internet. Its regulatory strategy centers on maximizing domestic innovation under managed risk, ensuring American leadership in the next-generation global financial system. This is an offensive strategy of “embracing risk to lead innovation.”
China, by contrast, prioritizes financial sovereignty and stability. With a banking-dominated financial system, stability is non-negotiable. DeFi’s borderless nature, high volatility, and potential for financial disintermediation fundamentally conflict with China’s national strategy of “preventing and defusing major financial risks.” Thus, China adopts a “technology permitted, finance restricted” approach—strictly preventing DeFi from disrupting the existing system and firmly upholding capital control boundaries. This is a defensive strategy of “fortifying stability while advancing cautiously.”
5. Conclusion: Seizing the Moment, Advancing with Professionalism
Chairman Atkins’ speech marks a historic turning point—from “wild growth” to “compliant development” in the Web3 era. For all industry participants, this presents unprecedented opportunity, but also demands higher strategic wisdom and compliance capability.
For founders and developers: You must build not only disruptive technology, but also robust, globally defensible legal architectures. True decentralization will serve as your strongest legal moat.
For investors and funds: Reduced policy risk unlocks massive market potential. Yet intrinsic project risks—technology, team, and economic design—remain central to investment decisions. Seeing beyond the “decentralization” narrative to identify genuinely valuable projects will be key to navigating market cycles.
This regulatory paradigm shift will profoundly impact every ecosystem participant. We encourage you to share this in-depth analysis with your partners, team members, and investors—to collectively explore and seize this historic opportunity, gaining first-mover advantage in a transforming landscape.
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