Written by: Zuo Ye
The Great Depression of 1929 led to the establishment of the Securities Exchange Act of 1934 and the SEC, but whether this is fortunate or unfortunate depends on whether you are an e/acc accelerationist or have a perspective of freedom under regulation. The SEC has never prevented financial innovation or crisis since then.
In 1998, LTCM (Long-Term Capital Management) failed in Russian bonds using quantitative methods, almost causing a repeat of the 1929 Great Crisis, yet this did not hinder the enactment of the ATS (Alternative Trading System) regulations in 1999, where quantifying, hedging, and arbitraging fully embraced information technology.
After the 2008 financial crisis, regulations were initiated against dark pool trading, but dark pools still exist. In 2025, after Gary Gensler's departure, the SEC decided to embrace the new trends of the future—everything can be on-chain, and everything can be compliant.
On-chain: RWA is just the beginning; future trading, asset allocation, and income generation must revolve around on-chain processes, just as one would embrace blockchain technology as they do computers.
Compliance: Airdrops, staking, IXOs, and rewards will create a uniquely American super app (Reg Super-App), with all DeFi being re-Americanized.
The survival crisis of the SEC
The Great Depression created the SEC; cryptocurrency will end the SEC.
Timeline of SEC regulatory shift: Gary Gensler steps down → Crypto Task Force → Project Crypto
There are traces to follow; the changes in SEC's regulatory activities can be divided into Gary's dismissal in January, and the new cryptocurrency policy after the current chair Atkins took office in April, marked by the establishment of the Crypto Task Force, leading up to Project Crypto by the end of July, completing a comprehensive 'surrender' to crypto.
To understand why Project Crypto has emerged, one must look for answers from SEC's regulatory dynamics from April to July, during which there were frequent actions. On one hand, lawsuits against Ripple, Kraken, etc., need to end gracefully; on the other hand, companies like Coinbase and Grayscale are becoming increasingly powerful, actively requesting the SEC to relax regulations.
In particular, the Ripple case has become a symbol of the SEC's transition from 'enforcement-style regulation' to 'regulatory-style service.' The subsequent restart of the IPO process by Kraken proves that the crypto concept has been thoroughly accepted by the U.S. regulatory authorities, and Robinhood has also begun to actively promote tokenized stocks.
Approving physical staking and redemption of BTC/ETH ETFs is the most significant progress, but more cryptocurrencies and more forms are still in a one-case-at-a-time review status; for instance, Trump’s own Trump Group ETF is also in line.
Daring to obstruct America's crypto journey is no longer an ordinary SEC; heavy punches must be thrown!
Image description: SEC 2025 cryptocurrency regulatory paradigm shift, image source: @zuoyeweb3
Thus, Trump chose to play by unconventional rules, supporting the CFTC and initiating legislative actions such as the Genius Act. The CFTC is already on the path of expanding its powers, and the White House's cryptocurrency report further announces substantial acceptance of existing DeFi.
The SEC has previously 'transferred' stablecoin regulation to banking regulatory agencies, and more digital asset regulatory powers have been assigned to the CFTC. The question of where the SEC goes now has become a real issue that must be considered.
The more substantial Clarity Act has not yet officially become law. If the SEC does not take proactive actions soon, it will be completely eclipsed by the CFTC, especially since the issuance of stablecoins has essentially touched the core of securities law. The SEC must take the initiative to delineate regulatory jurisdictions from an administrative practice before the Clarity Act becomes law, creating established facts.
However, under the current framework, there is very little the SEC can do, such as approving more staking-based ETFs (like SOL), issuing any cryptocurrency ETFs, tokenized stocks, securities, etc., and approvals for crypto companies to go public and for treasury companies (DATCO). The SEC's attitude is to wait for change by dragging its feet, repeatedly delaying and pausing various topics.
On July 17, there were already rumors of a plan for a merger between the SEC and CFTC, just after the launch of SEC's Project Crypto, followed closely by the CFTC's Crypto Sprint plan; the details are not important.
The division of oversight between the SEC and CFTC will come to an end in the cryptocurrency era. The only choice for the SEC's departmental interests to maximize is to embrace the new era and abandon all the dogmas of the old world.
On-chain transformation of the real world
DeFi is fully compliant, marking the end of the offshore arbitrage era.
Previously mentioned, neither the Genius Act nor the Clarity Act specifically addressed DeFi regulation, the former only involving stablecoins and the latter being too macro. Now, the SEC's Project Crypto details regulations from an administrative perspective, covering all aspects of DeFi from the perspectives of people, finances, and regulations.
There is no need to go overseas; people can return to America.
In summary, what offshore exchanges and overseas foundations could do can now be done domestically in the United States.
Whether it is stablecoins, IXOs, or tokenization (stocks, bonds), although the regulatory affiliations differ, the SEC will not casually prosecute for illegal securities issuance as long as communication is clear.
Secondly, how the founder of Tornado Cash judged that the SEC has no authority to interfere, but the SEC can ensure the safety of developers, ensuring that builders prefer to develop in the U.S. and encourage healthy and orderly competition.
DeFi has rules; money comes back to America.
In summary, there is no need to engage in offshore shell games, nor is there a need to overly obsess over the degree of decentralization.
The token issuance, on-chain activities (staking, lending, trading, investing), and reward distribution involved in DeFi are all compliant, especially since self-custodied trading has been elevated to the height of 'American liberal values.' Various crypto-staking ETFs will be fully opened.
Finally, do not engage in offshore regulatory arbitrage. Everything can be invested, developed, and started in the U.S. to ensure that crypto occurs in America.
RWA has regulations; tokens are on the American chain.
In summary, on-chain transformation has officially become the main theme.
Compared to DeFi, RWA has more specific regulations, distinguishing various types such as stocks, bonds, equities, and physical assets. The window for tokenized stocks and tokenization in private markets (Pre-IPO) is now open.
This time will be a more profound transformation than computerization, from paper vouchers to electronic trading and then to full-on blockchain integration. Any asset that can be financialized will be tokenized, and the information gap between a few and the many will be completely eliminated; of course, this may take many years.
In the end, DeFi will become a new form of finance, rather than a supplement to TradFi, and ETH will become a new vehicle for American financial hegemony.
Image description: SEC Project Crypto framework, image source: @zuoyeweb3
The title of this section is inspired by the slogan of RWA L1 Rialo developed by Subzero Labs. This RWA will no longer be synthetic assets or virtual custodial issuances but will directly enable the possibility of any asset being on-chain. For example, the recently listed Figma also retains the option to issue tokenized stocks.
Stocks are tokenized stocks, and assets are tokenized assets.
Conclusion
A booster for financial bubbles or a necessary path for asset innovation.
From today onwards, Project Crypto can be said to be the moment for DeFi's securities law, but how much can the department's principles be implemented, and how much can they be accepted by Trump and Capitol Hill? That can only be left to fate.
However, the CFTC and SEC will completely merge, as it will be difficult to distinguish between digital commodities and digital securities in the future.
