The SEC Sends Positive Signals on DeFi Regulation: What Does This Mean for the Crypto Industry?

Author: Lawyer Pang Meimei

Today, let's discuss a topic that's exciting the entire crypto community: The U.S. Securities and Exchange Commission (SEC) has shifted its previous strict scrutiny of the decentralized finance (DeFi) sector. At the "DeFi and the American Spirit" crypto roundtable held on June 9th, it first proposed that it is studying and formulating an innovation exemption mechanism for DeFi. This move quickly triggered a strong market reaction, and many DeFi tokens rose in response.

As a web3 lawyer, I've seen too many projects fail due to regulatory uncertainty. Can this signal really bring about a substantial breakthrough for the DeFi ecosystem? SEC Chairman Statement: DeFi Aligns with Core American Values ​​SEC Chairman Paul Atkins explicitly stated at the meeting that "the fundamental principles of DeFi align strongly with core American values ​​such as economic freedom and private property rights." He particularly emphasized support for the self-custody model for crypto assets and recognized the important role of blockchain technology in enabling financial transactions without intermediaries. The "innovation exemption" policy Atkins revealed can be considered a green light for DeFi, as it means that under this framework, qualified DeFi projects will have the opportunity to enter the market and conduct business trials more quickly while complying with basic regulatory requirements. More importantly, on September 5th, the SEC and the Commodity Futures Trading Commission (CFTC) jointly issued a statement calling for regulatory coordination. This move marked a shift from "siloed" regulation to collaborative work for the two regulatory agencies, a major shift in the crypto world. What does this mean for the DeFi industry? As a lawyer, I'm most concerned about the boundaries of compliance. These positive signals signal a fundamental shift in US crypto regulation, removing DeFi from a regulatory "gray area." First, this shift in regulatory attitude is clearly beneficial for entrepreneurs. The "innovation exemption" policy means that truly decentralized platforms may be exempt from securities registration, avoiding cumbersome disclosure and auditing requirements. This lowers the barrier to entry and can attract more institutional capital into the DeFi ecosystem. For Chinese project developers, this also means greater room for cross-border cooperation between China and the United States. Regulatory relaxation is undoubtedly a catalyst for structural change in DeFi. Second, it strengthens investor protection and boosts market confidence. From April to June 2025, the SEC's Cryptocurrency Working Group held four public roundtables covering topics such as crypto trading, custody, asset tokenization, and DeFi. These discussions, organized by the SEC's Crypto Task Force and open to the public, were described by SEC Commissioner Hester Peirce as "a spring sprint toward crypto clarity," marking the SEC's shift from confrontation to cooperation. The SEC's emphasis on "high-quality regulation" provides investment protection for DeFi users and mitigates rugged risk. Atkins reiterated the "right to self-management of private property" and explicitly supported users' direct participation in on-chain financial activities through their personal wallets. This effectively signaled that DeFi is not a security and should have its own dedicated ecosystem. Comparing finance to an airplane, DeFi has easily lost its way in the past few years due to its lack of a clear path. While some DeFi projects have successfully taken off and entered their flight path thanks to their strong sense of direction, others have remained in a state of turmoil, afraid to land or continue their journey. The coordinated oversight by the SEC and CFTC is more like a course and airport for DeFi. While the plane may land at different airports, at least it won't miss the correct route. Of course, the details of the exemption policy have yet to be finalized, and challenges remain. Until then, attorney Pang Meimei advises project owners to proceed with caution. Furthermore, it should clarify the legal responsibilities of developers by stating that code publishers should not be held responsible for others' use of their code. Using the analogy of self-driving car developers, Atkins proposed that "code publishers should not be held liable for others' use of their code," clearly shifting the responsibility from tool developers to users. In particular, developers building self-hosted tools or privacy-enhancing software should not be held accountable simply because others use their code for illegal activities. SEC Commissioner and Cryptography Task Force Chair Hester Peirce echoed this sentiment, emphasizing that code publishing and financial activities should be treated differently. However, she also cautioned that centralized entities should not use the "decentralized" label to evade regulation. Her remarks clearly demonstrate the SEC's commitment to the principle of "technological neutrality." Finally, staking mining regulations are now more clearly defined, alleviating compliance concerns among participants. The SEC's Division of Corporate Finance previously clarified in a guidance opinion that Proof-of-Work (PoW) mining and Proof-of-Stake (PoS) staking do not constitute securities transactions. This clarification has significantly alleviated the compliance concerns of many blockchain projects, miners, and validators. The market response has been significant, with many staking projects experiencing simultaneous increases, demonstrating institutional confidence in the staking ecosystem. Behind the Policy: Dual Pushes from Politics and the Market These developments are not accidental. In recent years, Republican SEC commissioners have consistently pushed for more crypto-friendly policies, and the "safe harbor" proposal, long championed by Hester Peirce and others, is gaining acceptance among more lawmakers. The market has reacted positively to this, interpreting it as a sign that the US may no longer attempt to suppress DeFi innovation through "enforcement and regulation," but rather a shift toward more conversational, structural, and inclusive regulation. If realized: US DeFi may usher in a new beginning. Once the "innovation exemption" moves from conception to implementation, the US DeFi ecosystem may escape some of the current regulatory ambiguity, allowing projects to advance technology implementation and explore business models within a clearer legal framework. This will not only help the development of local projects but also potentially attract overseas DeFi developers to return to the US market, fostering a healthier, more compliant, and more competitive decentralized finance landscape. Against the backdrop of the SEC's Republican commissioners pushing for more crypto-friendly policies, it suggests that regulators are attempting to truly understand the nature of DeFi and are willing to make corresponding legal adjustments. For the entire industry, this represents more than just a shift in regulatory attitudes; it could also be a redefinition of innovation, responsibility, and freedom. DeFi experienced rapid growth in 2020, amidst a regulatory vacuum. Now, the SEC has rehabilitated DeFi by adjusting its regulatory framework. This move demonstrates our confidence in the seamless integration and self-consistency of DeFi and traditional finance.