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The Era of On-Chain Financial Markets
Explaining the SEC's "Project Crypto" and what it means for financial markets
Internet Capital
August 04, 2025
gm friends —
The United States SEC (Securities and Exchange Comission) unveiled “Project Crypto” this past week.
The initiative aims to overhaul and modernize regulations for crypto assets and blockchain technology in finance.
Project Crypto includes the rewriting of multiple regulations & rules that pave the way for the integration of tokenization and DeFi into mainstream finance. I personally think this is a HUGE deal, and expedites the inevitable outcome of crypto becoming the backbone of the entire financial industry.
source: sec.gov
To learn more about what’s currently going on in the crypto markets stay tuned for this week’s podcast episode which goes live on the Internet Capital YouTube later today.
Project Crypto Explained
Project Crypto implements multiple rule changes related to crypto in the United States involving everything from retail participation in initial coin offerings (ICOs) to the legal classification of DeFi projects.
I’ve summarized the key components in the table below:
Component | Description | Potential Impact |
|---|---|---|
Asset Classification | Clarifies that most cryptocurrencies (e.g., Bitcoin, Ethereum) are not securities, distinguishing them from investment contracts. Introduces categories for digital collectibles (NFTs), commodities, and stablecoins. | Reduces "one-size-fits-all" enforcement. Benefits tokens by avoiding securities labels with reporting requirements. |
Ceasing Penalties for Early Projects | Stops fines for token issuers who used centralized structures in the past. | Encourages compliance without retroactive punishment, potentially attracting exiled companies back to the U.S. |
Tokenized Securities Framework | Develops rules for tokenizing traditional assets like stocks and bonds on blockchain. | Enables "on-chain" capital markets, making the U.S. a hub for blockchain-based finance. |
Airdrops and Incentives for U.S. Users | Allows Americans to participate in airdrops, ICOs, and bounties, which were previously restricted due to regulatory fears. | Levels the playing field for U.S. investors, reducing exclusion from global crypto opportunities. |
Self-Custody Protections | Safeguards the right to self-custody assets and updates custody rules for registered firms. | Boosts user autonomy and aligns with crypto's decentralized ethos. |
DeFi and AMMs Without Intermediaries | Permits DeFi protocols and automated market makers to operate without mandatory brokers. | Supports direct institutional and retail growth of DeFi projects like Uniswap, Aave, and Lido. |
Crypto 'Super App' Platform | Plans for integrated platforms combining trading, staking, lending, and securities services. | Could create user-friendly "one-stop shops" for crypto activities. |
Innovation Exemptions/Sandbox | Introduces a "regulatory sandbox" for projects to test innovations with exemptions, provided they meet reporting and compliance standards. | Lowers barriers for startups, fostering experimentation without full regulatory burdens. |
Developer Treatment | Views developers as "code publishers" rather than intermediaries in many cases. | Protects builders from liability, encouraging open-source development. |
My Take
Project Crypto could unlock trillions in capital by enabling fractional ownership, 24/7 services, and instant settlements, blurring the lines between Wall Street and decentralized systems.
Platforms like Coinbase are poised to expand into tokenized stocks and derivatives, enabling a hybrid ecosystem where traditional financial instruments are used throughout DeFi alongside tokens like ETH.
source: 4irelabs
This would enable regulated yield-generating mechanisms, lending, and staking on tokenized securities (i.e., the creation of entirely new kinds of financial assets with different risk/return profiles than anything that currently exists).
Connections to traditional financial services are also strengthened via stablecoins like USDC, where Coinbase's partnerships (see the recent PNC initiative) enable bank account integrations that blur the line between crypto and dollars in a bank account.
This facilitates hybrid "super-apps"that blend trading, staking, and banking, allowing users to link bank accounts directly for tokenized asset management and stablecoin-based payments, bridging DeFi with everyday finance while ensuring compliance
Thanks for reading!
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Nothing in this newsletter is meant to be taken as legal, tax, investing, or other advice. Internet Capital is for educational and entertainment purposes only. All views are our own, and not representative of any organizations with which we are affiliated. For any business partnerships please reach out via the email [email protected]
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