The new SEC chairman has won many "gold medals for avoiding death" in a row. Is another spring coming for DeFi?

Author: Azuma, Odaily

Last night, the Securities and Exchange Commission (SEC) held a roundtable with the theme of "DeFi and the American Spirit".

Prior to this meeting, the SEC had held four roundtables on cryptocurrency themes, but it may be limited by the performance of the new SEC chairman Paul Atkins, and there was no trace of much concrete and clear policy-oriented content in previous meetings.

But the meeting last night was completely different. Paul Atkins threw out multiple bombshells in his speech, almost giving DeFi one after another a "death-free gold medal" in the form of a stack of BUFF.

Affected by this positive news, the DeFi sector has also ushered in a long-lost violent rise. As of 11:20 today, the mainstream DeFi tokens are as follows:

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

Paul Atkins' speech full text

Thank you everyone, good afternoon. Today I am very honored to meet you. First of all, I would like to thank Member Peirce and the Cryptocurrency Working Group for organizing this event, and also for the participation of Member Crenshaw and Member Uyeda. Of course, I would like to express my special thanks to the roundtable guest and host Troy Parades for his time and wisdom to contribute free of charge to this discussion.

Today’s roundtable theme is “DeFi and the American Spirit.” This title is appropriate because the core American values ​​of economic freedom, private property rights and innovation are the innate 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 rights and economic property rights. As a shared database, blockchain allows people to own digital assets called crypto assets without relying on intermediaries. These peer-to-peer networks encourage participants to verify and maintain databases in accordance with network rules through economic incentive mechanisms. This is a true free market system—users pay demand-based service fees to network participants and incorporate their transactions into so-called "blocks" with limited storage capacity.

The last U.S. government claimed that participants and pledge service providers may be involved in securities transactions through litigation, speeches, regulatory and regulatory threats, thus hindering Americans from participating in these market-oriented systems. I am grateful to colleagues in the corporate finance department for clarifying their position: voluntarily participating in Proof of Work (PoW) or Proof of Stake (PoS) as a “miner,” “verifier” or “staking service provider” is not subject to the jurisdiction of the Federal Securities Law. Although I am pleased with this progress, this is not a formal enactment rule with legal effect, so we still need to work hard. The Securities and Exchange Commission must limit the regulations based on the powers granted by Congress.

Another core feature of blockchain technology is that it allows individuals to self-host crypto assets through digital wallets. The independent custody of private property is a basic American value and should not disappear due to logging into the Internet. I support giving market participants more flexibility to self-custodial crypto assets, especially where intermediaries can bring activities such as unnecessary transaction costs or restricted on-chain staking.

The last government claimed through regulatory actions that developers of on-chain technologies such as self-hosted digital wallets may be engaged in brokerage business, which seriously hurts related innovations. It is unreasonable for an engineer to be bound by federal securities laws simply because of publishing such software code. As a court verdict says (citing the original text of the verdict here): "It is ridiculous to have self-driving car developers take responsibility for third parties' use of vehicles that violate traffic regulations or rob banks. In this case, people will not prosecute the auto company to assist in the crime, but will prosecute the individual who committed the crime."

Many entrepreneurs are developing software applications that do not require operator management. This kind of self-executed code that is available to everyone, uncontrolled, and supports private point-to-point transactions may sound like a science fiction novel. But blockchain technology has indeed given birth to a new class of software that can implement these functions without intermediaries. We should not let the century-old regulatory framework stifle possible subversion - more importantly improve and advance -technological innovations in the current traditional intermediary model. We don't have to be automatically afraid of the future.

These on-chain self-executing software systems have proven to show strong resilience in a crisis. When centralized platforms are shaken and collapsed under recent pressure, many on-chain systems are still running continuously as the design of open source code.

Current securities regulations are mainly based on the supervision of issuers and intermediaries (such as brokerage dealers, consultants, exchanges and clearing agencies). The makers of these rules may not have imagined that self-executing code would replace these bodies. I have asked the committee staff to study whether further guidance or legislation is needed to enable the registered entity to conduct transactions with these software systems legally and in compliance with the law.

I am also full of expectations for issuers and intermediaries to use on-chain software systems to eliminate economic friction, improve capital efficiency, innovate financial products and enhance liquidity. Current securities regulations have taken into account the use of new technologies by issuers and intermediaries, but I still require staff to assess whether the Commission regulations need to be revised in order to better support those entities operating on-chain financial systems.

During the period when the Commission and its staff formulate regulatory rules suitable for on-chain financial markets, I have instructed staff to consider establishing a conditional exemption framework or “innovation exemption” mechanism that enables registered and non-registered entities to quickly launch on-chain products and services. By encouraging developers, entrepreneurs and other businesses willing to abide by specific conditions to carry out on-chain technological innovation in the United States, this exemption mechanism will help achieve President Trump’s vision of building the United States into the “ global cryptocurrency capital .”

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

Detail analysis

“The core American values ​​of economic freedom, private property rights and innovation are the innate genes of the Decentralized Finance (DeFi) movement.”

This sentence is a summary, directly giving DeFi a high level, emphasizing that the development of DeFi is in line with the core values ​​of the United States.

Voluntarily participating in Proof of Work (PoW) or Proof of Stake (PoS) as a "miner", "verifier" or "staking service provider" does not fall within the jurisdiction of the Federal Securities Law.

This can be said to be the first "gold medal for avoiding death", which is beneficial to a number of projects upstream and downstream of mining and pledge services, and indirectly helps to consolidate all PoW and PoS networks.

The last SEC, led by Gary Gensler, has made many moves in the pledge track. For example, the liquid staking derivative tokens stETH and rETH that once named Lido and Rocket Pool, belonged to unregistered securities, and Paul Atkins's words clearly stated that the SEC will no longer continue to cause trouble for these projects with securities violations.

I support giving market participants more flexibility to self-custodial crypto assets, especially when intermediaries bring unnecessary transaction costs or restrict activities such as on-chain pledges… The last government claims through regulatory actions that developers of on-chain technologies such as self-custodial digital wallets may engage in brokerage business, which seriously hurts the relevant innovations…

This is another retaliation of the hindered innovation in the self-custody field under the over-regulation of the previous SEC.

Paul Atkins uses the metaphor that “auto developers should not be held responsible for third parties’ hijacking cars” and emphasizes that the development of on-chain technologies such as self-custodial digital wallets should not be confused with financial brokers, so developers should not be bound by federal securities laws just because of publishing such software code.

It is hard not to remind people of the controversial TornadoCash developer case that year...

Current securities regulations are mainly based on the supervision of issuers and intermediaries (such as brokerage dealers, consultants, exchanges and clearing agencies). The makers of these rules may not have imagined that self-executing code would replace these bodies.

I personally think this sentence is very critical, because it means that Paul Atkins has clearly realized the essential difference between on-chain financial products and traditional financial services - relying on code to achieve automated services may mean that the SEC will take a different perspective in evaluating on-chain financial issues in the future.

During the period when the Commission and its staff formulate regulatory rules suitable for on-chain financial markets, I have instructed staff to consider establishing a conditional exemption framework or “innovation exemption” mechanism that enables registered and non-registered entities to quickly launch on-chain products and services.

This is undoubtedly the most important sentence in the whole text - this will provide clear legal guidance for the launch and operation of DeFi projects during the finalization of the new rules, and can be regarded as a loosening of the regulation of the entire DeFi industry.

Paul Atkins had previously emphasized that he hoped to change the SEC's working method from the last "post-punishment" to "pre-guidance", which is the specific strategy he gave.

In short, from the perspective of the entire DeFi track, the roundtable last night could almost be regarded as a milestone node, which represents the SEC finally giving a concrete and clear regulatory policy to this segment. For DeFi, a track that has long been regarded as the most vital in the industry but has been suppressed by regulation, this may be the beginning of another spring.