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SEC Chairman Paul Atkins has directed staff to consider an 'innovation exemption' for DeFi projects, signaling a shift in crypto regulation and potentially
SEC Chairman Paul Atkins has directed staff to consider an "innovation exemption" for decentralized finance (DeFi) projects, a move that could allow American crypto developers to build without fear of immediate lawsuits [2]. This marks a significant shift from the agency's previous stance, which often treated crypto development as a target for enforcement actions, and suggests a potential end to a 12-year period where crypto developers faced subpoenas and legal challenges from the SEC [2].
| At a glance | |
|---|---|
| Regulatory Shift | SEC considers 'innovation exemption' [2] |
| Impact | American crypto developers can build without fear of lawsuits [2] |
| Catalyst | SEC Chairman Paul Atkins' directive [2] |
| Context | Follows years of SEC enforcement against crypto companies [2] |
The SEC's new approach, articulated by Chairman Atkins at a recent roundtable, contrasts sharply with its prior actions, which included suing crypto companies and suggesting that activities like staking or developing wallet software might require broker licenses [2]. Atkins acknowledged that current securities laws, which assume a central company or CEO, are ill-suited for DeFi's self-running software model [2]. He compared prosecuting DeFi developers to holding a self-driving car developer liable for a third-party's traffic violation, signaling a move away from punishing engineers for writing code [2]. This policy change comes after former President Trump, who promised to make America a "crypto capital," appointed Atkins to lead the SEC [2].
Despite the SEC's evolving position, some legal scholars argue that crypto trading fundamentally differs from traditional finance and should not be integrated into the existing financial services system [1]. They contend that crypto trading is more akin to e-sports gambling, lacking the productive economic purpose that defines finance, such as helping businesses and governments raise capital or manage risk [1]. Integrating crypto into traditional finance, they argue, could introduce systemic contagion risks, similar to those seen before the 2008 financial crisis, by making crypto coins part of critical investment portfolios and potentially benefiting from the Federal Reserve's role as a lender of last resort [1]. Instead, these experts suggest a complete separation of crypto trading from traditional financial services and the establishment of a non-financial regulatory regime to protect consumers from its inherent risks [1].
The SEC's consideration of an "innovation exemption" represents a significant policy pivot, potentially creating a more favorable environment for crypto development in the U.S., even as broader questions remain about crypto's fundamental classification within the financial system [1, 2].
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AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 2 outlets · Sep 8, 2026 · How we report
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