Author: Paul S. Atkins, Chairman
Translated by: TechFlow
Thank you, good afternoon. I am delighted to gather with everyone today. First, I want to thank Commissioner Pierce and the Cryptocurrency Working Group for organizing today's event, and also thank Commissioners Crenshaw and Uyeda for their participation. Of course, I also want to especially thank the discussion panelists and moderator Troy Paredes, who voluntarily contributed their time and expertise to support our cause.
Today's roundtable theme is "Decentralized Finance and the American Spirit". This theme is very apt, as economic freedom, property rights, and innovation—core American values—are deeply rooted in the genes of decentralized finance (DeFi).
Blockchain is undoubtedly a highly creative and potentially revolutionary innovation that makes us rethink how ownership and transfer of intellectual and economic property occur. Blockchain is a shared database that can enable ownership of digital property called crypto assets without relying on intermediaries or centralized institutions. These peer-to-peer networks encourage participants to validate and maintain the database through economic mechanisms. These are free market systems where users pay demand-based fees to network participants to include transaction records in so-called "data blocks" with limited storage capacity.
Previously, the US government prevented Americans from participating in these market-based systems through litigation, speeches, regulation, and threats of regulatory action, claiming that participants and "Staking-as-a-service" providers might be involved in securities trading. I am grateful that the corporate finance staff clearly stated that voluntary participation in proof-of-work or proof-of-stake networks as "miners", "validators", or "Staking-as-a-service" providers are not within the scope of federal securities laws. While I am pleased with this progress, this is not a legally binding formal rule, so we cannot stop here. The Securities and Exchange Commission must develop regulations based on the powers granted by Congress.
Another core feature of blockchain technology is individuals' ability to autonomously manage crypto assets through personal digital wallets. Having autonomous management of private property is a fundamental American value, and this right should not disappear simply because people log onto the internet. I support providing market participants with greater flexibility to autonomously manage crypto assets, especially when intermediaries increase unnecessary transaction costs or limit the ability to participate in Staking and other on-chain activities.
The previous administration's government weakened innovation in self-managed digital wallets and other on-chain technologies through regulatory actions, claiming that software developers might be engaged in brokerage activities. However, engineers should not be constrained by federal securities laws merely for publishing such software code. As one court stated, it would be irrational to hold self-driving car developers responsible for third-party traffic violations or bank robberies—quoting the court's ruling, "In such cases, people would sue the individuals committing illegal acts, not sue the car company for assisting illegal activities."
Many entrepreneurs are developing software applications that do not require operator management. Software code that is available to everyone but controlled by no one, enabling private peer-to-peer transactions, sounds like science fiction, but blockchain technology makes this possible. This entirely new category of software can achieve these functions without intermediaries. I believe we should not let a hundred-year-old regulatory framework obstruct these technologies that could potentially disrupt, and most importantly, improve and advance current traditional intermediary models. We should not automatically fear the future.
These on-chain self-executing software systems have demonstrated resilience in the face of crises. While centralized platforms have been on the verge of or have collapsed under recent pressures, many on-chain systems continue to operate normally according to their open-source code design.
Current securities rules and regulations are primarily based on regulating issuers and intermediaries like broker-dealers, advisors, exchanges, and clearing institutions. The drafters of these rules and regulations might not have anticipated that self-executing software code could replace these issuers and intermediaries. I have requested committee staff to explore whether further guidance or rule-making is needed to help registrants trade with these software systems while complying with applicable laws.
I am also very excited about issuers and intermediaries using on-chain software systems to eliminate economic friction, improve capital efficiency, support 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 the commission's rules and regulations need to be revised to better support issuers and intermediaries who wish to manage on-chain financial systems.
As the Commission and its staff work to develop specialized rules applicable to on-chain financial markets, I have instructed staff to consider a conditional exemption framework or "innovation exemption" to quickly allow registered and unregistered parties to bring on-chain products and services to market. The innovation exemption can help realize President Trump's vision of making the US the "global crypto capital" by encouraging developers, entrepreneurs, and other companies willing to comply with specific conditions to innovate in on-chain technologies in the United States.
Thank you for your attention, and I look forward to the upcoming discussion.
