On June 9, 2025, Securities and Exchange Commission (“SEC”) Chairman Paul Atkins delivered notable opening remarks at the “DeFi and the American Spirit” roundtable in Washington, D.C., signaling a major shift in the agency’s posture toward decentralized finance (“DeFi”) and digital assets.
Chairman Atkins emphasized a desire to encourage innovation, protect property rights, and reduce regulatory drag on digital asset businesses. His message was clear: the SEC wants to partner with innovation, not punish it. “[T]he American values of economic liberty, private property rights, and innovation are in the DNA of the DeFi . . . movement,” Atkins said.
Break from Prior Enforcement-Heavy Approach
Atkins drew a sharp contrast to the prior administration’s aggressive posture on digital asset markets, which he characterized as overly reliant on lawsuits, speeches, and regulation by enforcement.
Instead, he praised current SEC staff for offering more clarity—for example, SEC’s Division of Corporation Finance recently clarified that participation in networks by validators, miners, and staking providers are not within the scope of the federal securities laws. However, he cautioned this interpretation remains staff guidance, not enforceable law.
Self-Custody and Code Are Not Securities Violations
Atkins strongly defended self-custody rights for digital assets, framing them as essential to both DeFi and American values: “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.”
He also stated that developers should not be liable merely for publishing wallet or smart contract code, likening it to blaming a self-driving car developer if the car is used in a crime.
Rethinking Securities Rules for On-Chain Systems
Atkins acknowledged that traditional securities rules and regulations were built for systems involving issuers and intermediaries, but DeFi operates through on-chain software code and peer-to-peer protocols. As a result, he has directed SEC staff to explore whether existing rules should be amended to reflect this new reality. This acknowledgment diverges from the SEC’s approach under the prior administration, which applied existing regulations to novel digital asset products.
Introducing the “Innovation Exemption”
Notably, Atkins unveiled a proposed “innovation exemption” — a conditional relief framework that would allow both registrants and non-registrants to launch on-chain products while the SEC develops permanent rules.
What is the Innovation Exemption? A time-limited, conditional relief from certain securities regulations for qualified projects — effectively a sandbox-style safe harbor.
Why It Matters for Builders and Investors? This exemption could be a game-changer for DeFi and digital asset innovators looking to build in the U.S. without years of uncertainty. Some potential benefits it could create:
Faster Go-To-Market: Firms can launch and test products without waiting for full rulemaking.
Regulatory Clarity: Projects can operate under known conditions, avoiding surprise enforcement.
Green Light for Registrants: Firms, brokers, and funds can pilot tokenized securities, smart contracts, and custody tools under SEC oversight.
Breathing Room for Non-Registrants: Startups, Decentralized Autonomous Organizations (“DAOs”), and DeFi developers can build wallets or staking services without triggering immediate regulatory scrutiny.
Investor Confidence: A structured but flexible exemption provides guardrails for innovation and enhances on-chain user protection.
Part of a Larger Trend: U.S. Catching Up to Global Fintech Sandboxes
The innovation exemption aligns with broader trends. Similar to Europe’s regulatory sandboxes, Commodity Futures Trading Commission (“CFTC”) Acting Chairman Caroline Pham detailed efforts to launch pilot programs and build on the initiative for U.S. digital asset markets. The CFTC’s Chairman nominee Brian Quintenz echoed the sentiment and described plans to leverage cryptocurrency expertise in his recent nomination hearing before the House. Quintenz described blockchain technology as transformative, with the potential to greatly improve financial services and other parts of society. To realize this potential, Quintenz believes that digital asset markets and participants need clear rules of the road so they can build without fear of regulation by enforcement. The U.S. House of Representatives also introduced an updated version of the Digital Asset Market Structure Legislation, the “Clarity Act.”
The SEC is now adding to this coordinated, innovation-forward stance. When both the SEC and CFTC open parallel paths for digital asset and DeFi development, it signals a broader shift toward supportive, modern regulation of blockchain-based finance. As Chairman Atkins stated, an innovation exemption could fulfill President Trump’s vision to make America the “crypto capital of the planet.”
How Mitchell Sandler Can Help
The digital asset legal landscape is evolving quickly. At Mitchell Sandler, our team is well positioned to help clients evaluate eligibility for exemptions, structure DeFi and digital asset projects with regulatory confidence, interact with SEC, CFTC, and other regulators, respond to regulatory inquiries, and advocate for clients involved in enforcement investigations.
If your organization has questions or needs assistance with these issues, please contact Seth Waxman, Chloé Dolsenhe, and Sean Hennessy to discuss how we can support you.
Download a PDF of this article here.
About The Authors
Seth Waxman
Chloe Dolsenhe
Sean Hennessy
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