SEC Chair Paul Atkins Advocates for Self-Custody Rights in Crypto Regulation

SEC Chair Paul Atkins has recently voiced strong support for self-custody rights in cryptocurrency regulation, marking a notable shift in the regulatory landscape. During a roundtable discussion titled "DeFi and the American Spirit," Atkins emphasized that the right to self-custody is a fundamental American value. This perspective contrasts with previous regulatory approaches that often relied on enforcement and broad interpretations of securities laws.

Atkins' comments were part of a broader discussion involving regulators and industry leaders, where he and other Republican commissioners argued that software developers should not be held liable for how decentralized tools are used. He rejected the idea that writing code for financial transactions constitutes a regulated activity, a stance echoed by Commissioner Hester Peirce, who warned against infringing on First Amendment rights.

The push for greater self-custody rights and regulatory clarity in the crypto and DeFi sectors could potentially unleash innovation and growth. Atkins directed SEC staff to explore exemptions or guidance that would allow DeFi platforms to operate with fewer barriers. This proposal aims to support on-chain financial systems and reflect the technological shift toward decentralized models.

DeFi, or decentralized finance, refers to blockchain-based tools that replicate traditional financial services such as lending, trading, and insurance without relying on centralized intermediaries. These platforms have long existed in a gray area of U.S. financial regulation, with developers often facing investigations or uncertainty about their legal status. Atkins called for reevaluating legacy frameworks and assessing whether new guidance or rulemaking would help entities interact with DeFi tools while remaining compliant.

This change in direction coincides with a broader shift at the SEC following the departure of former Chair Gary Gensler and the arrival of new leadership. Under the new administration, the SEC has rolled back several enforcement actions and launched a Crypto Task Force focused on industry engagement. The roundtables, held throughout the past few months, covered various topics including custody, trading, tokenization, and securities definitions. The latest discussion on DeFi capped the series, reinforcing the agency’s pivot from adversarial enforcement to rulemaking tailored to emerging technologies.

Atkins' support for self-custody rights is part of a broader effort to encourage on-chain innovation by easing regulations. He defended Bitcoin self-custody, calling digital assets resilient and key to financial sovereignty. This stance contrasts with previous SEC leadership, which often viewed digital assets with skepticism and imposed stringent regulations.

The SEC's new approach aims to protect developers and enable new blockchain-based systems to thrive. By exploring an "innovation exemption," the SEC hopes to create a regulatory environment that fosters growth and innovation in the crypto and DeFi sectors. This shift could have significant implications for the future of digital finance, as it signals a more supportive regulatory stance towards decentralized technologies.