Author: @BlazingKevin_, the Researcher at Movemaker

Introduction: The historic turn of regulation

THE ENCRYPTION INDUSTRY WAS AT A HISTORIC TURNING POINT IN THE REGULATORY ENVIRONMENT IN THE UNITED STATES IN 2025. FOLLOWING A LONG-STANDING MODEL OF “ENFORCEMENT IS REGULATION” THAT HAS GENERATED CONSIDERABLE LEGAL UNCERTAINTY, THE NEW PRESIDENT OF THE SEC, PAUL ATKINS, LAUNCHED THE “ENCRYPTED PROJECT” INITIATIVE IN JULY 2025, AIMED AT MODERNIZING SECURITIES REGULATION AND SUPPORTING THE EXECUTIVE BRANCH'S VISION OF POSITIONING THE UNITED STATES AS A “GLOBAL ENCRYPTION CAPITAL CENTRE”。

One of the core initiatives of this new regulatory paradigm is the introduction of the “Innovation Exemption” ** policy. ** The exemption was designed as a time-bound regulatory exemption to allow rapid market access for nascent encryption technologies and products, while reducing the initial compliance burden, pending the finalization by the SEC of permanent rules for digital assets. Atkins has confirmed that the rule of immunity is expected toJanuary 2026Entered into force. The release of this policy signal marks a shift in United States regulators from reactive responses to proactive construction in an attempt to find a more flexible balance between investor protection and industry innovation。

This paper will provide strategic advice to industry participants by in-depth analysis of the core mechanisms of the SEC ' s innovative exemption, its strategic positioning in the overall United States encryption regulatory framework, assessing the controversy and opportunities that the market raises for it, and by comparing them globally, particularly with the competitive environment of the EU MiCA regulation。

1. Core mechanisms and objectives for innovative exemptions

AT THE HEART OF THE INNOVATION EXEMPTION IS THE PROVISION OF A “SAFE HAVEN” OF TEMPORARY ACCESS TO ALLOW DIGITAL ASSETS COMPANIES TO OPERATE WITHOUT IMMEDIATE BURDEN OF FULL REGISTRATION AND DISCLOSURE UNDER TRADITIONAL SECURITIES LAW。

1.1 Scope and duration of immunity

The scope of innovative exemptions is broadAnyThe development or operation of business entities associated with encrypted assets may be requested, including trading platforms, DeFi agreements, stabilizers and even DAOs。

• Time frame design:The exemption period is usually set as12 to 24 months, which aims to provide the project team with sufficient “incubation period” to enable its network to “maturize”or“fully decentralised”。
• Simplified registration:Projects will only be submitted during the exemption periodSimplified information disclosure, without having to complete complex and time-consuming S-1 registration documents. This mechanism is similar to the "on-ramp" design being promoted by Congress in the CLARITY Act, which allows start-up companies to raise from the public every year, subject to disclosure requirements$75 millionTHE FUNDS ARE NOT SUBJECT TO FULL COMPLIANCE WITH THE REQUIREMENTS FOR THE REGISTRATION OF THE SEC。

1.2 Principle-based conditions of compliance

Atkins stressed that the immunity would bePrinciple-basedNot rigid rules. Companies that use exemptions still need to meet basic standards of compliance and investor protection, such as:

• Periodic reports and examination of:Possible request for submissionQuarterly operational reportsACCEPTS THE SECPeriodic reviewI don't know。
• Investor protection:For the project targeting the diaspora, it must be establishedRisk tipandInvestment limitI don't know。
• Technical standards:Conditions may include requirements for project useWhite listorAccreditation participants pool, even followERC-3643It's standard-based。

1.3 Currency classification and “decentroization” tests

THE OPERATION OF THE INNOVATION EXEMPTION DEPENDS ON THE NEW SECCurrency classification system, the system is designed to determine which digital assets are securities based on the principle of howey testing。

• Classification systems:SEC CLASSIFIED DIGITAL ASSETS INTO FOUR BROAD CATEGORIES:Commodity type/network tokenIT'S NOT LIKE IT'S A BAD IDEAFunction Type(Utility Tokens)Collection(NFTs), andCurrencyized security typeI don't know。
• Exit path:If the first three types of assets are satisfied “fully decentralised”or“Function integrity”And they canDisengage from the securities regulatory framework. Once the investment contract is considered to be “closed”, subsequent transactions will not automatically be considered “securities transactions” even if the token was originally issued as securities. ThisTransfer of controlThe model provides the project with a clear regulatory exit path。
• Meaning of immunity:WITHIN THIS FRAMEWORK, SEC INSTRUCTED STAFF TO CLARIFY WHEN DIGITAL ASSETS WOULD CONSTITUTE SECURITIES AND EMPHASIZED THATMost encrypted assets are not securitiesEven for securities, regulation should encourage rather than discourage their development。

2. Strategic context for innovative exemptions: synergies with parliamentary legislation

The SEC’s innovative exemption is not an isolated administrative operation, but, together with the two major legislative pillars being promoted by Congress, the CLARITY Act and the GENIUS Act, constitute the new encryption regulatory system in the United States。

2.1 Clarification of jurisdiction:Clarity Actof the Convention

CLARITY Act is intended to resolve a long-standing jurisdictional conflict between SEC and the Commodity Futures Trading Commission (CFTC)。

• Core division of labour:CLARITY ACTLevel I distribution/ fundraisingPLACED UNDER SEC JURISDICTION AND WILLDigital commodity spot transactionsTHE REGULATORY AUTHORITY IS CLEARLY VESTED IN THE CTC。
• Adult block chain testing:The CLARITY Act introduced the “mature block chain” test to determine when the project reaches a sufficient level of decentrization to apply to more liberal regulatory treatment (i.e., considered a digital commodity). Such tests include criteria such as decentralized token ownership, governance participation and functional independence from any single control group。
• Cooperation with exemptions:Innovative exemptions are those who are “matured”The state-of-the-art start-up project provides oneTemporary transition period. It allows for limited fund-raising and product testing through simplified disclosure while working towards complete decentrization. This means that the distinction between administrative immunity and draft legislation is highly compatible: immunity is a temporary administrative “test operation” permit, while the CLARITY Act provides a permanent legislative “graduation” criterion。

2.2 SEGREGATION OF THE STABLE CURRENCY FRAMEWORK: GENIUSEntry into force of Act**

GENIUS Act was signed into law in July 2025 as the first comprehensive federal digital asset legislation in the United States。

• Position of the stability currency:"GENIUS Act" is clearly toPayment of stabilization coinsEXCLUDED FROM THE DEFINITION OF “SECURITIES” OR “COMMODITIES” IN THE FEDERAL SECURITIES ACT AND THE COMMODITY EXCHANGE ACT, THEY ARE PLACED UNDER THE SUPERVISION OF BANKING REGULATORS (E.G. OCC)。
• Distribution requirements:The bill requires that the approved issuer must haveOne:1(c) The proportion is set aside in highly liquid assets (in United States dollars only, treasury bills, etc.) andProhibition of payment of interest or proceedsI don't know。
• Regulatory impact:Since the regulatory framework for the payment of the stable currency and the qualification requirements of the issuer have been clarified by the GENIUS Act, the Commission ' s innovation exemption will be concentrated mainly outside the stable currencyMore innovativeAreas such as the DeFi agreement and new network tokens avoid duplication or conflict of regulation in the area of stable currency。

2.3 Institutional cooperation and market supervision

SEC AND CFTC ANNOUNCED THAT THEY WOULD ADOPTJoint statementandJoint round tables• Strengthen regulatory coordination to address uncertainties in cross-agency jurisdictions。

• Cash transactions:THE JOINT STATEMENT CLARIFIES THAT EXCHANGES REGISTERED IN SEC AND CFTCAllowedThe promotion of trade in certain spot-encrypted asset products reflects the willingness of regulators to encourage market participants to freely choose the place of dealing。
• Coordination of exemptions:One of the topics discussed in the joint round table was “Innovative exemptions” and deFi regulation. Such coordination is essential to reduce compliance gaps among market participants。

The “traditionalization” risk of DeFi

THE INTRODUCTION OF THE SEC INNOVATION EXEMPTION TRIGGERED A STRONG POLARIZED RESPONSE IN THE ENCRYPTION INDUSTRY。

3.1 Opportunities for Innovators and Compliance

For start-ups and existing platforms seeking to operate locally in the United States, the innovation exemption offers real benefits:

• Reduce access costs:In the past, a encryption project may have been costly if it was to operate in compliance in the United StatesMillions of dollarsLegal fees and feesOver a yearTime. Innovative exemptions have significantly reduced the number of start-up teams by simplifying disclosure procedures and providing a clear framework for transitionCompliance threshold and time costI don't know。
• Attracting venture capital:A clear regulatory path would allow the United States market to be reconsidered for projects that would otherwise have been “leaving” or overseas because of regulatory ambiguity. Policy certainty helps to attract institutional investors and venture capital because they value their ability to invest within a clear framework。
• Promoting product innovation:The exemption period allowed a series of new encryption concepts to be tested under the new framework, particularly the emerging DeFi and Web3 ecosystems. For example, the company ConsenSys isRegulatory toleranceThe environment flourishes and allows rapid testing of decentrized applications。
• For large institutions:TRADITIONAL FINANCIAL GIANTS SUCH AS MORGAN CHASE AND MORGAN STANLEY ARE ACTIVELY EMBRACING DIGITAL ASSETS. SEC CANCELEDSAB 121(an accounting standard that forced the custodian to record the client ' s encrypted assets as a liability on the table) to provide digital asset hosting services for the size of banks and trust companiesWe've cleared out major obstaclesI don't know. Together with the administrative flexibility provided by innovative exemptions, these institutions can enter the encryption field at lower regulatory capital costs and clearer legal pathways。

3.2 DeFi community concerns and risks of “traditionalization”

The central contention of immunity policy is thatTo focus on ideasImpact:

• FORCE USER AUTHENTICATION (KYC/AML):The new regulation requires that all projects participating in the exemption must have a “reasonable user validation process”This means that the DeFi agreement needs to implement the KYC/AML procedure。
• Dissociation and control of protocols:In order to comply, the DeFi agreement may need to break down the mobility pool into “licensed pool” and “public pool” and require adoptionERC-3643AND SO ON. ERC-3643 AIMED ATOrganisationandTransfer LimitThe function is embedded in a smart contract if every transaction requires a white list check and the token can be usedCentralized entity freezeSo DeFi is still the real DeFi being questioned. Industry leaders such as the Uniswap founder believe that regulation of software developers as financial intermediaries wouldHarming American competitivenessandStifling innovationI don't know。

3.3 Objections by traditional financial institutions

The traditional financial sector has also expressed opposition to the “innovation exemption”, fearing that this could lead to “regulatory arbitrage”。

• With assets, different rules:Companies such as the World Federation of Exchanges (WFE) and Citadel Securities wrote to SEC urging them to abandon the “Innovative Exemption” scheme, arguing that a broad exemption for tokenized securities would be a good way to move forwardSame assetCreateTwo independent regulatory regimesI don't know。
• It's a tradition:THE ASSOCIATION OF SECURITIES INDUSTRIES AND FINANCIAL MARKETS (SIFMA) EMPHASIZED THAT TOKENIZED SECURITIES MUST BE SUBJECT TO TRADITIONAL FINANCIAL ASSETSSame basic rules for investor protectionI don't know. They felt that deregulation would increase market risk and fraud。

4. Global regulatory comparisons: strategic differences in the US-Europe model

SEC ' s innovative exemption and a more flexible US model, and the EU ' s MiCA representsPrior harmonizationThe model forms the two poles of global digital asset regulation, which differ significantly at the philosophical and operational levels。

U.S. Innovative Exemption and CLARITY Act's “Transfer of Control”Ideas, with MiCA“Foreign authorization”The pattern is in stark contrast. The U.S. model tolerates early uncertainty and higher risk exposure in exchange for the speed and flexibility of innovationSmall and medium-sized financial technology companies and start-upsMost attractive. For MiCA to adopt structural safeguards and uniform rulesLarge, old financial institutions (such as Chase Morgan) provide stable and predictable markets across the EU。

These regulatory differences make it necessary for global companies to “market-to-market”Double compliance strategyTo address the different classification and operational requirements of two main jurisdictions for the same product (e.g. dollar-linked stabilization currency)。

Market outlook and summary

The formal landing of the SEC innovation exemption policy is a crucial step towards the maturity of the United States encryption regulatory system, which not only provides an administrative “safe harbour” but also more profoundly affects the geographical flow of global digital asset innovation in the coming years, marking 2026 as the millennium of “compliance innovation”. With the innovative exemption and unprecedented legal certainty granted by the CIAT Act, the United States encryption industry will attract significant institutional funding to accelerate the shift of encrypted assets from the traditional financial margins to “structured asset classes”。

The strategic focus must be clear for industry participants who are eager to capture this policy dividend: start-ups should view the exemption period (12-24 months) as a low-cost, fast-track window into the United States market, but “fully decentralised” as the ultimate goal of their operations. This means that teams must design clear decentrized road maps based on “control” rather than relying on vague “continuing efforts” criteria. Failure to achieve a validated decentrized project on time would expose the risk of retroactive compliance. In addition, in view of the fact that the requirements for the implementation of the DeFi agreement, which are addressed in the exemption policy, are still controversial, consideration may need to be given to abandoning the United States retail market after the exemption period for projects that cannot be technically completely decentralised and do not wish to adopt compliance standards such as ERC-3643。

Despite a breakthrough at the executive and legislative levels in the United States, the challenge of global regulation of fragmentation remains daunting. Disagreements between the flexible model of the United States and that of the European Union MiCA, which is rigorous and ex ante, will continue to lead companies to “regulate arbitrage” globally. In order to create a level playing field and ensure that consumer protection is not affected by geographical location, the future of the industryUrgent need for international coordinationI don't know. In the long run, one possible projection is that by 2030 the major jurisdictions may be moving towards oneCommon Foundation FrameworkTHIS INCLUDES UNIFORM AML/KYC STANDARDS AND STABLE CURRENCY RESERVE REQUIREMENTS, WHICH WILL PROMOTE INTEROPERABILITY AND INSTITUTIONAL ADOPTION ON A GLOBAL SCALE。

THE COMMISSION'S INNOVATIVE EXEMPTION POLICY REPRESENTS A MILESTONE IN THE MOVE OF THE UNITED STATES REGULATORY SYSTEM FROM “OBFUSCATED PRESSURE” TO “CLEAR NORMS”, WHICH SEEKS TO COMPENSATE FOR LEGISLATIVE DELAYS WITH ADMINISTRATIVE FLEXIBILITY, PROVIDING DIGITAL ASSETS WITH A TRANSITION PATH TOWARDS COMPLIANCE WHILE MAINTAINING DYNAMISM. FOR THE ENCRYPTION INDUSTRY, THE OPENING OF THIS DOOR TO EXPLORATION MEANS THAT THE AGE OF SAVAGE GROWTH IS OVER"Innovative compliance" will become the core competitiveness of the cycleI don't know. The next stage of encryption will no longer be based solely on code, but will depend more onClear asset allocation and regulatory frameworkI don't know. The key to the success of a business is whether it can move forward firmly when it enjoys the speed advantage of immunityVerifiable decentralised and robust compliance linesThis translates the complexity of regulation into a competitive advantage in global markets。

About Movemaker

Movemaker is the first official community-based organization to be launched jointly by Ankaa and BlockBooster under the authority of the Aptos Foundation, and focuses on promoting the ecological development of the Aptos Chinese-speaking community. As the official representative of Aptos in the Chinese-speaking Community, Movemaker works to build a diverse, open and prosperous Aptos ecosystem by connecting developers, users, capital and numerous ecological partners。

Declaration of exemption:

This paper/blog is for reference only and represents the author's personal point of view and does not represent Movemaker's position. It is not intended to provide: (i) investment proposals or investment recommendations; (ii) offers or solicitations for the purchase, sale or holding of digital assets; or (ii) financial, accounting, legal or tax recommendations. Holding digital assets, including stable currency and NFTs, is extremely risky, with high price volatility and may even become worthless. Carefully consider whether a transaction or holding of a digital asset is appropriate for you, depending on your financial situation. Ask your legal, tax or investment adviser if you have any specific problems. The information provided in this paper (including market data and statistical information, if any) is of general interest only. Due diligence has been exercised in the preparation of these data and charts, but no responsibility exists for any factual errors or omissions expressed therein。