The Breakdown - Why the SEC Chair Just Declared Self-Custody a Foundational American Value

Episode Date: June 11, 2025

In a significant policy shift, SEC Chair Paul Atkins defends self-custody as a fundamental American right, marking a turning point for crypto regulation and DeFi innovation. NLW explores why this declaration is critical for crypto’s future, how it impacts the ongoing legislative battles in Washington, and what it means for asset tokenization and blockchain developers. Plus, the ripple effects from Circle’s blockbuster IPO continue, igniting a wave of crypto IPO filings as Wall Street scrambles to catch up. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Tuesday, June 10th. And today we are talking about why the head of the SEC says that the right to self-custody is not just a foundational value for Bitcoiners, but for all of American society. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, if you want to dive deeper into the conversation, come join us on the Breakers Discord.

You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, really interesting one today that shows a sign of progress and the positive directionality of a lot that's going on with Bitcoin and Crypto. Over the years, self-custody has been one of, if not the most fundamental fights in crypto policy. There have been many different skirmishes along the way, but the view for most Bitcoiners has been that if we can defend the right to self-custody, then most of the most of the custody, then most everything else will work itself out. In fact, this was a big part of the origin

story for the crypto lobbying space in the first place. In 2020, during the dying days of the first Trump administration, then Treasury Secretary Stephen Mnuchin, proposed a rule banning what he called unhosted wallets. The nascent crypto lobby descended on Washington in response, leading to a letter from Republican lawmakers pressuring the administration to put the rule on ice. Variations on this rule and many other backdoor self-custody bans were proposed in the intervening years. Each time, defense of self-custody became a rallying cry for the industry. Various factions set aside their differences to lobby for this fundamental digital right. In early 2022, as the regulatory threats to the industry ramped up, Alex Thorne of Galaxy Digital wrote,

many regulatory issues matter, but none is as important as protecting the ability to self-custody. This is core functionality and also fundamental from a human rights perspective, a red line for us. And that's what makes this declaration from the sitting SEC chair so important. Speaking at the agency's roundtable on Defi, Atkins said, The right to have self-custody of one's private property is a foundational American value that should not disappear when one logs onto the internet. The rest of the speech addressed the point that preserving self-custody is a fundamental requirement for a defy-based financial system.

Atkins stated, I'm in favor of affording greater flexibility to market participants to self-custody crypto assets, especially where intermediation imposes unnecessary transaction costs or restricts the ability to engage in staking or other on-chain activities. Unfortunately, the prior administration undermined innovation in self-custodial digital wallets and other on-chain technologies by asserting through regulatory actions that the developers of such software may be conducting brokerage activities. Engineers should not be subject to federal securities law solely for publishing this type of software code. Now, this could be the most important policy shift among the Trump administration's many crypto reforms. Custodia Bank's CEO, Caitlin Long

commented, and with this, the SEC officially begins reversing decades of attempts to eradicate bearer assets from the U.S. financial system, which began with ending stock certificates in 1994, and reached its peak under Biden and Warren's war on cash. Self-custody of private property is foundational. When questioned on why this was a revolution rather than an incremental change, she added, Today's speech by Atkins was an important break with the past by recognizing self-custody of one's private property as a foundational value. Making custody for financial assets optional instead of mandatory is a big deal. Now, placing wallet and staking software clearly outside of the regulatory perimeter is a huge step towards ending the war on crypto developers. But this would also have a massive

impact on the future of tokenized financial markets. Using a blockchain to trade stocks isn't a big change from using existing centralized infrastructure. The big shift is using self-custody to change the balance of power between individual investors and intermediaries. It doesn't even matter if 99% of people never take self-custody of their assets. The ability to do so still protects against asset confiscation and other draconian policies that could be considered in a time of crisis. Lasse Claussen of 1KX network tweeted, The promise of blockchains can only be fulfilled with self-custody. I love seeing regulators understand the profound importance of this. The people observing the asset tokenization trend also

recognized how important this moment is. Nate Garassi of the ETF store commented, This speech by new SEC Chair Paul Atkins is a thing of beauty, so encouraging to see the proactive embrace of innovation. Anthony Basili, the head of tokenization at Coinbase, wrote, The SEC wants to see more products and services for self-custody. The future is on chain. DLDR is that for this SEC, self-custody is not just a curiosity of blockchain technology, but a fundamental expression of American values, extended into the digital age and asserted using code. Now, staying in Washington for a moment, let's get an update on the Clarity Act. Undeterred by Democrat obstruction, Republican lawmakers are continuing to update the market

structure bill. Financial Services Chairman French Hill has added an amendment that states that, quote, non-controlling blockchain developers are not required to hold money transmitter licenses. This would allow non-custodial crypto services like wallets, defy protocols, and node software to be offered without the need for licensing and the associated compliance requirements. Not needing a license was already the status quo following FinCEN guidance from 2019, but that guidance was thrown into uncertainty in recent years after the founders of Tornado Cash and Samurai Wallet were prosecuted for license violations among other more serious charges. Tom Emmer, the lead sponsor of the amendment, tweeted,

If you do not custody consumer funds, you aren't a money transmitter. Plain and simple. This amendment would close the door to regulating these services by enforcement by codifying the FinC guidance. You can expect some Democrats to frame it as a reduction in anti-money laundering in KYC requirements, even though they don't currently exist in any law or regulation. The amendment does enjoy the support of pro-Crypto Democrat Richie Torres, but unfortunately his opinion doesn't seem to go very far among the anti-crypto faction of his party. The market structure bill is headed for a markup hearing later today,

so we might have another Maxine Waterstunt to report tomorrow. The big takeaway, however, is that the bill is still moving regardless of any sort of obstructionism. The stable coin bill is also keeping momentum in the Senate. Despite a very busy few weeks in Congress, the bill remains a priority, according to Senate leader John Thune, who told Politico, we're trying to figure out if there's still a path forward on amendments, but the goal is to have it across the floor this week. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know.

They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of tradfai and crypto, and one of the benefits for a lot of us is that Grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visitgrayscale.com.

Go tograyscale.com to explore their full suite of crypto investment products and invest in your share of the future. Next up, we move over to the market side of things. Circle's monster IPO continues to reverberate throughout Wall Street and the crypto community. The stock is still trading above $115, representing close to a Forex for investors who got in at the final IPO pricing of 31. Many thought this fundamental mispricing was a big black mark on the investment banks, with Mike Dutas of Sixth Man Ventures commenting, you probably don't want to work with the bankers who took Circle public at 31 and watched it closed day 1 at 86. They left more than a billion on the table that could have been used to operate the business rather than in the banker's friends' pockets.

Dan McCartle suggested that Circle Insiders can console themselves in the gigantic pile of money the IPO generated for them, tweeting, Circle is trading at almost 4x the IPO price, two trading days after list in an otherwise flat market. So bankers still have no idea about the crypto world, how to price stuff, how to think about demand, etc. If Circle shareholders weren't getting so rich anyways, they'd be pissed. Then again, not everyone is happy with how the company's listing played out. Jeff Dorman of Crypto Investment firm Arka wrote a scathing open letter entitled FU to Jeremy a lair in circle. Arca had placed a $10 million order ahead of the IPO, but got filled on just $135,000 worth of the stock. He wrote,

ARCA has been through hell and back like every other crypto-native firm for the last eight years. Most of us stick together and help each other. I cannot believe our efforts to help you grow for years culminated in you giving us a joke throwaway allocation. You are the first and only crypto company that has ever treated ARCA this way. Most of ARCA's management team left Wall Street eight years ago to start a crypto-native company specifically to get away from trot-fi clowns like you. Ironically, you've come full circle. Dorman had placed his order two months in advance as one of the earliest investors in the IPO. After receiving no response from Circle, ARCA announced that they sold all of their shares and closed their accounts with Circle.

While not everyone was super appreciative of this very public crashout, it certainly underscores where the industry is heading. Basically, having a decade-long track record as a crypto-native firm is no longer some big advantage. With BlackRock and Arc taking down a huge portion of the offering, crypto funds are now just another type of investor. On Wall Street, Circle is quickly becoming the hot stock of the moment. Just a few days into trading, we already have multiple applications for leveraged single-stock ETFs. Pro shares are seeking to launch a 2x leveraged fund, while Bitwise have applied for a covered call strategy ETF, which sells call options to generate income on stock holdings.

These kinds of ETFs are typically applied to tech companies exhibiting rocket and growth like Tesla, Nvidia, MicroStrategy, and Palantir. Strapping this kind of strategy to Circle could mechanically push up the stock. price by giving retail traders easy access to leverage bets. Now, the frenzy of activity around Circle calls into question how the stock should be valued. At a current valuation of around $25 billion, the company is trading at a 90 times multiple to their net income and roughly half the market cap of USC. They're also trading at around a third of the valuation of Coinbase. These are fairly eye-popping figures on the current state of the business, but it's very clear that this is not

a bet on where Circle is today. It's a bet on the future of stable coins and a clear indication that the market wants exposure to that sector at basically any price. Oman Malikon, an adjunct professor at Columbia Business School, made the point that the valuation fundamentally changes the options for Circle. He tweeted, Most of the assumptions about a fair value for Circle were based on some linear model of USDC growth, interest rates, etc., leading to an IPO value below the last official funding round. But this kind of pop and market cap upon going public and the resulting balance sheet muscle can lead to step-function jumps. The company is now in a stronger position to renegotiate deals,

high coin base, and forge new partnerships. Thus, an overvalued stock begets stronger fundamentals, so the stock is no longer overvalued. But of course, they'll need to execute, and the stablecoin space is about to get real heated. I think about this also in terms of what it means for Circle's position in the stablecoin race. A few months ago, everyone was talking about how they might need to go public really fast, because pretty soon the big boys were going to get in on the Stablecoin game, and Circles' lead might evaporate quickly. The bigger they get, though, the more power they have in that fight, and the more big Wall Street actors are lining up to make Circle their bet as opposed to one of those future as yet on release table coins. The other big impact, of course, of the Circle IPO is the signal

that the time is now for crypto companies looking to go public. Cracken and Bitgo are a couple of the big names with a public offering in the works, but Gemini has beaten everyone else to the punch. The exchange filed their confidential draft registration statement with the SEC late last week, which is the first formal step towards an IPO. The statement from the company said the number of shares on offer and a price range has not yet been determined, but the wheels are are now set in motion. The listing will come after the SEC completes their review process, which could take months. Still, it's clear that Gemini is trying to strike while the iron is hot. Circle took months to publicize their offering, fighting against criticism throughout the process,

and ending up with a very timid roadshow offering. It only became clear in the final few days that Circle was set up for a monster debut. The same probably isn't true for Gemini. We can anticipate the exchange to speed run that process and come to market as quickly as possible to take advantage of the current enthusiasm for new crypto listings. Chris Perkins, the president of coin fund, commented that this could be the last batch of big crypto IPOs before switching to a new type of capital formation. He wrote, Looks like the floodgates are open for crypto IPOs. But my take, in the next couple of years, direct public listings on chain will surpass traditional IPOs in terms of capital raised.

Impossible to compete with the capital formation superpower that public blockchains deliver. That will be interesting to see for sure, but for now, that is going to do it for today's breakdown. I appreciate you listening, as always, and until next time, Be safe and take care of each other. Peace.