Source: SEC Chair of the United States; translated by AIMan@Golden Finance
I want to talk to you about the 'Project Crypto' that Commissioner Hester Peirce and I jointly proposed. Project Crypto will become the North Star for the SEC to assist President Trump in realizing his historic goal of making the United States the 'world crypto capital.'
Before discussing our plans to establish dominance in the crypto market, allow me to take a moment to review some turning points in financial market history that bear similarities to the turning point we are currently facing, so that the future we shape can be worthy of the legacy we inherit.
The evolution of capital markets: From the sycamore tree to the blockchain
The winds of innovation have always swept through our capital markets and often feel unstoppable. In 1792, the winds of innovation blew through the branches of a sycamore tree, where a couple dozen stockbrokers gathered beneath its shade to create the precursor to the New York Stock Exchange. This humble agreement—fewer than a hundred words, handwritten on a piece of sheepskin—opened the door to an intricate architecture that would control the flow of capital for generations to come. (Note: The Sycamore Tree Agreement was an agreement made by 24 brokers on Wall Street beneath a sycamore tree on May 17, 1792, considered the origin of the NYSE's rules.)
For centuries, our markets have never stagnated. They have continually expanded, developed, and reshaped with the ideas and technologies of their time. The vitality of the markets comes from the people who participate in them. The markets guide human wisdom toward society's most challenging problems by rewarding those who develop the most innovative and purchase-worthy solutions. The market is Adam Smith's invisible hand, enhancing those who act for the public good—even as they pursue their own interests.
The SEC's duty is to maintain the market, allowing the sparks of human creativity and skill to flourish for the benefit of society. Throughout its history, the SEC has both fostered innovation and regrettably stifled it. Fortunately, progress always follows its patterns. When our regulatory stance can welcome innovation with thoughtful consideration rather than fear, America's leadership will only become stronger.
In the 1960s—I can proudly say before my time—Wall Street was in a bull market. But behind the scenes, our market mechanisms struggled to keep up. Most clearing and settlement transactions involved costly and cumbersome processes. Stacks of paper stock certificates needed to be pushed back and forth between Wall Street and other financial districts in the U.S. by staff with carts. It was a sight from another century, as people worked hard to meet the demands of the modern securities market.
In fact, the paper-based clearing and settlement systems originally built for a gentler era have begun to buckle under the strain of soaring trading volumes. One company's delay has held up another's work. Securities were lost or stolen. Cases of insolvency surged. Many capital-strapped broker-dealers also faced difficulties due to trading interruptions. In desperation, trading hours were shortened, and exchanges ultimately closed on Wednesdays to allow firms to address the backlog of certificates.
The then-chair of the SEC described the collapse due to outdated systems as 'the longest and most severe crisis in the securities industry for 40 years... companies went under, and investor confidence plummeted.' Notably, the SEC took proactive steps to address the so-called 'paperwork crisis.' The agency helped market participants form the Depository Trust Company (DTC), fundamentally changing the way securities are held and traded. Now, stock ownership can be transferred through computerized book entries, eliminating the need to physically move paper certificates from clients to brokers, from brokers to brokers, and from brokers back to clients. The certificates themselves are securely stored in vaults, while ownership is transferred electronically, laying the foundation for the modern clearing and settlement system still in use today.
Just as this automatic ticker displayed was a breakthrough at the time, fundamentally changing the way Americans accessed market information, line by line, trade by trade. But breakthroughs do not belong to the past.
By the late 1990s, the popularity of electronic trading systems (ATS) surged, disrupting old assumptions about how markets operated. SEC Chairman Arthur Levitt also believed that the SEC should provide regulatory flexibility for innovations in electronic markets. Therefore, the (Regulation Alternative Trading Systems, ATS) passed in 1999 allowed ATS to be regulated like broker-dealers, rather than like exchanges.
So this brings me to today. Today is a moment when American ambition is needed. Today is a moment that requires a project capable of unleashing that ambition.
Our regulatory framework does not need to cling to a simulated past—this is detrimental to new realms. After all, the future is arriving at full speed—the world will not wait. The U.S. must do more than just keep pace with the digital asset revolution. We must drive it.
Building the future: America's leadership in the golden age of finance
Therefore, today, I want the world to know that under my leadership, the SEC will not sit idly by and watch as innovation flourishes overseas while our capital markets stagnate. To realize President Trump's vision of making America the world capital of cryptocurrency, the SEC must comprehensively consider the potential benefits and risks of transitioning our markets from an off-chain environment to an on-chain environment.
We are at the beginning of a new era in market history. As I mentioned earlier, today I announce the launch of 'Project Crypto,' a broad initiative of the SEC aimed at updating securities rules and regulations to enable on-chain capabilities in the U.S. financial markets.
Just weeks ago, President Trump signed the (GENIUS Act), ensuring that the U.S. will continue to maintain its leadership in the global payments arena with a stablecoin-backed regulatory framework. At the signing of the (GENIUS Act), I was pleased that President Trump supported Congress's efforts to pass cryptocurrency market structure legislation by the end of the year. I commend the House for garnering such strong bipartisan support and look forward to working with the Senate to develop market structure legislation based on the House's work to ensure that our markets are free from regulatory interference in the future, solidifying America's status as the world capital of cryptocurrency.
Yesterday, the President's Digital Asset Market Working Group released the PWG report, which clearly recommends that the SEC and other federal agencies establish a framework to maintain America's dominance in the crypto asset market. This report serves as a blueprint for ensuring that the U.S. leads in blockchain and crypto technology. The President stated last week that he hopes 'the entire world operates under the pillars of American technology.' I stand ready to assist in this endeavor.
It is for this reason that I have launched 'Project Crypto' and directed SEC's policy divisions to collaborate with the crypto working group led by Commissioner Peirce (PWG) to swiftly develop proposals to implement the PWG's recommendations. 'Project Crypto' will help ensure that the United States remains the best place in the world for entrepreneurship, cutting-edge technology development, and participation in capital markets. We will help crypto companies that have fled the U.S. return, especially those that have been struggling due to the previous administration's enforcement actions and Operation Chokepoint 2.0. Whether from incumbent firms or new entrants, the SEC welcomes all market participants eager to innovate.
Following the recommendations of the PWG report, I have instructed SEC staff to draft clear and concise rules for the distribution, custody, and trading of crypto assets for public comment. While SEC staff work to complete these regulations, the SEC and its staff will consider using interpretive, exemptive, and other authorities in the coming months to ensure that outdated rules and regulations do not stifle innovation and entrepreneurship in the United States. Many of the SEC's legacy rules and regulations are outdated in the 21st century, let alone for on-chain markets. The SEC must update its rulebook to ensure that the regulatory moat does not hinder industry progress and competition—whether from new entrants or existing firms—thereby harming the interests of the general public.
Crypto Onshoring: Project Crypto series initiatives
Now, 'Project Crypto' will involve a series of initiatives from the SEC.
First, we will work to bring crypto asset distribution back to the United States.
The era of complex offshore corporate structures, decentralized theaters, and chaotic security statuses has come to an end. President Trump has stated that America is in a golden age—under our new agenda, so too will our crypto asset economy.
According to the PWG report, my top priority is to establish a regulatory framework for U.S. crypto asset issuance as soon as possible. Capital formation is a core mission of the SEC, yet the SEC has long neglected the market's demand for choice and suppressed financing based on cryptocurrencies. As a result, the crypto market no longer provides crypto assets and deprives investors of the opportunity to leverage this technology for productive economic enterprises. The SEC's ostrich mentality—and its shoot-first-ask-questions-later approach—are now a thing of the past.
Although the SEC has previously stated that most crypto assets are not securities, confusion around the application of the 'Howey Test' has led some innovators to preemptively treat all crypto assets as securities. American entrepreneurs are modernizing various legacy systems and tools using blockchain technology. Senator Bernie Moreno of Ohio is such an entrepreneur; he is a successful businessman and newly elected senator who founded a company that transfers car ownership onto the blockchain before becoming a senator. He recognized the need to improve the efficiency of ownership transfers and designed a practical solution using new technology. These entrepreneurs need—and should have—clear rules to determine whether securities laws apply to their businesses.
I have instructed SEC staff to develop clear guidelines for market participants to determine whether crypto assets are securities or bound by investment contracts. Our goal is to help market participants classify crypto assets into categories such as digital collectibles, digital commodities, or stablecoins and assess the economic realities of transactions. This approach allows market participants to determine based on clear guidelines whether any unfulfilled promises or obligations from the issuer cause the crypto asset to be bound by investment contracts.
Moreover, it should not be considered a security. We need a regulatory framework for crypto asset securities that allows these products to thrive in the U.S. market. Many issuers prefer the product design flexibility that securities laws provide, and investors will also benefit from the opportunity to gain allocations, voting rights, and other typical features of securities. If a project does not follow its intended action plan, it should not be forced to establish decentralized autonomous organizations and offshore foundations, or to decentralize prematurely. I am pleased to see new use cases for crypto asset securities in business, such as the ability to participate in blockchain network consensus using tokenized equity.
Therefore, for crypto asset transactions subject to securities laws, I have asked staff to propose appropriate disclosure, exemption, and safe harbor proposals, including for so-called 'initial coin offerings,' 'airdrops,' and network rewards. For these types of transactions, our goal should be for issuers not to exclude Americans from their offerings to avoid legal complexities and litigation, but rather to include Americans to enjoy legal certainty and a more permissive regulatory environment. I believe that if we adhere to this principle, an innovative Cambrian explosion may be on the horizon.
Additionally, many companies seek to 'tokenize' their common stock, bonds, partnership interests, and other securities, or to tokenize third-party securities. Due to regulatory challenges in the U.S., such innovations are mostly occurring overseas today. I have also heard from our regulatory policy staff that many companies, from well-known firms on Wall Street to unicorn tech companies in Silicon Valley, are lining up to request our assistance in tokenization. I have instructed SEC staff to work with companies seeking to issue tokenized securities within the United States and to provide relief where appropriate to ensure that Americans are not left behind.
Enhancing freedom: Choice of custodians and trading venues
Second, in order to achieve the President's goals, the SEC has a responsibility to ensure that market participants have the maximum choice in deciding where to custody and trade crypto assets.
As I have stated before, the right to self-custody private property is a core American value. I firmly believe that the right to use self-custodied digital wallets to maintain personal crypto assets and participate in on-chain activities such as Staking is indispensable. However, some investors will still rely on SEC-registered entities (such as broker-dealers and investment advisors) to hold assets on their behalf, and these firms will face additional regulatory requirements in doing so. My primary mission during my chairmanship is to implement the recommendations of the PWG report and update the SEC's custody requirements for registered intermediaries.
The previous administration's 'special purpose broker-dealer' framework, SAB 121, and 'Operation Chokepoint 2.0' have led to a scarcity of custodian service providers in today's market. Existing custody rules were not designed with crypto assets in mind. I have instructed staff to consider how best to adjust the existing framework to facilitate the custody of crypto assets, including possible exemptions or other relief measures in addition to modifying the rules themselves.
As suggested in the PWG report, market participants 'should be allowed to engage in multiple businesses under the most efficient licensing framework possible.' We should not force market participants to adapt to a Procrustean regulatory framework for the sake of regulation. I support empowering them to choose the most effective regulatory framework, provided that framework adequately protects investors.
Promoting super applications: Horizontal integration of product offerings
Third, a key task during my chairmanship is to allow market participants to innovate using 'super apps.'
I am often asked, 'What does a super app mean?' Simply put: securities intermediaries should be able to offer a wide range of products and services under one license in the same roof. Brokers with alternative trading systems should be able to facilitate trading of non-securities crypto assets, as well as crypto asset securities, traditional securities, and other services (such as crypto asset staking and lending), without applying for licenses in fifty different states or multiple federal licenses. There is nothing in federal securities law that prohibits SEC-registered trading venues from listing non-securities products on their platforms; I have directed SEC staff to develop further guidance and proposals to ultimately turn this 'super app' vision into reality. They might even call it 'Reg Super-App.'
In line with the PWG report, the SEC should work with other regulatory bodies to strive to establish the most efficient licensing framework for SEC-registered entities. They should not be unnecessarily burdened by multiple regulatory agencies or regulatory systems. This model works well for banks, which are broadly exempt from many overlapping regulatory frameworks, such as the registration of broker-dealers and clearing agencies. Regulators should provide the necessary minimum effective oversight to protect investors while allowing entrepreneurs and businesses to thrive. We should not impose overly paternalistic regulations, as this could force them to relocate overseas or undermine the international competitiveness of American businesses. Our regulators should unleash the power of venue and product competition for the benefit of all Americans. We should not artificially restrict business models and impose duplicative regulatory costs on American companies, which often tend to burden the largest companies that are more capable of bearing such regulatory loads.
Based on the recommendations of the PWG, I have instructed SEC staff to create a framework that allows non-securities crypto assets and crypto asset securities to trade in parallel on SEC-regulated platforms. Additionally, I have asked staff to evaluate the use of SEC authorizations allowing non-securities crypto assets bound by investment contracts to trade on unregistered trading venues. I eagerly anticipate seeking such solutions, as they not only allow state-licensed crypto asset platforms that are not registered with the SEC to launch certain crypto assets but also pave the way for CFTC-regulated platforms to offer products with margin capabilities—even without Congress granting the CFTC any additional authorizations, thus releasing greater liquidity for these assets.
Unlocking the American market: Large, exquisite on-chain software systems
Fourth, I have instructed SEC staff to update outdated institutional rules and regulations to unleash the potential of on-chain software systems in our securities markets.
The forms and scales of on-chain software are diverse—some systems are truly decentralized and operate without any intermediary. Other on-chain software systems have operators. Both types of on-chain software should have a place in our financial markets. Any regulatory market structure for crypto assets must open a path for software developers to create on-chain software systems that operate without any central intermediaries. DeFi software systems (such as automated market makers) facilitate automated, non-intermediated financial market activities. Federal securities laws have always assumed that the involvement of intermediaries requires regulation, but that does not mean we should intervene to force the presence of intermediaries when the market can operate without them.
We will create space in the market for both of these models, specifically by: protecting pure software code publishers, reasonably distinguishing between intermediary activities and non-intermediary activities, and establishing reasonable and feasible rules for intermediaries seeking to operate on-chain software systems. DeFi and other forms of on-chain software systems will become part of our securities markets without being drowned in redundant or unnecessary regulation.
In order to turn this vision into reality, we need to consider making some modifications to the rules. For example, to accommodate the trading of on-chain tokenized securities, we may need to explore revisions to the (National Market System Rules) (Reg NMS), and we also need to take regular measures to correct any market distortions resulting from this. Many of you may remember that two decades ago, I co-authored a lengthy dissent with SEC Commissioner Cynthia Glassman opposing the passage of (National Market System Rules). Given that we have endured two decades of prescriptive requirements that have distorted market activities and hindered the development of the securities market, this dissent now seems even more salient. The clear intent of Congress was 'to guide the development of the national market system through competitive forces, rather than unnecessary regulation.' I will seek ways to return to this intent to promote innovation and competition in our markets.
Promoting innovation: Commercial viability is our true North Star
Finally, innovation and entrepreneurship are the engines of the American economy.
President Trump described America as a 'Nation of Builders.' Under my leadership, the SEC will encourage America's Builders rather than stifle them with red tape and one-size-fits-all rules. The SEC is actively considering industry requests that may initiate innovative activities, while also considering an innovation exemption that allows registrants and non-registrants to quickly bring new business models and services to market that do not fully comply with our existing rules and regulations. The SEC will continue to ensure that market participants adhere to certain conditions and requirements designed to achieve the policy goals of federal securities laws.
According to my vision for innovation exemptions, innovators and visionaries will be able to bring new technologies and business models to market immediately without having to comply with incompatible or cumbersome prescriptive regulatory requirements that hinder productive economic activity. Instead, they will be able to comply with certain principle-based conditions aimed at achieving the core policy goals of federal securities laws. These conditions could include, for example, a commitment to regularly submit reports to the SEC, inclusion of a whitelist or 'verified pool' feature, and restrictions on tokenized securities that do not meet compliance functionality standards (e.g., ERC3643). I encourage market participants and SEC staff to keep commercial viability in mind when considering various models.
Conclusion
As we advance these priorities, I look forward to working with my colleagues in this administration to make the United States the global hub for cryptocurrency. This represents not only a regulatory shift but also a generational opportunity.
From the leaves of the sycamore tree to the ledger on the blockchain, the winds of innovation continue to blow—and our task is to let this tide propel American leadership forward.
After all, ladies and gentlemen, we have never been content to follow. We will not sit idly by. We will lead, we will build. And we will ensure that the next chapter of financial innovation is written right here in the United States.