SEC Chair Paul Atkins has announced that the U.S. Securities and Exchange Commission is moving to formalize an "innovation exemption" for cryptocurrency and fintech startups, with the proposal expected to be finalized by the end of 2025. This initiative aims to address years of regulatory uncertainty that pushed crypto development overseas, which Atkins described as "four years, at least" of repression under the previous Biden administration's "regulation by enforcement" approach led by former Chair Gary Gensler.
The exemption would create a conditional exemptive relief framework, allowing decentralized projects to operate under temporary, supervised conditions while broader rulemaking takes shape. This is intended to lower barriers for experimentation in areas like DeFi, tokenization, and payments, without the fear of retroactive enforcement. Industry leaders, such as Wendy Fu, CEO of Momentum Finance, noted that it could let projects "test their ideas without burning millions on lawyers first," while Jakob Kronbichler, CEO of Clearpool, emphasized it could "bridge the gap between innovation and regulation in the U.S. market."
However, progress is currently stalled due to a U.S. government shutdown, and the SEC must carefully craft the language to retain fiscal guardrails and prevent instability. Notably, Ethereum governance tokens spiked on the news, reflecting immediate market optimism. Atkins reiterated his confidence in delivering the exemptions as a top priority to encourage innovators to operate in the United States.