SEC Chairman: American values are rooted in the genes of Decentralized Finance.

Author: SEC Chairman Paul S. Atkins; Source: Carbon Chain Value

On June 9th, a series of roundtable discussions themed “DeFi and the American Spirit” initiated by the U.S. SEC’s Cryptocurrency Special Working Group was held as scheduled. This series of roundtable discussions has been held four times.

The current SEC Chairman Paul S. Atkins delivered the opening speech. In his speech, Paul S. Atkins stated that America’s core values—economic freedom, private property rights, and the spirit of innovation—are deeply rooted in the genes of the DeFi movement.

Atkins stated that blockchain is undoubtedly a highly creative and potentially revolutionary innovation that prompts us to rethink the ownership proof and transfer methods of intellectual property and economic property rights. Blockchain is a shared database that allows users to own digital assets known as cryptocurrencies without relying on intermediaries or central authorities.

The following is the full text of Paul S. Atkins’ speech:

Thank you all, good afternoon. I am deeply honored to gather with you today. First of all, I want to thank Commissioner Peirce and the cryptocurrency working group for their organizational work for today’s event, as well as the participation of Commissioner Crenshaw and Commissioner Uyeda. Of course, I also want to thank all the guests at the roundtable and our host Troy Parades for voluntarily contributing their time and talents to support our work.

The theme of today’s roundtable discussion is “DeFi and the American Spirit.” This title is very fitting as the core values of America—economic freedom, private property rights, and the spirit of innovation—are deeply embedded in the genes of the decentralized finance (DeFi) movement.

Blockchain is undoubtedly a highly creative and potentially revolutionary innovation that prompts us to rethink the proof of ownership and transfer of intellectual property and economic property rights. Blockchain is a shared database that allows users to own digital assets known as crypto assets without relying on intermediaries or central authorities. Instead, these peer-to-peer networks incentivize participants to verify and maintain the database according to network rules through economic mechanisms. These are free market systems where users pay demand-driven fees to have transactions included in so-called “blocks” with limited storage capacity.

The previous U.S. government took regulatory actions through lawsuits, speeches, regulatory measures, and threats, claiming that participants and “staking service” providers might engage in securities trading, thereby preventing Americans from participating in these market-based systems. I appreciate the clarification from the company’s finance department that individuals voluntarily participating as “miners,” “validators,” or “staking service” providers on proof-of-work or proof-of-stake networks do not fall under the purview of federal securities laws. While I feel reassured by this step, it is not a formal rule with legal effect, so we cannot stop here. The Securities and Exchange Commission must formulate relevant regulations based on the authorities granted to us by Congress.

Another core feature of blockchain technology is that individuals can achieve self-custody of their crypto assets through personal digital wallets. The right to self-custody of private property is a core value in the United States and should not disappear due to logging into the internet. I support empowering market participants with greater flexibility to self-custody their crypto assets, especially in situations where intermediaries create unnecessary transaction costs or restrict participation in staking and other on-chain activities.

The former president’s administration argued through regulatory actions that developers of such software might engage in brokerage activities, thereby undermining the innovation of self-custody digital wallets and other on-chain technologies. Engineers should not be bound by federal securities laws simply for releasing such software code. As a court stated, it is absurd to hold developers of autonomous vehicles responsible for traffic violations or bank robberies committed by third parties using the vehicle. The court ruling states: “In this case, people do not sue car manufacturers for facilitating illegal activities; they sue the individuals who commit the illegal acts.”

Many entrepreneurs are developing software applications that require no operator management. This automated software code, accessible to everyone but not controlled by anyone, along with its support for private peer-to-peer transactions, may sound like science fiction. However, blockchain technology makes a whole new class of software possible, capable of executing these functions without the need for intermediaries. I do not believe we should allow a century-old regulatory framework to stifle innovative technologies that could disrupt and, most importantly, improve and advance the current traditional intermediary model. We should not automatically fear the future.

These on-chain automated software systems have proven their resilience in times of crisis. Despite centralized platforms wavering and failing under recent pressure, many on-chain systems continue to operate according to their open-source code design.

Currently, most securities rules and regulations are based on the premise of regulating issuers and intermediaries (such as brokers, advisors, exchanges, and clearing agencies). The creators of these rules may not have anticipated that automated execution software code could replace such issuers and intermediaries. I have asked the committee staff to explore whether further guidance or rule-making is needed to assist registrants in complying with applicable laws when trading with these software systems.

I look forward to the issuers and intermediaries utilizing on-chain software systems to eliminate economic friction, improve capital efficiency, launch new financial products, and enhance liquidity. Current securities regulations have taken into account the possibility of issuers and intermediaries using new technologies, but I have asked the staff to consider whether revising the rules and regulations of the committee could more appropriately provide the necessary facilitation for issuers and intermediaries seeking to manage on-chain financial systems.

As the committee and its staff develop rules applicable to on-chain financial markets, I have instructed the staff to consider establishing a conditional exemption framework or “innovation exemption” to swiftly allow registered and non-registered entities to bring on-chain products and services to market.

The innovation exemption can help realize President Trump’s vision of making the United States a “global cryptocurrency hub” by encouraging developers, entrepreneurs, and other institutions willing to comply with specific conditions to innovate using blockchain technology in the U.S.