Original | Odaily Planet Daily ( @OdailyChina )

Author: Azuma ( @azuma_eth )

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

Prior to this meeting, the SEC had held four roundtable meetings on the topic of cryptocurrencies, but perhaps due to the performance progress of the new SEC Chairman Paul Atkins, not much concrete and clear policy-oriented content came out of the previous meetings.

• Odaily Note: Paul Atkins officially took office on April 22, and then gave a very short opening speech at the third meeting (just four days after taking office). At the fourth meeting, he gave a long speech on cryptocurrency for the first time as SEC Chairman (see " What signals did the new SEC Chairman's first Crypto-themed speech reveal? " for details). However, the speech only gave an overall overview of his work plan as SEC Chairman, and did not explain too much about the regulatory issues involving a specific segment.

But the meeting last night was completely different. Paul Atkins dropped several bombshells in his speech, almost giving DeFi a "get out of jail free" medal in the form of stacking BUFFs.

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

• AAVE is currently trading at 289.15 USDT, up 15.54% in 24 hours;

• UNI is currently trading at 7.045 USDT, up 12.85% in 24 hours;

• HYPE is currently trading at 39.15 USDT, up 11.2% in 24 hours;

• PENDLE is currently trading at 4.355 USDT, up 14.2% in 24 hours;

• MKR is currently trading at 1980 USDT, up 13.66% in 24 hours;

Paul Atkins' full speech

Thank you, and good afternoon. It is a great honor to be with you today. First of all, I would like to thank Commissioner Peirce and the Cryptocurrency Working Group for organizing this event, and also thank Commissioners Crenshaw and Uyeda for participating. Of course, I would also like to thank roundtable guest and moderator Troy Parades for his free contribution of time and wisdom to this discussion.

The theme of today’s roundtable 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 genes inherent in the decentralized finance (DeFi) movement.

Blockchain is undoubtedly a creative and potentially revolutionary innovation that forces us to rethink the proof of ownership and transfer of intellectual and economic property rights. As a shared database, blockchain allows people to own digital property called crypto assets without relying on intermediaries. These peer-to-peer networks use economic incentives to encourage participants to verify and maintain the database according to the network's rules. This is a true free market system - users pay network participants a demand-based service fee to include their transactions in so-called "blocks" with limited storage capacity.

The previous administration has used litigation, speeches, regulation, and threats of regulation to discourage Americans from participating in these market-based systems by claiming that participants and staking service providers may be involved in securities transactions. I am grateful to my colleagues in the Corporate Finance Division for clarifying their position: voluntary participation in Proof of Work (PoW) or Proof of Stake (PoS) networks as "miners," "validators," or "staking service providers" is not subject to federal securities laws. While I am pleased with this progress, it is not a formal rule with the force of law, so there is still work to do. The SEC must write regulations based on the authority 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 of private property is a fundamental American value that should not disappear just because you log on to the Internet. I support giving market participants more flexibility to self-custody crypto assets, especially when intermediaries would introduce unnecessary transaction costs or restrict activities such as on-chain staking.

The previous administration severely undermined innovation by taking regulatory action to claim that developers of on-chain technologies such as self-hosted digital wallets could be engaged in brokerage business. It is unreasonable for engineers to be subject to federal securities laws simply for publishing such software code. As one court ruling put it (quoting the original ruling here): "It is absurd to hold self-driving car developers responsible for third parties using their vehicles to violate traffic rules or rob banks. In this case, people will not sue the car company for assisting the crime, but the individual who committed the crime."

Many entrepreneurs are developing software applications that don’t require operator management. Self-executing code that is available to everyone, controlled by no one, and supports private peer-to-peer transactions may sound like science fiction. But blockchain technology has indeed enabled a whole new class of software that can do these things without the need for intermediaries. We should not let century-old regulatory frameworks stifle technological innovation that could disrupt —and more importantly, improve and advance—the current traditional intermediary model. We don’t have to automatically fear the future.

These on-chain self-executing software systems have proven to be resilient in times of crisis. While centralized platforms have recently faltered and collapsed under pressure, many on-chain systems have continued to operate as designed in their open-source code.

Current securities rules are primarily based on regulation of issuers and intermediaries, such as broker-dealers, advisors, exchanges, and clearing organizations. The authors of these rules probably did not envision self-executing code replacing these entities. I have asked Commission staff to study whether further guidance or legislation is needed to allow registered entities to legally and compliantly transact with these software systems.

I am also looking forward to issuers and intermediaries using on-chain software systems to eliminate economic friction, improve capital efficiency, innovate financial products, and enhance liquidity. Existing securities regulations have taken into account the use of new technologies by issuers and intermediaries, but I still ask staff to evaluate whether it is necessary to revise the Commission's regulations to better support those who operate on-chain financial systems.

While the Commission and its staff develop appropriate regulatory rules for the on-chain financial market, I have directed staff to consider establishing a conditional exemption framework or "innovation exemption" mechanism to enable registered and unregistered entities to quickly launch on-chain products and services. By encouraging developers, entrepreneurs, and other businesses willing to comply with certain conditions to innovate on-chain technology in the United States, this exemption mechanism will help realize President Trump's vision of making the United States the " global cryptocurrency capital ."

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

Detailed analysis

“The core American values of economic freedom, private property rights, and innovation are the genes that the decentralized finance (DeFi) movement is born with.”

This sentence is a summary that directly elevates DeFi and emphasizes that the development of DeFi is in line with the core values of the United States.

Voluntary participation in a Proof-of-Work (PoW) or Proof-of-Stake (PoS) network as a “miner,” “validator,” or “staking service provider” is not covered by the federal securities laws.

This can be said to be the first "get out of jail free" card, which is beneficial to a number of projects upstream and downstream of the mining and pledge service industries, and will indirectly help stabilize all PoW and PoS networks.

The previous SEC, headed by Gary Gensler, has taken action on the staking track many times. For example, it once named Lido and Rocket Pool's liquidity staking derivative tokens stETH and rETH as unregistered securities. Paul Atkins' words clearly stated that the SEC will no longer continue to cause trouble for these projects for securities violations.

I support giving market participants more flexibility to self-custody crypto assets, especially where intermediaries would impose unnecessary transaction costs or restrict on-chain activities such as staking… The previous administration’s regulatory actions, which claimed that developers of on-chain technologies such as self-custodial digital wallets could be engaged in brokerage business, severely undermined innovation…

This is another correction to the situation where innovation in the self-custody field was hindered under the excessive regulation of the previous SEC.

Paul Atkins used the analogy of "car developers should not be held responsible for third parties hijacking cars to do evil" to emphasize that the development of on-chain technologies such as self-hosted digital wallets should not be confused with financial brokerage institutions, and therefore developers should not be subject to federal securities laws simply for publishing such software codes.

It’s hard not to think of the controversial case of TornadoCash developers…

Current securities regulations are primarily based on the regulation of issuers and intermediaries, such as broker-dealers, advisors, exchanges, and clearing organizations. The authors of these rules probably did not envision that self-executing code would replace these entities.

Personally, I think this sentence is very crucial, 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, which may mean that the SEC will take a different perspective in evaluating on-chain financial issues in the future.

As the Commission and its staff develop regulatory rules appropriate for on-chain financial markets, I have instructed staff to consider establishing a conditional exemption framework or “innovation exemption” mechanism to enable registered and unregistered entities to quickly launch on-chain products and services.

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

Paul Atkins has previously emphasized that he hopes to change the SEC's working methods from the previous term's "after-the-fact punishment" to "ex-ante guidance." This is the specific strategy he gave.

In short, from the perspective of the entire DeFi track, last night's roundtable meeting can almost be regarded as a milestone, which means that the SEC has finally given a concrete and clear regulatory policy to this sub-track. For DeFi, which has long been regarded as the most vital track in the industry but has been subject to regulatory suppression, this may be the beginning of a new spring.