SEC Considers New Rules for Onchain Trading and Crypto Vaults

In a move that could signal a fundamental shift in how the United States governs digital assets, SEC Chair Paul Atkins has indicated that the agency is moving toward a framework of formal rulemaking for the next generation of financial technology. Speaking on Friday at the AI+ Expo in Washington, Atkins outlined a vision where the agency provides clear “rules of the road” for onchain markets and AI-driven finance, moving away from the contentious era of regulation by enforcement.

The announcement comes as the financial sector experiences an accelerating convergence of artificial intelligence and blockchain technology. Atkins argued that the current regulatory landscape, designed for a world of centralized intermediaries, is ill-equipped to handle software-driven markets that automate trading, settlement, and custody in a single protocol. By pursuing formal rulemaking, the SEC aims to provide the industry with the legal certainty required to scale hybrid models that blend traditional finance with decentralized infrastructure.

This pivot is particularly significant for firms integrating AI-powered financial applications and blockchain-based settlement. For years, the industry has pushed for a transition from court-based precedents to a codified set of rules that clearly define what constitutes a security and how a decentralized protocol can comply with federal law without needing a centralized board of directors or a physical headquarters.

Addressing the ‘Intermediary Gap’ in Blockchain Protocols

At the heart of the SEC’s current challenge is a structural mismatch between 20th-century law and 21st-century code. Historically, securities regulations were built around a fragmented ecosystem of specialized intermediaries: brokers who execute trades, exchanges that match buyers and sellers, and clearinghouses that ensure the final settlement of assets. Each of these entities has specific registration requirements and oversight mandates.

However, Atkins noted that newer blockchain systems often combine these disparate functions into a single software protocol. When a single piece of code handles the trade, the clearing, and the settlement onchain, the traditional definitions of “broker” or “exchange” no longer neatly fit. This “all-in-one” nature of blockchain protocols has created a regulatory gray area that the SEC now seeks to resolve through formal rulemaking rather than through individual lawsuits.

By clarifying how the agency views these hybrid traditional-decentralized market models, the SEC hopes to foster an environment where innovation can occur within a legal framework. The goal is to ensure that investor protections remain robust even when the “middleman” is a smart contract rather than a corporate entity.

Focus on Crypto Vaults and Onchain Settlement

While the broad vision focuses on AI and automation, Atkins highlighted specific technical areas that require urgent regulatory clarity. Chief among these are “crypto vaults” and blockchain settlement infrastructure. Crypto vaults—which often serve as automated custody solutions or yield-generating vehicles—have operated with varying degrees of transparency and oversight, leaving investors vulnerable to systemic risks or protocol failures.

Similarly, the transition to onchain settlement—where the transfer of ownership and the payment occur simultaneously and nearly instantaneously—threatens to disrupt the traditional clearinghouse model. The U.S. Securities and Exchange Commission is now considering how to regulate this infrastructure to prevent systemic collapses while embracing the efficiency gains of blockchain settlement.

The focus on these areas suggests that the SEC is looking beyond simple token classification and is instead examining the actual plumbing of the financial system. By regulating the infrastructure—the vaults and the settlement layers—the agency can potentially mitigate risk at the source rather than chasing individual actors after a failure has occurred.

Key Areas Targeted for New Rulemaking

The Intersection of AI and Automated Finance

The timing of these remarks at the AI+ Expo underscores the SEC’s recognition that AI is not just a tool for analysis, but a driver of market structure. AI-powered financial systems are increasingly capable of executing complex strategies and managing portfolios with minimal human intervention. When these AI agents operate on blockchain-based markets, the speed and volume of trading can escalate far beyond the capacity of traditional monitoring systems.

Atkins framed the SEC’s effort as part of a broader shift toward “automated finance.” In this vision, the agency must determine how to hold entities accountable when a financial decision is made by an algorithm and executed by a decentralized protocol. This involves rethinking concepts of “intent” and “negligence” in a world where the software is the primary actor.

The push for rulemaking is intended to prevent a scenario where AI-driven finance evolves in a vacuum, potentially creating new forms of systemic risk that the SEC cannot address until a crisis occurs. By establishing rules for AI-driven financial applications now, the agency aims to balance the drive for efficiency with the necessity of market stability.

What This Means for Market Participants

For institutional investors and fintech developers, the shift toward formal rulemaking is generally viewed as a positive development. The “regulation by enforcement” approach—characterized by high-profile lawsuits and ambiguous guidance—has historically discouraged traditional financial institutions from fully integrating blockchain technology due to the risk of unforeseen legal liabilities.

If the SEC successfully implements a clear set of rules for onchain markets, it could trigger a wave of institutional adoption. Banks and asset managers would have a compliant pathway to move trading and settlement activity onchain, potentially reducing costs and increasing the liquidity of digital assets.

However, the process of formal rulemaking is often slow and subject to public comment and political pressure. The industry will be watching closely to see whether the proposed rules are flexible enough to accommodate the rapid evolution of technology or if they inadvertently stifle innovation by applying outdated concepts to new tools.

Stakeholders affected by these changes include:

• DeFi Protocol Developers: Who will need to align their software architecture with new SEC mandates.
• Institutional Custodians: Who must adapt their “vault” services to meet new regulatory standards.
• Retail Investors: Who may benefit from increased transparency and standardized protections in onchain markets.
• Algorithmic Traders: Who will face new disclosure or registration requirements for AI-driven systems.

As the SEC begins the process of drafting these rules, the dialogue between the regulator and the regulated will be critical. The transition from a litigious relationship to a collaborative rulemaking process could define the trajectory of the U.S. Financial system for the next decade.

The next confirmed checkpoint for the industry will be the publication of the SEC’s formal notice of proposed rulemaking, which will outline the specific legal changes and open the floor for public comment. We will continue to monitor the SEC’s official filings for the exact timeline of these proposals.

Do you believe formal rulemaking will accelerate the adoption of onchain finance, or will it create too many hurdles for innovation? Share your thoughts in the comments below.