Understanding the SEC: From "Project Crypto" to "Peanut Butter and Watermelon"

Author: Charlie Liu

Two speeches, five days apart, seem to have properly positioned the chessboard of American crypto finance.

On July 31, SEC Chairman Paul S. Atkins announced "Project Crypto," incorporating the goal of "fully putting the American capital markets on the blockchain" into the regulatory agenda.

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

When you look 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 using "a deeper perspective on rights" to reshape the attractiveness of talent.

Two Speeches

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

He traced the historical context from the Buttonwood Agreement of the NYSE to the birth of ATS (Alternative Trading Systems), and then down to today's real proposition: to fully move the issuance, custody, and trading of American assets onto the blockchain.

There are three key points:

First, use clear and simple actionable standards to address the old question of "whether or not it is a security," and delineate clear tracks for different types of tokens (digital commodities, stablecoins, securities tokens with distributable profits, etc.).

Second, modern custodial rules, while publicly emphasizing that "self-custody is a core American value," incorporate on-chain activities such as staking into compliant investment activities.

Thirdly, it proposes the regulatory concept of "super-app" - handling both securities and non-securities digital assets within a regulated platform to reduce the market efficiency loss caused by fragmented regulation.

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

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

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

Since technology eliminates intermediaries, the boundaries of rights should also be updated accordingly; otherwise, it will lead to a compliance impulse of "report if possible," resulting in higher costs and uncertain effectiveness.

She cited many cases and data to illustrate the redefinition of privacy and regulatory boundaries 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 the legitimacy of privacy-enhancing technologies should be defended.

Character Portrait

Atkins's professional background is as a "market structure engineer."

He served as a commissioner of the SEC from 2002 to 2008, as non-executive chairman of BATS Global Markets from 2012 to 2015, and then founded and operated 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 a senior legal advisor for the Senate Banking Committee, and earlier worked as a lawyer in the SEC's Investment Management Division, also serving as legal counsel for Atkins.

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

Also because of this background and trust, she is currently appointed to lead the SEC's Crypto Task Force.

Capital and Talent

If we break down American competitiveness into two curves - the attractiveness of capital markets and the attractiveness of talent - these two speeches happen to drive each curve, and then intersect to form a combined force.

Atkins specifies "capital market attractiveness" as: the determinacy of token classification, the parallel of custody and self-custody, 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 bases "talent attraction" on first principles: financial privacy is a component of civil rights and should not be "implicitly surrendered" due to technological changes.

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

In other words, the former makes the orbit available, while the latter makes people willing to get on the orbit.

Comparison of Regulatory Perspectives Among Countries

The current international competition is no longer about whether there is regulation, but rather whose regulation resembles a "computable, combinable" operating system.

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

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

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

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

Their commonality is using stablecoin payments as an entry point, first making money programmable, and then tokenizing securities and physical assets.

The narrative of the "first principles" in the United States has two layers.

The first layer is the "money" aspect: The GENIUS Act signed by Trump on July 18 established a "federal foundation" 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 the licensing entities (banks/federal non-banks), it is the first time that the "programmable form of the dollar" has been included in a unified standard.

The second layer is the level of "power": Peirce does not simply talk about "light regulation" but puts the principles of third parties and the practical effects of the BSA on the table, advocating for the replacement of "generalized summons-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-centric", the Middle East, which is "business-list-centric", and Asia, which is "payment-led", the United States is attempting to place "rights and market structure" alongside as the starting point for its system. This is precisely the part that can provide long-term confidence to developers and entrepreneurs.

Going Abroad Strategy

Based on fifteen years of experience in the financial and fintech sectors in the United States and globally, I would like to share some strategic advice for Chinese capital and Web3/RWA companies.

First, the strategic positioning should be layered.

In the short term, we can use Hong Kong/Singapore/UAE/Europe as a practice ground for growth and compliance by "surrounding the city with the countryside"; however, in the medium to long term, we must place the United States at the core and start planning for it 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 threshold is not just about costs, but also about a reverence for 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 debt funds will become standard for B2B, cross-border settlement, and on-chain finance.

For companies primarily based on stablecoins, RWA, and broker-dealer infrastructures, prioritize achieving "US readiness" for reserve composition, redemption mechanisms, independent audits, and bankruptcy isolation. Additionally, in jurisdictions such as Singapore, the UAE, and Europe, practice operational metrics and risk control rhythms with real funds and real clients, while preemptively accumulating internal control documents and audit trails as "compliance assets."

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

Atkins' "super-app" direction suggests that the U.S. may allow for a more "unified licensed stack," which poses new interface requirements for collaboration between trading and market making, brokerages and investment advisors, as well as 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 white lists, clearing connections, and on-chain settlement pilots, transforming oneself into a "pluggable" node-type enterprise, rather than becoming a heavy asset player with a fully self-built process.

Fourth, localization of narrative and team.

Peirce's speech signals a trend: the U.S. regulation regarding the triangle relationship of "privacy-compliance-efficiency" is moving towards "scientific quantification and the principle of proportionality."

Your risk control team, data engineering, and legal department need to be able to demonstrate their value under the logic of "reducing ineffective submissions and retaining effective audits"; your core engineers should also be willing to iterate in this 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 have a deep understanding of local narratives and business culture, translating regulatory language into business language, and translating technical advantages into customer value, being able to establish long-term trust in the multiple contexts of industry associations, state and federal regulations, institutional compliance, and procurement.

Conclusion

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

Reading Atkins' "Project Crypto" alongside Peirce's "Peanut Butter and Watermelon," you'll see an America that simultaneously caters to both capital and talent:

The former uses institutional certainty and market engineering to reabsorb liquidity and issuance; the latter utilizes the primary protection of privacy and freedom, allowing developers, users, and brands to willingly 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 definitely a "high ground" that must be conquered in the medium to long term.

First, refine the compliance and technology stack that can be seamlessly migrated to the United States in the surrounding markets, and then choose the right time to land, completely integrating Web3 and Web2 finance in the United States, a place where "narratives and systems resonate together." This is the correct way to traverse cycles and share the digital dividend of dollar assets.