SEC Chairman: American values ​​are rooted in DeFi genes

Author: Paul S. Atkins, Chairman of the U.S. SEC; Source: Carbon Chain Value

On June 9, the series of roundtable meetings themed "DeFi and the American Spirit" initiated by the U.S. SEC Cryptocurrency Task Force was held as scheduled. This series of roundtable meetings has been held for four sessions.

Current SEC Chairman Paul S. Atkins delivered an opening speech. In his speech, Paul S. Atkins said that the core values ​​of the United States - economic freedom, private property rights and innovative spirit - are deeply rooted in the genes of the DeFi movement.

Atkins said that blockchain is undoubtedly a very creative and potentially revolutionary innovation that forces us to rethink the way ownership of intellectual property and economic property rights is proved and transferred. Blockchain is a shared database that allows users to own digital property called crypto assets without relying on intermediaries or central institutions.

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

Thank you, everyone, 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 today's event, as well as Commissioners Crenshaw and Uyeda for participating. Of course, I would also like to thank the guests of the roundtable and our host Troy Parades for volunteering your time and talents to support our work.

Today’s roundtable theme is “DeFi and the American Spirit.” This title is very appropriate because the core values ​​of the United States—economic freedom, private property rights, and the spirit of innovation—are deeply rooted in the DNA of the decentralized finance (DeFi) movement.

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

Previous U.S. administrations have argued through litigation, speeches, regulatory actions, and threats of regulatory action that participants and “staking service” providers may engage in securities transactions, thereby discouraging Americans from participating in these market-based systems. I thank the Department of Corporation Finance staff for clarifying its view that “miners,” “validators,” or “staking service providers” who voluntarily participate in proof-of-work or proof-of-stake networks are not subject to the federal securities laws. While I am pleased with this step, it is not a formal rule with the force of law, so we cannot stop here. The SEC must develop regulations based on the authority Congress has given us.

Another core feature of blockchain technology is the ability for individuals to self-custody their crypto assets through personal digital wallets. The right to self-custody of private property is a core American value that should not disappear just because you log on to the Internet. I support giving market participants greater flexibility to self-custody cryptoassets, especially where intermediaries create unnecessary transaction costs or restrict participation in staking and other on-chain activities.

The previous president’s administration undermined innovation in self-custodial digital wallets and other on-chain technologies by arguing through regulatory actions that developers of such software may be engaged in brokerage business. Engineers should not be subject to federal securities laws simply for publishing such software code. As one court said, it is absurd to hold developers of self-driving cars liable for third parties using the car to commit traffic violations or rob banks. To quote the court’s original ruling: “In such cases, people do not sue the car manufacturer for facilitating illegal behavior; they sue the individual who committed the illegal behavior.”

Many entrepreneurs are developing software applications that do not require any operator management. This self-executing software code that is accessible to everyone but controlled by no one, and the private peer-to-peer transactions it enables, may sound like science fiction. But blockchain technology enables a whole new class of software that can perform these functions without the need for a middleman. I do not believe we should allow century-old regulatory frameworks 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, self-executing software systems have proven their resilience during crises. While centralized platforms have teetered and failed under recent pressures, many on-chain systems continue to operate as designed with open source code.

Most current securities rules and regulations are premised on the regulation of issuers and intermediaries, such as broker-dealers, advisors, exchanges, and clearing organizations. The authors of these rules may not have foreseen that self-executing software code could replace such issuers and intermediaries. I have asked Commission staff to explore whether further guidance or rulemaking is needed to help registrants comply with applicable law when transacting with these software systems.

I look forward to issuers and intermediaries using on-chain software systems to eliminate economic friction, improve capital efficiency, launch new financial products, and enhance liquidity. Current securities regulations already contemplate the possibility of issuers and intermediaries using new technologies, but I have asked staff to consider whether revising the Commission's rules and regulations would be more appropriate to provide the necessary facilities for issuers and intermediaries seeking to manage on-chain financial systems.

As the Commission and its staff develop rules applicable to on-chain financial markets, I have instructed staff to consider establishing a conditional exemption framework or "innovation exemption" to quickly allow registered and unregistered institutions 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 certain conditions to innovate using on-chain technology in the United States.