What Did Paul Atkins Say About Onchain Software?
SEC Chair Paul Atkins said the agency needs to clarify how its existing regulatory framework applies to software applications as it considers future rules for onchain financial markets.
Speaking Friday at an artificial intelligence expo hosted by the Special Competitive Studies Project, Atkins said software applications do not always fit cleanly into traditional SEC categories such as clearing agency, broker, or exchange.
“Software applications today do not always organize themselves neatly along these categorical lines,” Atkins said. “A single protocol can execute a trade, manage collateral, route liquidity, execute trading strategies through vault structures, and settle the transaction—all within a unified, automated system, often within seconds.”
Why Does This Matter for DeFi Regulation?
The remarks point to a central problem in crypto oversight: onchain systems often combine functions that traditional markets separate across regulated entities. A DeFi protocol may route trades, manage collateral, settle transactions, and automate yield strategies without a conventional intermediary.
That creates tension with rules written for broker-dealers, exchanges, and clearing agencies. If the SEC applies legacy definitions too broadly, software developers and wallet providers could face rules designed for intermediaries that hold customer assets or execute client orders.
Atkins said the SEC should consider notice-and-comment rulemaking to revisit definitions tied to exchanges, clearing agencies, and brokers as they apply to onchain trading systems. He also called for greater clarity around crypto vaults, which are onchain applications that allow users to earn yield passively.
Investor Takeaway
How Has the SEC’s Crypto Approach Changed Under Atkins?
Atkins’ comments reflect a more crypto-friendly tone at the SEC compared with the agency’s stance under former Chair Gary Gensler, who argued that most cryptocurrencies fell within the commission’s jurisdiction.
Since taking office, Atkins has discussed an innovation exemption for tokenized securities and overseen the release of a taxonomy intended to clarify which digital assets may qualify as securities.
Last month, the SEC’s Division of Trading and Markets released a staff statement saying interfaces such as DeFi wallets would generally not be considered brokers. That view reduces one of the main regulatory concerns for wallet providers and other front-end software tools.
Investor Takeaway
How Did Crypto Industry Groups React?
Industry groups welcomed the remarks, viewing them as a sign that the SEC may avoid forcing decentralized systems into categories built for traditional market infrastructure.
The DeFi Education Fund described Atkins’ comments as “powerful” in a post on X. The Hyperliquid Policy Center said it was encouraged to see “a Chairman willing to map these systems to existing legal frameworks on their own terms, rather than force them into legacy categories built for legacy architecture.”
Atkins said onchain market structures are often hybrid, combining parts of traditional finance and decentralized finance. He said the SEC should clarify how it views this range of models through public rulemaking, using exemptive authority where necessary.
For crypto firms, the practical question is whether future rules give developers and protocols a workable path to compliance without treating every software layer as a broker, exchange, or clearing agency.
