SEC signals shift in DeFi regulation as Chair Atkins proposes conditional relief

The US Securities and Exchange Commission (SEC) is preparing to revise its approach to regulating decentralised finance (DeFi) and blockchain-based protocols.

In a move that reflects growing awareness of DeFi’s economic impact, SEC Chair Paul Atkins has called for updated frameworks that safeguard investors without stifling innovation.

The shift comes as policymakers aim to balance legal certainty with technological progress, particularly around areas like self-custody, protocol staking, and blockchain-based fundraising.

Atkins addressed the evolving regulatory stance during the SEC’s Crypto Task Force Roundtable on Decentralised Finance, where he acknowledged that current restrictions may have constrained growth in the sector.

He also suggested the agency is considering conditional exemptions for certain DeFi activities, alongside published guidance clarifying legal grey areas around staking and mining.

SEC reviews exemptions for DeFi and blockchain startups

A central focus of the SEC’s revised approach is offering “conditional exemptive relief” for qualified DeFi projects.

These exemptions would allow startups to operate with fewer regulatory barriers during early development phases, reducing the legal uncertainty that has previously discouraged innovation.

As part of this shift, the SEC is reviewing updates to self-custody rules and determining which activities fall within its jurisdiction.

This includes examining proof-of-work mining and staking-as-a-service platforms, both of which have come under scrutiny for their potential to involve securities transactions.

During the roundtable, Atkins criticised the approach of previous US administrations, stating they had created a “chilling effect” on market participation by pursuing legal action and regulatory threats against DeFi participants and staking providers.

Staking and mining guidance define legal thresholds

In a rare move, the SEC has released two formal documents outlining the agency’s interpretation of how staking and mining relate to securities laws.

These include the Statement on Certain Proof-of-Work Mining Activities and the Statement on Certain Protocol Staking Activities, which identify conditions under which such activities may not be regulated as securities offerings.

These guidelines offer developers clearer boundaries on how they can engage users and raise funds without triggering enforcement.

While not offering blanket immunity, they suggest that passive network participation, when done without profit-sharing or promises of return, may fall outside the scope of securities law.

This technical distinction is seen as vital for DeFi protocols that rely on decentralised consensus mechanisms and community governance.

The clarification aims to reduce confusion and enable compliant innovation across decentralised applications.

Market response and future policy

The SEC’s evolving stance comes at a time when DeFi continues to gain institutional attention.

Major investment firms and developers are watching closely, particularly in light of recent industry lobbying for clarity and fair treatment under financial laws.

The regulator’s willingness to provide structured exemptions, clarify grey areas, and reference judicial reasoning may signal a more balanced regulatory path going forward.

However, stakeholders caution that policy implementation will need to be consistently applied to avoid confusion or selective enforcement.

As discussions continue, the SEC’s latest actions suggest a roadmap that includes risk-adjusted exemptions, enhanced transparency, and respect for open-source development—key ingredients for ensuring the US remains competitive in blockchain innovation.

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