The Securities and Exchange Commission needs to make clear how its longstanding regulatory framework applies to software applications as the agency considers writing future rules for onchain financial markets, said its Chair, Paul Atkins.

Software applications don't fit neatly into the SEC's regulatory roles, such as a clearing agency, broker or exchange, Atkins said on Friday at an artificial intelligence expo hosted by the Special Competitive Studies Project.

"Software applications today do not always organize themselves neatly along these categorical lines," Atkins added. "A single protocol can execute a trade, manage collateral, route liquidity, execute trading strategies through vault structures, and settle the transaction—all within a unified, automated system, often within seconds."

The remarks underscore the SEC’s increasingly crypto-friendly posture under Atkins compared with former Chair Gary Gensler, who took a more cautious approach to digital assets and argued that most cryptocurrencies fell under the agency’s jurisdiction.

Since taking office, Atkins has floated the idea of an innovation exemption for tokenized securities and overseen the release of a taxonomy aimed at clarifying which digital assets may qualify as securities.

Last month, the SEC's Division of Trading and Markets released a staff statement to delineate that interfaces, such as DeFi wallets, would generally not be considered brokers. 

Atkins said the SEC should look into notice and comment rulemaking to revisit definitions related to exchange, clearing agency and broker definitions as they apply to onchain trading systems. He also called for more clarity around crypto vaults — onchain software applications that allow people to earn yield passively. 

"As the Commission considers these policy initiatives, we should remember that onchain market structures today are often hybrid in nature, combining elements of what are often referred to as 'traditional' and 'decentralized' finance," Atkins said. "We should clarify how the Commission views the spectrum of models that may implicate our statutes through notice and comment rulemaking, using our exemptive authorities where necessary and prudent, all with full participation from innovators, investors, and the public alike."

Industry groups praised the remarks. The DeFi Education Fund described Atkins’ comments as "powerful" in a post on X, while the Hyperliquid Policy Center said it was encouraged to see "a Chairman willing to map these systems to existing legal frameworks on their own terms, rather than force them into legacy categories built for legacy architecture."