SEC New Chair's Roundtable Remarks: DeFi and the American Spirit
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SEC New Chair's Roundtable Remarks: DeFi and the American Spirit
Innovation exemptions can help realize President Trump's vision of making America the "global crypto capital."
Navigating Web3 tides with focused insightsAuthor: Paul S. Atkins, Chairman
Translation: TechFlow
Thank you, good afternoon. I'm very pleased to be here with all of you today. First, I’d like to thank Commissioner Pierce and the Cryptocurrency Working Group for organizing this event, as well as Commissioners Graves and Uyeda for their participation. Of course, I also want to especially thank our roundtable panelists and moderator Troy Paredes, who have generously volunteered their time and expertise in support of our mission.
Today’s roundtable is titled “Decentralized Finance and the American Spirit.” This theme is particularly fitting because core American values—economic freedom, private property rights, and innovation—are deeply embedded in the DNA of decentralized finance (DeFi).
Blockchain is undoubtedly a highly creative and potentially revolutionary innovation that challenges how we think about ownership and transfer of intellectual and economic property. Blockchain is a shared database that enables ownership of a form of digital property known as crypto assets without reliance on intermediaries or centralized institutions. These peer-to-peer networks use economic incentives to encourage participants to validate and maintain the database in accordance with network rules. These are free-market systems where users pay demand-based fees to network participants to have their transactions included in so-called “blocks” of limited storage capacity.
Prior administrations have used lawsuits, speeches, regulation, and threats of regulatory action to deter Americans from participating in these market-based systems, asserting that participants—and providers of “staking-as-a-service”—might be engaging in securities transactions. I am grateful that staff in the Division of Corporation Finance have made clear that voluntary participation in proof-of-work or proof-of-stake networks as a “miner,” “validator,” or “staking-as-a-service” provider falls outside the scope of federal securities laws. While I welcome this progress, it is not a legally binding formal rule, so we cannot stop here. The Securities and Exchange Commission must adopt regulations grounded in the authority Congress has given us.
Another fundamental feature of blockchain technology is the ability for individuals to self-custody crypto assets through personal digital wallets. The right to manage one’s private property independently is a foundational American value—one that should not vanish the moment people go online. I support greater flexibility for market participants to self-custody crypto assets, especially when intermediaries impose unnecessary transaction costs or restrict access to staking and other on-chain activities.
The previous administration undermined innovation in self-custody wallets and other on-chain technologies through regulatory actions, claiming developers of such software might be acting as brokers. Yet engineers should not be subject to federal securities laws merely for publishing software code. As one court noted, it would be irrational to hold the developer of a self-driving car liable when a third party uses the car to violate traffic laws or rob a bank—in such cases, courts do not sue the car company for aiding wrongdoing; they sue the individual who committed the unlawful act.
Many entrepreneurs are now building software applications that operate without an operator. Self-executing software code that is available to all but controlled by no one, enabling private peer-to-peer transactions, may sound like science fiction—but blockchain makes it possible. This new class of software can deliver these functions without intermediaries. I believe we should not allow century-old regulatory frameworks to stifle innovations that have the potential to disrupt—and, more importantly, improve and advance—the current model of traditional intermediation. We should not automatically fear the future.
These on-chain, self-executing software systems have demonstrated resilience in times of crisis. While centralized platforms have faltered or collapsed under recent stress, many on-chain systems have continued to function as designed under their open-source code.
Most existing securities rules and regulations are built around oversight of issuers and intermediaries—such as broker-dealers, advisors, exchanges, and clearing agencies. Their drafters likely did not anticipate that self-executing software code could replace these actors. I have asked Commission staff to explore whether further guidance or rulemaking is needed to help registrants transact with these software systems while complying with applicable laws.
I am also excited about the potential for issuers and intermediaries to use on-chain software systems to reduce economic friction, increase capital efficiency, support novel financial products, and enhance liquidity. While current securities regulations already contemplate the use of new technologies by issuers and intermediaries, I have asked staff to consider whether our rules and regulations should be updated to better support those issuers and intermediaries seeking to operate on-chain financial systems.
As the Commission and its staff work toward developing tailored rules for on-chain financial markets, I have directed staff to consider a conditional exemption framework—or an “Innovation Exemption”—to rapidly allow both registrants and non-registrants to bring on-chain products and services to market. An Innovation Exemption could help fulfill President Trump’s vision of making America the “global center for crypto capital,” by encouraging developers, entrepreneurs, and companies willing to meet specific conditions to innovate in on-chain technologies within the United States.
Thank you for your attention. I look forward to our discussion.
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