Wait, What Did He Just Say?

Takeaways From Chairman Atkins’ “DeFi and the American Spirit” Remarks

Yesterday afternoon, I tuned in to the “DeFi and the American Spirit” to listen in as some of the brightest nerds in the CryptoLaw universe (ideally) wrestled with one another in between ice cream breaks and was passively listening as SEC Chairman Paul Atkins gave his remarks when something was off. They were shockingly reasonable, acknowledging that maybe, just maybe, forcing new tech into old legal and regulatory boxes is neither the best nor only approach to regulating the US capital markets. This is not part two (or three) of the series I am working on that looks at the state and future of decentralization, but needed to say SOMETHING in light of the Chairman’s remarks. Also, shout out to the panel participants on this and the prior roundtables – they have all been excellent and the SEC and the participants deserve kudos for making them happen.

The Ghost of Gensler Past

First, some context for those who haven’t been living through the crypto regulatory wars. Under Gary Gensler’s SEC (2021-2024), the commission’s approach to digital assets could be summed up as “sue first, ask questions later.” It was regulation by enforcement – bringing down the regulatory hammer on exchanges, staking providers, and token issuers while insisting that the rules are clear and ignoring questions about how the rules apply to a rapidly developing technological landscape.

Think of it like a traffic cop who refuses to post speed limit signs, then pulls everyone over for speeding.

It is not the best system for running a safe and efficient highway system.

Enter Paul Atkins, stage right.

In his brief speech, Atkins’ explicitly contrast the “lawsuits, speeches, regulation, and threatened regulatory action” of the prior regime with what’s coming: actual, honest-to-goodness rulemaking.

Mining/Staking

One of the headlines from Atkins’ speech: confirmation that the staff believes that proof of stake validation through staking does not constitute an investment contract and does not need to be treated as a security or a series of securities transactions. This is a huge bit clarity and is strange (if heartening) to hear from the Chairman-horse’s mouth. The staff finally acknowledges what anyone who’s ever run a node knows: validating transactions on a blockchain is fundamentally different from selling securities.

The staff’s logic is refreshingly straightforward: when you mine Bitcoin or validate Ethereum transactions, you’re not investing in a common enterprise expecting profits from others’ efforts (the Howey test). You’re doing computational work and getting paid for it. It’s closer to running a server than buying stock.

Excitement aside, it is important to remember – as the Chairman notes - that staff guidance “is not a duly promulgated rule with the force of law.” This is crucial. Staff opinions are like weather forecasts: helpful for planning, but they can change without warning. A future SEC could reverse this position tomorrow without any procedural requirements.

That said, Atkins’ commitment to rulemaking matters – if this position is reduced to formal rules, it would be harder to yank away on a whim. So, let’s take the W but keep the eye on the collective prize.

The Innovation Exemption

Another exciting point is the idea of an “innovation exemption” - essentially a regulatory sandbox allowing blockchain projects to launch in the U.S. under relaxed rules (provided they meet certain conditions). This isn’t unprecedented. The SEC has created similar exemptions before for emerging structures, including those that led to revamped versions of crowdfunding and ETFs we know (and love?) today.

An innovation exemption for crypto could work similarly. Imagine a safe harbor where projects can:

• Launch tokens without immediate SEC registration;

• Operate DeFi protocols under conditional relief; and

• Experiment with new financial primitives.

The conditions would likely include investor protections: maybe volume limits, disclosure requirements, or sunset provisions requiring full compliance after a certain period. But there would be a sandbox to play in, safely, for the first time.

Self-Custody

“The right to have self-custody of one’s private property is a foundational American value that should not disappear when one logs onto the internet.”

…

This directly challenges the SEC’s previous proposals that would have effectively forced all crypto into third-party custodians. It’s recognizing a fundamental truth: in crypto, “not your keys, not your coins” isn’t just a meme - it’s a property rights issue.

The traditional financial system assumes you need intermediaries to hold your assets safely. But crypto flips this: the safest place for your assets may very well be in your own wallet, protected by your own efforts, rather than relying on corporate promises.

Atkins is directing staff to find ways to preserve self-custody options while still protecting investors.

Smart Contracts

Perhaps the most forward-thinking part of Atkins’ speech addresses autonomous smart contracts and DeFi protocols. He acknowledges what DeFi builders have been saying for years: decentralized protocols that run without any operator are fundamentally different from traditional financial intermediaries.

Current securities laws assume there’s always a responsible party - an exchange, a broker, a clearing house. But what happens when the “exchange” is just code running on Ethereum? When the “broker” is an automated market maker? When settlement happens instantly on-chain with no intermediary?

Atkins suggests the SEC will explore how to integrate these realities into the regulatory framework. This could mean allowing registered broker-dealers to interact with DeFi protocols, updating settlement rules to accommodate instant blockchain finality; and creating compliance standards that can be embedded directly in smart contracts.

The Lingering Question

Here’s what really matters: is this change real, or just rhetoric?

The optimist in me sees genuine transformation. Atkins isn’t just talking about tweaking enforcement priorities - he’s proposing fundamental changes to how the SEC approaches crypto. The commitment to rulemaking, the innovation exemption, the respect for self-custody and autonomous code - these represent a philosophical shift, not just tactical adjustments.

The skeptic in me notes that turning vision into regulation is hard. The SEC is a massive bureaucracy with institutional momentum. There will be pushback from staff who’ve spent years building enforcement cases. Traditional financial incumbents will lobby against too much flexibility. And there’s always the risk that political winds shift again.

But here’s why I’m cautiously optimistic: Atkins isn’t proposing to abandon investor protection or create a crypto free-for-all. He’s arguing for smarter regulation that acknowledges technological reality. That’s a sustainable position that can survive political changes.

The Bottom Line

For the first time in years, the SEC is speaking crypto’s language instead of demanding crypto learn to speak securities law. Atkins’ speech signals a shift from “how do we cram DeFi into existing boxes?” to “how do we build new boxes that actually fit?”

This isn’t deregulation; it’s smart regulation. It’s recognizing that you can protect investors without killing innovation, that property rights matter in cyberspace, and that sometimes the best compliance mechanism is good code, not more paperwork.

The crypto industry has been waiting for this moment - a regulator who understands that blockchain isn’t just a new way to do old things, but a fundamentally new thing that requires fundamentally new thinking. Now comes the hard part: turning these principles into practice. The gap between regulatory vision and regulatory reality can be vast. But for the first time in a long time, we have a vision worth fighting to make real.

Stay tuned. The next year in crypto regulation is going to be anything but boring.

What kind of lawyer would I be without a disclaimer?

Everything I post here constitutes my own thoughts, should only be used for informational purposes, and does not constitute legal advice or establish a client-attorney relationship (though I am happy to discuss if there is something I can help you with). I can be reached via email at dlopezkurtz@crokefairchild.com, on telegram @davidlopezkurtz, on twitter @lopezkurtz, and on LinkedIn here.