Author: Paul S. Atkins, SEC Chairman; Source: Carbon Chain Value
On June 9th, the roundtable conference themed "DeFi and the American Spirit" initiated by the US SEC Cryptocurrency Special Working Group was held as scheduled. This series of roundtable conferences has been held for four sessions.
Current SEC Chairman Paul S. Atkins delivered the opening speech. He stated that the core American values - 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 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 property called crypto assets without relying on intermediaries or central institutions.
The following is the full text of Paul S. Atkins' speech:
Thank you all, and good afternoon. I am honored to be with you today. First, I want to thank Commissioner Peirce and the Cryptocurrency Working Group for organizing today's event, and Commissioners Crenshaw and Uyeda for their participation. Of course, I also want to thank the guests of the roundtable and our host Troy Parades for voluntarily contributing their time and talents to support our work.
Today's roundtable theme is "DeFi and the American Spirit". This title is very apt, as the core American values - economic freedom, private property rights, and innovative spirit - are deeply rooted 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 crypto assets without relying on intermediaries or central institutions. Instead, these peer-to-peer networks incentivize participants to verify and maintain the database through economic mechanisms. These are free market systems where users pay demand-driven fees to have transactions included in "blocks" with limited storage capacity.
The previous US government attempted to prevent Americans from participating in these market-based systems by litigation, speeches, regulatory measures, and threats of regulatory action, claiming that participants and "staking service" providers might be engaged in securities trading. I appreciate the clarification from the corporate finance staff that voluntary "miners", "validators", or "staking service" providers participating in proof-of-work or proof-of-stake networks are not within the scope of federal securities laws. Although I am pleased with this step, it is not a legally binding formal rule, so we cannot stop here. The Securities and Exchange Commission must develop regulations based on the authority granted to us by Congress.
Another core feature of blockchain technology is that individuals can self-custody crypto assets through personal digital wallets. The right to self-custody private property is a core American value that should not disappear simply by logging onto the internet. I support giving market participants greater flexibility to self-custody crypto assets, especially when intermediaries cause unnecessary transaction costs or restrict participation in staking and other on-chain activities.
The previous administration's executive authority claimed through regulatory actions that developers of such software might be engaged in brokerage, thereby undermining innovation in self-custodial digital wallets and other on-chain technologies. Engineers should not be subject to federal securities laws merely for publishing such software code. As one court stated, it would be absurd to hold autonomous vehicle developers responsible for third-party traffic violations or bank robberies using the vehicle. Quoting the court's ruling: "In such a case, people would not sue the car manufacturer for facilitating illegal activities; they would sue the individuals who committed the illegal acts."
Many entrepreneurs are developing software applications that require no operator management. This automatically executing software code accessible to everyone but controlled by no one, and the private peer-to-peer transactions it supports, might sound like science fiction. However, blockchain technology makes a new type of software possible that can execute these functions without intermediaries. I do not believe we should allow century-old regulatory frameworks to stifle innovative technologies that could potentially disrupt and, most importantly, improve and drive current traditional intermediary models. We should not automatically fear the future.
These on-chain automatically executing software systems have proven their resilience during crises. While centralized platforms wavered and failed under recent stress, many on-chain systems continued to run according to their open-source code design.
Most current securities rules and regulations are premised on regulating issuers and intermediaries such as brokers, advisors, exchanges, and clearing institutions. The creators of these rules might not have anticipated that automatically executing software code could replace such issuers and intermediaries. I have asked committee staff to explore whether further guidance or rule-making is needed to help registrants comply with applicable laws 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 laws already consider the possibility of issuers and intermediaries using new technologies, but I have asked staff to consider whether revising the committee's rules and regulations would more appropriately provide necessary convenience 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 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 former President Trump's vision of making the United States the "global cryptocurrency center" by encouraging developers, entrepreneurs, and other institutions willing to comply with specific conditions to innovate using on-chain technologies in the United States.
