Ethereum News Today: Regulators Stay Neutral as Blockchains Split Between Control and Freedom

Public blockchains continue to be affirmed as the regulatory standard in the evolving landscape of blockchain technology, despite the recent surge in corporate-controlled layer-1 (L1) networks. Variant Fund’s chief legal officer, Jake Chervinsky, emphasized that decentralized public blockchains remain the foundational standard for product development, even as companies like Circle and Stripe have launched their own L1s—Arceeee and Tempo, respectively. Chervinsky noted that no U.S. regulator has explicitly demanded the implementation of permissioned validator sets or built-in compliance tools, nor has Congress introduced legislation that would enforce such requirements. His position underscores the importance of maintaining base layer neutrality rather than compromising decentralization for regulatory benefits that have not been formally requested [1].

Venture capitalist Revaz Shmertz offered a contrasting perspective, suggesting that corporate L1s represent a form of regulatory arbitrage. He argued that regulatory agencies may act unilaterally through enforcement actions or guidance letters, independent of congressional inaction. According to Shmertz, corporate blockchain initiatives aim to preemptively satisfy compliance requirements, thereby avoiding the need for lobbying for broader crypto-friendly legislation. He further stated that this approach could lead to a "bifurcated adoption," where compliant corporate chains cater to institutional use cases while decentralized protocols remain dominant in retail and DeFi applications [1].

The DeFi Education Fund (DEF) submitted a letter to the U.S. Securities and Exchange Commission (SEC) on April 18, proposing five core principles for a "token safe harbor" framework. The proposal emphasized a technology-agnostic approach, focusing on mitigating activity-related risks rather than prescribing specific blockchain models. DEF advocated for broad eligibility criteria, allowing already-distributed tokens to qualify if they meet decentralization goals, rather than evaluating tokens solely at their genesis [1].

U.S. SEC Chairman Paul Atkins, during a recent press briefing, highlighted the need for regulatory clarity in the rapidly evolving digital asset landscape. He emphasized that the SEC is shifting its focus toward fostering innovation, particularly in digital assets and blockchain technology. Atkins noted that the agency’s "Project Crypto" initiative aims to provide clear and predictable regulatory frameworks to support innovation in the U.S. markets. He also underscored the importance of international cooperation, especially with the UK and Europe, to modernize financial systems and facilitate cross-border innovation [4].

The rise of public blockchains is also being supported by their inherent ability to provide secure, transparent, and scalable infrastructure. Public blockchains, such as Ethereum, have demonstrated their utility in hosting stablecoins and DeFi protocols. Ethereum, for instance, holds more than half of the stablecoin market and nearly 60% of the total value locked (TVL) in DeFi protocols. This dominance is attributed to Ethereum’s early adoption of smart contract capabilities, which enabled it to attract a large user and developer base [5]. Institutional adoption has further bolstered Ethereum’s growth, with corporate investments in Ethereum treasuries and the approval of spot Ethereum ETFs contributing to significant inflows in recent months [5].

The ongoing developments in the blockchain industry highlight a critical juncture where regulatory compliance and commercial control are key drivers of institutional adoption. While public blockchains are seen as the regulatory standard, corporate L1s are emerging as alternatives that prioritize compliance from the outset. However, whether these corporate chains will gain widespread adoption or if decentralized public blockchains will continue to dominate remains to be seen. The coming months will likely test the strength of these competing models as regulatory bodies and market participants navigate the complexities of the evolving digital economy [1].

Source:

[1] Legal expert affirms public blockchains remain regulatory standard despite corporate L1 launches (https://cryptoslate.com/legal-expert-affirms-public-blockchains-remain-regulatory-standard-despite-corporate-l1-launches/)

[2] Top Layer 1 (L1) Coins by Market Cap (https://www.coingecko.com/en/categories/layer-1)

[3] Public vs. Private Blockchains: Which Is Better? (https://www.dock.io/post/public-vs-private-blockchains)

[4] Digital Press Briefing: U.S. Securities and Exchange Commission Chairman Paul Atkins (https://www.state.gov/digital-press-briefing-u-s-securities-and-exchange-commission-chairman-paul-atkins)

[5] Ethereum: Can It Be a Long-Term Winner? (https://www.fool.com/investing/2025/09/06/ethereum-can-it-be-a-long-term-winner/)