Crypto Mom Peirce Speaks: Developing blockchain is just coding; don't treat DeFi code as securities

SEC Commissioner Hester Peirce states that developing blockchain code is essentially open-source software and should not be treated as securities intermediaries. She points out that the encryption world is filling up with brokers, dealers, and clearinghouses under the first rule, but blockchain infrastructure itself should not be hijacked by the same set of rules.
(Background: Crypto Mom Hester Peirce lists the SEC Cryptocurrency Task Force's "Top Ten Priorities," revealing a new regulatory landscape in the U.S.)
(Additional context: SEC Crypto Mom Hester Peirce strongly supports privacy tools: protecting financial privacy is equivalent to safeguarding national security)

Table of Contents

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• "SEC Rulebook Filled with Intermediaries"
• Peirce’s Core Arguments from Firsthand Sources
• Overall Shift in SEC Regulation
• Lessons from Domestic Practices: What Happens When Infrastructure Is Hijacked First?

U.S. SEC Commissioner Hester Peirce said during a speech at Princeton University’s IC3 Blockchain Camp on Tuesday that the act of developing blockchain and DeFi code is fundamentally publishing open-source software and should not automatically be labeled as securities intermediaries.

In her official SEC statement, Peirce pointed out that many blockchain projects only need to release open-source software, an activity "usually protected by the First Amendment of the U.S. Constitution."

"SEC Rulebook Filled with Intermediaries"

Peirce is a familiar figure in the crypto community, known as "Crypto Mom." In her speech, she directly highlighted the SEC’s regulatory logic:

"The SEC’s rulebook is full of intermediaries: brokers, dealers, exchanges, clearinghouses, transfer agents, investment advisors, and investment companies. Yet, when you look at the crypto world, you also see brokers, dealers, exchanges, clearinghouses, transfer agents, investment advisors, and investment companies."

But she immediately asks: should the rules designed for centralized financial institutions also apply to blockchain infrastructure itself?

Peirce’s Core Arguments from Firsthand Sources

Peirce’s arguments can be broken down into three levels:

• First Level: Open Source Equals Freedom — Releasing open-source software for blockchain projects is protected by the First Amendment, and developers should not automatically be subject to federal securities laws.
• Second Level: De-Intermediation — Decentralized protocols can operate without traditional intermediaries, and the responsibility for securities law violations should fall on individuals engaging in illegal activities.
• Third Level: Infrastructure Diversity — Distributed networks are used for a wide range of purposes, not just securities trading, so the infrastructure itself should not be hijacked by a single set of rules.

Peirce also reminds us that decentralized protocols can operate without traditional intermediaries, and violations should be attributed to the individuals actually engaging in illegal conduct, not every user of the software.

Overall Shift in SEC Regulation

Peirce’s speech aligns with the SEC’s recent policy direction. SEC Chair Paul Atkins described the SEC’s approach in a May speech as "enforcement rather than regulation" (original wording). Since its inception, the SEC’s Cryptocurrency Task Force has been examining how existing securities laws apply to digital assets and decentralized systems.

A few weeks ago, the SEC also issued guidance on broker registration requirements, indicating that certain front-end websites and software interfaces that only provide access to decentralized protocols may not qualify as "brokers" in the traditional sense (WilmerHale analysis).

Lessons from Domestic Practices: What Happens When Infrastructure Is Hijacked First?

Peirce’s perspective has direct implications for Taiwan as well. The infrastructure of Taiwan’s securities market—such as the Central Depository & Clearing Corporation’s automated systems and the exchange’s matching engines—is essentially an extension of "open-source software." If Taiwan’s Securities and Futures Bureau’s clearing system is considered a "securities intermediary," then every retail trader using that system would theoretically also have intermediary status.

Her argument reminds us: the order of rule-making is crucial. First define what counts as an "intermediary," then decide who should follow the rules, rather than treating everyone using the software as an intermediary.

The SEC’s draft strategic plan before 2030 explicitly states that blockchain and crypto asset technologies have the potential to "reshape the U.S. financial infrastructure," implying that future regulatory frameworks will need more nuanced classifications rather than a one-size-fits-all approach that treats all infrastructure as securities intermediaries.