"SEC Shifts Focus Towards Cryptocurrency, Potentially Boosting Ethereum and DeFi Significantly"
The U.S. Securities and Exchange Commission (SEC) is embarking on a new phase in its approach to digital assets, as suggested by Matt Hougan, Chief Investment Officer at Bitwise Asset Management. The catalyst for this change is Project Crypto, a Commission-wide initiative announced on July 31, 2025, by SEC Chair Paul Atkins[1].
Project Crypto aims to modernize the securities laws and regulations to enable the U.S. financial markets to move "on-chain" and fully embrace blockchain technology[2][4]. Key aspects and implications of the SEC’s new approach under Project Crypto include:
- Clearer classification and regulation of crypto assets: Chair Atkins stated that most crypto assets are not securities, correcting earlier confusing applications of the Howey test. The SEC is developing clear guidelines to distinguish whether particular digital assets should be regulated as securities, stablecoins, digital commodities, or digital collectibles[1][3][4].
- Purpose-fit disclosures, exemptions, and safe harbors for crypto distributions: The SEC will propose rules for crypto offerings such as initial coin offerings (ICOs), airdrops, and network rewards, with the goal of facilitating compliant capital raising and protecting investors, while encouraging entrepreneurship[1][3].
- Integration of tokenized securities and DeFi: The initiative supports the tokenization of traditional securities (stocks, bonds, partnership interests) and enabling their trading on decentralized finance (DeFi) protocols like automated market makers without a central intermediary. This reflects a shift toward supporting decentralized innovation within a regulated framework[1][2].
- Modernizing custody and intermediaries regulation: The SEC will explore adapting existing custody rules and licensing frameworks to accommodate digital asset custody and trading by intermediaries, recognizing that some investors will rely on intermediaries despite the emphasis on self-custody[3].
- Use of interpretive and exemptive relief in the near term: Until new rules are adopted, SEC staff have been instructed to use their existing authorities to ensure current regulations do not stifle innovation and to facilitate onshoring of crypto asset distributions back to the U.S.[1][4].
The broader implications are significant: Project Crypto signals a major policy shift aiming to solidify the U.S. as a global leader in digital finance and crypto innovation, moving away from the previous SEC stance perceived as overly restrictive. It aligns with the Trump administration's executive order on digital assets and legislative efforts like the GENIUS Act for stablecoin regulation. If successful, it could reshape capital markets by integrating blockchain technology, encourage domestic innovation, and increase regulatory clarity and efficiency for participants across the digital asset ecosystem[2][3][4].
SEC Commissioner Hester Peirce, in a separate speech at the Science of Blockchain Conference, called for stronger protection of financial privacy and crypto users' rights[5]. Peirce's speech, however, does not directly address the potential impact of Atkins' vision on the crypto market, blockchain-based infrastructure, or digital asset regulation.
Matt Hougan, on the other hand, stated that he has to think bigger and move to a faster timeline after reading the speech. He believes that if the potential impact of Atkins' vision was not priced into the market for him, it was likely not priced in for others as well[6]. Hougan identified three key themes poised to benefit from a friendlier SEC stance: the crypto market, blockchain-based infrastructure, and digital asset regulation.
Notably, the speech does not mention Layer 1 smart contract platforms like Ethereum and Solana, public trading platforms such as Coinbase and Robinhood, or decentralized finance protocols, including Uniswap and Aave[6]. It does, however, include a blueprint to position the United States as a leader in the global crypto economy.
Peirce's speech adds to the regulatory narrative surrounding digital assets, highlighting the benefits of DeFi and privacy-preserving technologies like zero-knowledge proofs, while criticizing the country's financial system's surveillance practices and arguing that the Bank Secrecy Act and tools like the SEC's Consolidated Audit Trail compromise individual freedom[7].
In summary, Project Crypto under Chair Atkins represents a proactive, modernized regulatory framework focusing on clarity, innovation, and integration of digital assets into the mainstream U.S. financial system, with significant implications for market structure, investor protection, and America's competitive position in digital finance globally.
- The SEC's Project Crypto initiative aims to modernize the U.S. financial markets by enabling them to move "on-chain" and fully embrace blockchain technology, which includes Ethereum as a major Layer 1 smart contract platform.
- The SEC's new approach under Project Crypto will result in clearer classification and regulation of crypto assets, including Ethereum, as Chair Atkins stated that most crypto assets are not securities.
- The integration of tokenized securities and DeFi, which can include Ethereum-based decentralized finance protocols like Uniswap and Aave, is supported by Project Crypto.
- The potential impact of Project Crypto on the crypto market, blockchain-based infrastructure, and digital asset regulation, including Ethereum and other Layer 1 platforms, has been identified by Matt Hougan as a key theme that could benefit from a friendlier SEC stance.
