SEC Chair Paul Atkins Signals “Innovation Exemption” for DeFi Platforms, Criticizes Past Regulatory Approach

The U.S. Securities and Exchange Commission (SEC), under the leadership of newly appointed Chair Paul Atkins, is exploring a significant shift in its approach to regulating decentralized finance (DeFi) platforms. At a recent SEC Crypto Task Force roundtable event titled “DeFi and the American Spirit” held on June 9, Atkins announced that the agency is considering a conditional “innovation exemption” framework to accelerate the development and market entry of onchain products and services. This move marks a departure from the enforcement-heavy policies of the previous administration under former SEC Chair Gary Gensler, which Atkins criticized as overly restrictive. Additionally, Atkins emphasized the importance of self-custody, describing it as a “foundational American value” that should be preserved in the digital asset space.

A Shift Toward Innovation-Friendly Regulation

Atkins’ remarks, delivered during the SEC’s fifth crypto task force roundtable of 2025, outlined a vision to streamline regulatory processes for DeFi and other blockchain-based technologies. The proposed “innovation exemption” would allow both registered and non-registered entities to bring onchain products to market more quickly, provided they meet specific conditions. Atkins stated that this framework could “encourage developers, entrepreneurs, and other firms that are willing to comply with certain conditions to innovate with on-chain technologies in the United States,” aligning with President Donald Trump’s goal of positioning the U.S. as the “crypto capital of the planet”.

The initiative comes as part of a broader effort to address longstanding regulatory uncertainty in the crypto sector. Atkins has directed SEC staff to explore amendments to existing rules and regulations to better accommodate issuers and intermediaries operating onchain financial systems. This approach contrasts sharply with the policies under Gensler, who led over 100 enforcement actions against crypto firms, often asserting that most cryptocurrencies were securities requiring registration. Atkins criticized this approach, arguing that it imposes outdated regulatory frameworks on emerging technologies, stifling innovation. “I do not believe that we should allow century-old regulatory frameworks to stifle innovation with technologies that could upend and most importantly improve and advance our current, traditional intermediated model. We should not automatically fear the future,” Atkins said.

Self-Custody as a Core Principle

A key focus of Atkins’ remarks was the right to self-custody, which he described as a fundamental American value that should extend to digital assets. Speaking at the roundtable, he expressed support for greater flexibility in allowing market participants to custody their own crypto assets, particularly when intermediaries impose unnecessary transaction costs or restrict activities like staking. “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,” Atkins said, directly addressing concerns that previous SEC policies undermined innovation in self-custodial wallets and other onchain technologies.

Atkins specifically called out the prior administration’s stance, which suggested through enforcement actions that developers of self-custodial software could be considered brokers subject to SEC oversight. This approach, he argued, created barriers to innovation and limited user autonomy in the crypto ecosystem.

Broader Implications for DeFi and Crypto Markets

The proposed “innovation exemption” could have significant implications for DeFi platforms, which have faced regulatory scrutiny for their decentralized nature and lack of traditional intermediaries. By creating a framework that balances innovation with investor protections, the SEC aims to foster growth in the sector while addressing concerns about compliance. Atkins’ emphasis on notice-and-comment rulemaking, as opposed to regulation through enforcement, further underscores this shift toward transparency and collaboration with the industry.

While specific details of the exemption framework remain under development, Atkins’ comments suggest a focus on enabling DeFi platforms to operate more freely while ensuring consumer safeguards. This aligns with earlier industry calls for clearer guidance on issues like staking, which has been a point of contention due to regulatory uncertainty.

As of press time, according to Sosovalue data, the DeFi sector has seen a broad increase of 7.26% over the past 24 hours, with AAVE rising 14.36%, MKR gaining 13.15%, and Uniswap advancing 11.89%.

Looking Ahead

Atkins’ leadership marks a pivotal moment for the U.S. crypto industry, which has long sought a more predictable regulatory environment. His prior experience as an SEC commissioner from 2002 to 2008 and his work with crypto firms through his consultancy, Patomak Global Partners, position him as a knowledgeable advocate for digital asset innovation. However, challenges remain, including navigating political divisions—evidenced by the 52-44 Senate vote to confirm Atkins, split along party lines.

As the SEC’s Crypto Task Force continues its series of roundtables, with the next report expected in the coming months, the industry will be watching closely for concrete proposals on the “innovation exemption” and self-custody policies. For now, Atkins’ remarks signal a promising step toward a regulatory framework that supports the growth of DeFi and onchain technologies while preserving core principles of user autonomy.