Understanding the SEC, from 'Project Crypto' to 'Peanut Butter and Watermelon'

Source: Loop LION on Dune Road

Author: Charlie Little Sun

Two speeches, five days apart, have positioned the chessboard of American crypto finance as if they were one before the other.

On July 31, SEC Chairman Paul S. Atkins announced "Project Crypto", incorporating "bringing U.S. capital markets fully on-chain" into the regulatory agenda.

On August 4, Commissioner Hester M. Peirce directly confronted the reconstruction of financial privacy and regulatory concepts at UC Berkeley's "Peanut Butter & Watermelon."

Looking at both together, you will find that the United States is not only using "clearer rules" to enhance the attractiveness of the capital market, but also reshaping the attractiveness of talent with a "deeper perspective on rights."

Two speeches

Atkins' "Project Crypto" is a declaration of a "market structure-level" transformation.

He traced the historical context from the Buttonwood Agreement of the New York Stock Exchange to the birth of ATS (Alternative Trading Systems), and then landed on today's real proposition: to fully move the issuance, custody, and trading of American assets onto the chain.

There are three key points:

First, use clear and simple practical standards to address the old question of "is it a security" and delineate clear paths for different types of tokens (digital goods, stablecoins, securities tokens with distributable profits, etc.).

Secondly, the modernized custody rules publicly emphasize that "self-custody is a core American value" and incorporate on-chain activities such as staking into compliant investment activities.

The third is to propose the regulatory concept of "super-app"—to handle both securities and non-securities digital assets on a regulated platform, reducing the market efficiency loss caused by fragmented regulation.

The entire speech repeatedly emphasized the theme of "bringing back the outflowing business and teams to the United States," and connected Project Crypto with the President's Working Group (PWG) and the newly proposed federal stablecoin legislation.

Peirce's "Peanut Butter and Watermelon" is a "social contract level" recalibration of financial privacy in the digital age.

She approached the issue from the third-party doctrine and the reporting practices of BSA/AML, pointing out a key misconception: to directly transfer the large-scale surveillance of the banking system to a peer-to-peer encrypted network.

Since technology eliminates intermediaries, the boundaries of rights should also be updated accordingly; otherwise, it will give rise to a compliance impulse of "reporting whenever possible", which incurs higher costs without necessarily achieving better results.

She cited many cases and data to illustrate the redefinition of the boundaries of privacy and regulation in the digital environment, opposing the default inclusion of ordinary users and developers in the surveillance chain.

She does not deny the necessity of combating crime, but emphasizes that the principle of proportionality should be followed, precise law enforcement should be implemented, and a defense for the legitimacy of privacy-enhancing technologies should be made.

Character portrait

Atkins's professional background is "Market Structure Engineer."

He served as a commissioner of the SEC from 2002 to 2008, served as non-executive chairman of BATS Global Markets from 2012 to 2015, and then founded and ran the compliance and market structure consulting firm Patomak until he became the 34th chairman of the SEC in April 2025.

From his public resume, it is evident that he places great importance on key points such as "promoting competition" and "reducing unnecessary overlapping regulation", which is also why "Project Crypto" appears to be a design blueprint that aligns exchanges, brokerage, clearing, custody, and on-chain settlement.

Peirce's label is "Crypto Mom," but more importantly, she has a "dual perspective" both inside and outside the system.

She has been a commissioner of the SEC since 2018, previously conducted research at the Mercatus Center, served as senior legal counsel for the Senate Banking Committee, and earlier worked as an attorney in the SEC's Division of Investment Management, as well as serving as legal counsel for Atkins.

This background allows her to be familiar with the boundaries of legislation and law enforcement, while also finding a foothold in the framework of technology and rights to "update the legal principles rather than just the rules."

Also because of these backgrounds and the trust from Atkins, she is currently appointed to lead the SEC's Crypto Task Force.

Capital and Talent

If we break down American competitiveness into two curves—capital market attractiveness and talent attraction—these two speeches happen to each pull one curve, and then intersect to form a combined force.

Atkins specifies "capital market attractiveness" as: the determinacy of token classification, the parallel of custodial and self-custodial solutions, the unification of trading venues and cross-category compatibility, and the compliance of on-chain settlement.

These can directly improve the efficiency of "Issuance - Trading - Clearing - Custody", releasing the liquidity of dollar assets on the chain.

Peirce establishes "talent attraction" based on first principles: financial privacy is a component of civil rights and should not be "defaulted away" due to technological changes.

Regulation needs to be auditable and accountable, but it should not come at the expense of universal freedom.

In other words, the former makes the track available, while the latter makes people willing to board the track.

Comparative Perspective of Regulations in Different Countries

The current international competition is no longer a question of "whether there is regulation," but rather whose regulation resembles a "computable and composable" operating system.

The MiCA in Europe will first implement rules for two major categories of stablecoins, ART and EMT, in 2024. It provides a unified standard for obligations in white papers, capital and reserves, information disclosure, and redemption timing, adapting to cross-border "passport" regulations. This system is good at "exchanging licenses for certainty," but it still defines native interactions in DeFi with a focus on service providers.

The dual-track system of the UAE - Dubai VARA's "Virtual Assets and Related Activities Regulations" (2023) and Abu Dhabi ADGM's FRT (Fiat-Referencing Token) framework - is known for its "high transparency + fast iteration" regulatory manual, which indeed provides a "checklist-style licensing" for exchanges, custody, and issuance businesses. Its characteristic is to "first lay out the business pipeline", and then continuously fine-tune through updated guidelines.

The "Stablecoin Regulation" effective August 1, 2025, in Hong Kong incorporates "fiat-backed stablecoin issuance" into licensed activities, with the Monetary Authority leading the rules and licensing issuance, forming a top-down path of "first stablecoins, then a broader token market." Its strengths lie in a clear legal hierarchy and a defined primary regulator, but the ecosystem's capacity for pure public chain native applications and cross-border collaboration still needs to be observed.

The Monetary Authority of Singapore (MAS) finalized a stablecoin framework in 2023, proposing "100% high-quality reserves, redemption within five working days, independent audits, and capital constraints, along with compliance identification." Japan, in the revision of the "Fund Settlement Act" in 2023, positioned "Yen-denominated stablecoins" as "currency-denominated assets," restricting issuance to "banks, trusts, and fund transfer operators." South Korea's draft "Digital Asset Basic Law" emphasizes "bankruptcy isolation," reserve custody, and audits.

Their commonality is to use stablecoin payments as a starting point, first making money programmable, and then connecting securities and physical assets to tokenization.

The American narrative of "first principles" has two layers.

The first layer is the "money" aspect: The GENIUS Act signed by Trump on July 18 established a "federal root" for payment stablecoins, requiring 1:1 high liquidity reserves, regular disclosures, and designed bankruptcy "super-priority" holder protection clauses; from payment clearing, to fund security, and to licensing entities (banks/federal non-banks), it is the first time that the "programmable form of the dollar" is included in a unified standard.

The second layer is the aspect of "power": Peirce is not simply discussing "light regulation", but rather brings the principles of third parties and the real effects of the BSA to the forefront, advocating for the replacement of "broad call-style surveillance" with "proportionality principle + precise law enforcement", which is a return to "privacy as a fundamental human right".

Compared to Europe, which is "license-centered", the Middle East, which is "business list-centered", and Asia, which is "payment-led", the United States is attempting to position "rights and market structure" as a starting point for its system. This is precisely the part that can provide long-term confidence to developers and entrepreneurs.

Going Global Strategy

Based on the past fifteen years of experience in working and starting businesses in the finance and fintech sectors in the United States and globally, I would like to share some strategic advice for Chinese capital and Web 3/RWA companies.

First, the strategic positioning should be layered.

In the short term, we can use Hong Kong/Singapore/UAE/Europe as a training ground for growth and compliance with the strategy of 'rural encircling the city'; however, in the medium to long term, we must place the United States at the core position and start planning from now.

The United States is simultaneously the source of profit pools, valuation centers, and discourse power; not entering means a long-term discount.

The entry barrier is not just about costs, but also about respecting the first principles: products must be inherently "privacy-friendly," and compliance must be "auditable and accountable."

Second, the two legs of products and licenses.

After the GENIUS Act lays the federal framework for payment stablecoins, on-chain cash denominated in USD and short-term bond funds will become the standard configuration for B2B, cross-border settlement, and on-chain finance.

For companies primarily based on stablecoins, RWA, and broker-dealer underlyings, prioritize making the reserve composition, redemption mechanisms, independent audits, and bankruptcy isolation "US-ready", and conduct operational indicators and risk control rhythm drills with real funds and real clients in jurisdictions such as Singapore, the UAE, and Europe, proactively accumulating internal control documents and audit trails into "compliance assets".

Third, the American-style integration of channels and ecosystems.

Atkins's "super-app" direction means that the U.S. may allow for a more "unified licensed stack," which raises new interface requirements for collaboration between trading and market making, brokers and advisors, and synthetic assets and custody.

The pragmatic approach is to establish ecological cooperation with the U.S. financial system as early as possible in areas such as compliance whitelists, clearing connections, and on-chain settlement pilots, transforming oneself into a "pluggable" node enterprise, rather than becoming a heavy asset player with a fully self-built process.

Fourth, the localization of narrative and team.

Peirce's speech signaled a message: the U.S. regulation regarding the triangular relationship of "privacy-compliance-efficiency" is moving towards "scientific quantification and proportionality principles."

Your risk control team, data engineering, and legal department need to demonstrate value under the logic of "reducing ineffective submissions and retaining effective audits"; your core engineers must also be willing to iterate in a culture of "writing rights into products"—this is precisely the key to attracting top talent from the U.S.

More importantly, your business and operations teams need to deeply understand the local narratives and business culture, translate regulatory language into business language, translate technical advantages into customer value, and be able to build long-term trust in multiple contexts such as industry associations, state and federal regulations, institutional compliance, and procurement.

Conclusion

The attractiveness of the United States will come from both a "better market structure" and a "higher standard of rights".

Reading Atkins's "Project Crypto" alongside Peirce's "Peanut Butter and Watermelon," you will see an America that is oriented towards both capital and talent:

The former uses system determinism and market engineering to reabsorb liquidity and issuance; the latter employs first principles of privacy and freedom, encouraging developers, users, and brands to set the "default market" here.

For Chinese enterprises and capital, even if the United States is not the "only battlefield" to conquer immediately, it is certainly a "high ground" that must be overcome in the medium to long term.

First, polish the compliance and technology stack that can be seamlessly migrated to the United States in the surrounding markets. Then, choose the right time to land, completely integrating Web 3 and Web 2 finance in the United States, a place where "narratives and systems are in sync." This is the correct way to traverse cycles and share the digital dividend of dollar assets.

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