SEC Commissioner Draws Line Between Blockchain Infrastructure and Securities Regulation

U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce has pushed back against expanding securities oversight to blockchain infrastructure, arguing that neutral networks, open-source software, and noncustodial tools should not automatically fall under traditional market regulation.

Speaking at the IC3 Blockchain Camp in Princeton, Peirce framed crypto regulation as a “boundary problem,” questioning whether existing securities rules—built around intermediaries such as brokers, exchanges, and custodians—should apply to decentralized systems that are designed to function without them.

Her remarks come as regulators continue to grapple with how to classify and supervise blockchain-based systems that increasingly blur the line between infrastructure and financial markets.

Infrastructure vs. intermediaries

Peirce argued that the SEC’s regulatory framework is fundamentally structured around intermediaries, including brokers, dealers, exchanges, clearinghouses, transfer agents, investment advisers, and custodians.

In her view, applying those categories too broadly risks misclassifying blockchain infrastructure itself as a regulated financial entity.

“In some cases, the blockchain is used to perform functions similar to those performed by these intermediaries, but it is not clear that our rules should apply to the blockchain itself,” she said, noting that blockchains are used for far more than securities transactions.

She stressed that regulatory attention should focus on conduct, control, custody, and discretion, rather than the mere existence of infrastructure that processes data.

DeFi, validators, and developers in focus

Peirce’s framework could have wide implications for decentralized finance (DeFi), node operators, validators, and software developers, as well as centralized crypto platforms.

Under her approach, liability would depend on whether a party:

• Controls customer assets

• Exercises discretion over transactions

• Performs functions traditionally carried out by regulated intermediaries

If none of these conditions are met, she suggested that participants such as validators, developers, or user interfaces should not automatically be treated as securities market actors.

She also warned against regulatory models that effectively “pretend an intermediary exists” in systems designed to eliminate intermediaries altogether.

Neutral code and open-source tools

A central theme of Peirce’s remarks was the treatment of software itself.

She argued that publishing code should be treated as protected expression and that developers writing open-source software should not be forced into regulatory categories designed for financial institutions.

In her view, blockchain networks operate as general-purpose infrastructure—similar to the internet—and should not be regulated as securities platforms simply because they can be used to transmit financial data.

“Neutral infrastructure should not become a regulated securities venue merely because it carries blockchain transactions,” her remarks implied, reinforcing the idea of base-layer neutrality as a legal principle.

Centralized crypto still in scope

While advocating for narrower oversight of decentralized systems, Peirce drew a clear distinction for centralized crypto intermediaries.

Entities that hold customer funds, manage assets, or exercise discretion over transactions could still fall under securities regulation, even if they operate onchain.

This leaves a regulatory split emerging between:

• Centralized finance (CeFi): more likely to remain within SEC jurisdiction

• Decentralized protocols (DeFi): potentially outside traditional regulatory frameworks if no controlling party exists

Design responsibility and risk mitigation

Peirce also encouraged blockchain developers to address risks proactively rather than waiting for regulatory intervention.

She highlighted best practices such as: stronger code audits, improved key management, protocol safeguards against exploits, and clear disclosures about decentralization trade-offs

She also emphasized that users should retain the ability to transact without intermediaries, arguing that shared use of software should not automatically trigger exchange registration requirements.

Regulatory implications

The speech highlights a broader policy divide inside U.S. financial regulation: whether blockchain systems should be treated as financial intermediaries or neutral infrastructure layers.

Peirce’s position suggests a framework where regulation is determined not by technology, but by who has control and decision-making power within a system.

That distinction could become increasingly important as the SEC continues to refine its approach to digital asset markets, DeFi protocols, and onchain trading infrastructure.