Key Takeaways:
Project Crypto seeks to move traditional American financial markets on-chain.
Ahmad Shadid warns that while the initiative may succeed technically, it risks killing the original vision of DeFi by 2027.
Key risks to decentralization include mandatory licensing favoring large firms, and regulatory demands like pre-approval for smart contracts.
Programmable compliance represents a more dangerous form of regulatory oversight, he says.
The U.S. Securities and Exchange Commission’s “Project Crypto” isn’t the dawn of financial freedom, but the slow death of DeFi, says Ahmad Shadid, founder of decentralized GPU infrastructure provider io.net, valued at $4.5 billion.
Project Crypto seeks to move U.S. financial markets onto the blockchain. The SEC launched the initiative in July, with the stated goal of “unleashing the full potential of on-chain software in our securities markets.”
In an interview with Cryptonews, Shadid, who is also the CEO of emerging decentralized AI ecosystem O.xyz, said the SEC’s embrace of blockchain technology could lock in the very gatekeepers crypto was built to dismantle.
“We’re not building the future of financial freedom,” he said. “We’re building the most elegant financial prison in history, where the bars are made of code and the guards are algorithms.”
“The tragedy isn’t that traditional finance will adopt blockchain. It’s that they’ll claim they’ve decentralized while making the system more centralized than ever before.”
What is Project Crypto?
Project Crypto is the SEC’s attempt to bring traditional securities on-chain by “modernizing” old rules, allowing tokenized assets to trade alongside non-security crypto assets on regulated, blockchain-based platforms.
Announcing the initiative on July 31, SEC Chairman Paul Atkins said the Commission will draft “clear and simple rules of the road for crypto asset distribution, custody, and trading.”
It is a departure from legacy rules that have long been seen as obsolete and poorly suited to crypto. With the project, users can issue, trade, and settle regulated securities like stocks, bonds, and derivatives on-chain.
“Many of the Commission’s legacy rules and regulations do not make sense in the twenty-first century, let alone for on-chain markets,” Atkins said.
Project Crypto also supports the emergence of so-called “super-apps” — platforms that allow broker-dealers to offer a range of financial products, including tokens, crypto staking, and lending, with a single license.
Atkins said apps, like Coinbase’s recently launched one, will be a priority under his chairmanship. Super apps would replace the existing costly framework, subjecting firms to multiple regulatory authorities.
“Project Crypto will help ensure that the United States remains the best place in the world to start a business, develop cutting-edge technologies, and participate in capital markets,’ said Atkins.
“We will reshore the crypto businesses that fled our country, particularly those that were crippled by the previous administration’s regulation-by-enforcement crusade and ‘Operation Chokepoint 2.0,'” he added.
Project Crypto: Road to Centralization
The SEC is selling Project Crypto as a way of making financial markets more efficient and safer, but Shadid sees it as centralization in disguise, defeating the foundational principles of decentralized finance (DeFi).
“By 2027,” he says, “what we call DeFi will be indistinguishable from traditional finance.”
“Same gatekeepers, same power structures, same wealth concentration — just with smart contracts enforcing the rules instead of humans.”
DeFi was built to eliminate the inefficiencies of legacy finance. Anyone with a smartphone and an internet connection could lend, borrow, trade, or earn yields on tokens without needing a bank account or a broker.
For early adopters, this was more than just financial innovation: it was an ideological statement about access, equality, and autonomy. However, as crypto assets gained mainstream adoption, things started to change.
Exchanges became wealthy corporations, venture firms pumped money into crypto startups, and the “trustless” systems of old increasingly relied on admin keys, token votes, and other levers of centralized control.
Shadid fears Project Crypto will accelerate this shift, saying:
“We traded the dream of financial sovereignty for the nightmare of programmable compliance, and we’re calling it progress.”
When asked what parts of the SEC’s initiative pose the greatest risks, the O.xyz founder pointed to three areas:
Licensing: Regulations that require every platform, wallet, and service to obtain licenses will favor larger players with the “financial muscle” to comply. Small teams, often the lifeblood of open-source innovation, may be locked out.
All-in-one platforms: As new rules drive consolidation, big firms are likely to roll out integrated platforms that handle custody, trading, lending, and other services. The convenience is tempting, but Shadid warns that “it will lock users into one ecosystem and centralize control.”
Programmable compliance: Perhaps the most insidious change, in his view, is a move toward automated regulatory enforcement. “Rules that require mandatory KYC for wallets, ban anonymous access, or require pre-approval before one can launch a smart contract [will create] a fenced-in version of crypto,” Shadid said.
“Put all these together, and it becomes clear: the issue isn’t about safety; it’s about a quiet concentration of power in a few hands.”
Regulatory Clarity is a Double-Edged Sword
If regulators set the stage for centralization, the industry itself plays no small role in enabling it. From venture capital firms to major exchanges, Shadid says, the lure of profit has eroded DeFi’s original philosophy.
“The involvement of big money in a project often skews the team’s priorities. Many may end up creating products that cater to investors and boards instead of building open systems,” he said, adding:
“The space stopped being about giving users more power and started looking like a new version of the system it was supposed to replace.”
Shadid is not all doom and gloom. He believes Project Crypto could still deliver real benefits for both developers and users, telling Cryptonews:
“Stablecoin guidelines, simplified tax frameworks, and improved protection for users are all positive steps.”
Over the years, entrepreneurs have built products in a fog of legal uncertainty, unsure which tokens might be labeled securities or run afoul of the SEC’s out-of-date rules. In that sense, regulatory clarity was long overdue, said Shadid.
According to the io.net founder, the risk is not in the existence of rules but in their execution, especially through so-called ‘programmable compliance.’
Unlike traditional regulations, where investigations, hearings, and appeals provide room for human interpretation, blockchain-based compliance leaves no room for context. Smart contracts enforce rules in real time and without exception.
For example, a wallet flagged as suspicious may be barred from trading before its owner even knows why. Shadid is worried such a system could be more dangerous than the human bureaucracies decentralized finance was supposed to improve upon.
“There’s little room for context in programmable compliance, which blocks actions before they happen, making it silent, automatic control, rather than just enforcement.”
Holding Algorithms To Account
Who watches algorithms, if they are the new guards in DeFi?
According to Shadid, transparency and governance are key. He argues that open-source code, frequent audits, and public debate must underpin any system that claims to be decentralized, like the SEC’s Project Crypto.
“People must see the code, understand what it does, and know when it changes,” he said. “There shouldn’t be any hidden logic or black boxes.”
User control is just as important. Without community participation, even transparent systems can become authoritarian. “We need actual control over these technologies,” he added. “There must be open governance…”
Ignoring the risks, Shadid said regular crypto users still hold some power to resist centralization. “They need to vote with their money,” he stated. “Go for platforms that respect their freedom and don’t require logins or collect personal information.”
Users should also ask questions, refusing to accept “polished” branding or “big names” as proof that a project is safe.
“The more ordinary users know, the harder it will be for anyone to rewrite the rules in the dark,” said Shadid. “Power stays in check when people are paying attention.”
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