Here are the notes I used when creating this video: https://youtu.be/mlHOHvcX36I
Shortly after the PWG released their report on Strengthening US leadership in Digital Financial Technology, the SEC announced Project Crypto which is aimed at updating existing market infrastructure to enable digital assets. There are 5 major initiatives and it is absolutely massive and disruptive in a positive way.
Let’s get started
First:
Asset distribution back to America:
Refers to crypto exchanges and token issuers setting up holding companies in places like the Caymans, Seychelles, or BVI to avoid U.S. oversight
Think FTX
Decentralization theater:
When a project pretends to be decentralized (DAO, token governance, etc.) but in reality, control sits with a small group of founders or insiders. 60% of supply held by insiders
Confusion over security status:
Is this token a security (regulated by SEC) a commodity (CFTC) or something else.
subject to an investment contract:
If people are buying it primarily to profit from the work of others (Howey Test), then the SEC still considers it a security by context.
Projects should not be forced to DAO
Many token projects set up a DAO just to claim “we’re decentralized, so the SEC can’t regulate us.
Offshore foundations
Lots of big projects (Solana, Ethereum Foundation, Algorand, etc.) set up foundations in Switzerland, Singapore, Caymans to distance themselves from U.S. jurisdiction.
Second: Choice of custodian
Custody requirements
SEC rules say who is allowed to hold (custody) client assets — like stocks, bonds, or cash — when you invest through a broker, investment adviser, or fund.
Today, custody rules are designed for traditional assets (cash at a bank, stocks at DTCC, bonds at a custodian bank).
They require “qualified custodians” (big banks, trust companies, certain broker-dealers).
Why have the different types of custodians?
Registered intermediaries
firms that are regulated and registered with the SEC/FINRA — like broker-dealers, investment advisers, clearing firms, exchanges.
Why It Matters
Right now, most crypto custody is done by specialist firms (Coinbase Custody, Anchorage, BitGo) that aren’t in the same legal category as banks/custodians for securities.
Big Wall Street players (Fidelity, JPMorgan, etc.) want clarity so they can custody crypto too — and bring it into mainstream portfolios.
For investors: this is a signal that crypto custody is moving from offshore and startups → into the regulated, institutional sphere.
Impact
This could squeeze out independent crypto custodians if the SEC raises the bar (minimum capital, insurance, audits).
It also centralizes control: your crypto sits with a regulated custodian (likely a bank), not on-chain in your wallet.
Good for safety & institutional adoption, bad for DeFi’s “be your own bank.”
Third: Super-Apps
Intemediaries would be able to do a broad range of products and services under one roof with a single license.
Instead of siloed apps (Coinbase for crypto, Fidelity for stocks, Venmo for payments), you’d get all-in-one financial ecosystems.
Impact:
Super-apps centralize control — which runs directly against the decentralization ethos of crypto.
Likely winners: large incumbents with lobbying power. Likely losers: small startups and pure-DeFi projects that can’t meet the compliance bar.
I have directed the Commission staff to develop a framework that will allow non-security crypto assets and crypto asset securities to be traded side-by-side on SEC-regulated platforms
That line is referring to one of the core tensions in U.S. crypto regulation — the gap between:
SEC securities exchanges (like NYSE, Nasdaq) → heavily regulated, enormous compliance requirements.
Crypto exchanges (like Coinbase, Kraken) → operate under state money transmitter laws, not SEC exchange laws.
we don’t need Coinbase to become Nasdaq — but we also won’t let them keep operating in a gray zone. Let’s carve out a regulated middle path.”
permit non-security crypto assets that are subject to an investment contract to trade on trading venues that are not registered with the Commission
The SEC is considering whether to allow certain cryptos (that aren’t securities, but are sold in ways that look like investments) to legally trade on existing crypto exchanges like Coinbase or Kraken — without forcing those exchanges to jump through the same hoops as Wall Street stock exchanges.
FOURTH: On-Chain Software
On-Chain software
What It Means
On-chain = code that executes directly on the blockchain (smart contracts, protocols, DAOs).
Software systems = the self-running programs that control how crypto assets move, how governance is managed, how DeFi apps operate, etc.
Examples:
Uniswap’s smart contracts (on-chain system for automated trading).
MakerDAO (on-chain system that issues DAI stablecoin).
Ethereum staking contracts (on-chain system for consensus + rewards).
They want to distinguish between:
Traditional financial intermediaries (brokers, exchanges, custodians), which are off-chain businesses regulated through licenses.
On-chain software systems, where the code itself executes the financial function (no human middleman).
How to deal with DeFi protocols and smart contracts that are on-chain.
IMPACT DeFi protocols may be forced into compliance frameworks they weren’t designed for.
FiFTH Commercial viability
What it means
Main Street:
Easier Access, Lower risk, clearer guidance
Self custody but also regulated custodians
Consolidation of services means less confusions less fees
Crypto Investor:
Clarity, reduced risk
Smoother bridge between crypto and wall street
DeFi doesn’t necessarily become centralized but maybe compliance
For Projects and Entrepreneur:
Stay home
No need to hide
Faster market entry
Innovation with exemption if needed
Tokenized equity/debt possible on-chain
Super-app mixing multiple services
Project Crypto marks a philosophical pivot—from aggressive enforcement to a pro-innovation, clarity-first regulatory regime. It sets the stage for U.S. leadership in digital assets and seriously lowers the regulatory barriers for investors and innovators alike. Whether you’re investing, building, or trading—this is your invitation to engage.