Wintermute Urges SEC to Exempt On-Chain Settlement from Legacy Rules in 2025

• Why Is Wintermute Challenging the SEC’s Legacy Rules?
• How Could On-Chain Settlement Reshape Markets?
• What’s the DeFi Broker-Dealer Debate About?
• What Are the Risks of Deregulating On-Chain Finance?
• How Does This Fit Into Crypto’s Regulatory Battles?
• What’s Next for Blockchain Settlement Standards?
• Frequently Asked Questions

London-based Wintermute Trading has called on U.S. regulators to exempt blockchain-based securities settlements from outdated rules, arguing that decades-old regulations stifle innovation in digital asset markets. The firm’s push focuses on two key issues: allowing on-chain settlements without triggering customer protection rules and clarifying that DeFi liquidity providers shouldn’t need broker registrations. This move could streamline institutional adoption of tokenized assets—but raises questions about investor safeguards. Here’s why the crypto industry is watching closely.

Why Is Wintermute Challenging the SEC’s Legacy Rules?

Wintermute’s October submission to the SEC’s Crypto Working Group targets Rule 15c3-3, the "Customer Protection Rule," designed to prevent broker misuse of client assets. The firm argues that when intermediaries settle tokenized securities directly on-chain—with counterparties controlling their own wallets—they should qualify for an existing exemption from maintaining special bank accounts. "Forcing legacy banking infrastructure onto blockchain settlement defeats its efficiency benefits," wrote Wintermute. Their stance? Let regulated intermediaries develop customized clearing procedures for tokenized assets without triggering intermediary rules.

How Could On-Chain Settlement Reshape Markets?

By bypassing traditional clearinghouses, on-chain settlement could slash costs and operational friction. Wintermute claims current rules were drafted for "multi-layered intermediation"—a structure blockchain renders obsolete. But critics warn reduced intermediation means fewer investor protections. The SEC now faces balancing innovation with market integrity, especially after Wintermute’s September push to exclude network tokens like bitcoin from securities classification. As one BTCC analyst noted, "This isn’t just about efficiency—it’s redefining what ‘settlement’ even means in a DeFi world."

What’s the DeFi Broker-Dealer Debate About?

Wintermute’s second request tackles the SEC’s distinction between "dealers" (requiring registration) and "traders" (operating solely for proprietary accounts). The firm seeks confirmation that DeFi liquidity providers—even those facilitating markets—shouldn’t be deemed brokers. "Providing liquidity via smart contracts isn’t intermediation," they asserted on X (formerly Twitter). This echoes crypto’s broader regulatory struggle: fitting decentralized protocols into frameworks built for Wall Street.

What Are the Risks of Deregulating On-Chain Finance?

While exemptions could boost institutional crypto adoption, they carry risks. Fewer intermediaries mean less oversight—a concern given 2023’s $2.8B in DeFi hacks (CoinMarketCap data). Wintermute counters that blockchain’s transparency offers superior audit trails. Still, SEC Commissioner Hester Peirce has cautioned that "efficiency can’t come at the cost of accountability." The outcome may hinge on whether regulators view blockchain as infrastructure needing new rules or financial activity requiring old ones.

How Does This Fit Into Crypto’s Regulatory Battles?

Wintermute’s petition aligns with crypto’s push for tailored frameworks. Their argument mirrors Ripple’s partial victory against the SEC—where courts ruled some token sales weren’t securities. With the EU’s MiCA regime now live and the UK advancing crypto laws, U.S. agencies face pressure to adapt. As TradingView charts show, tokenized securities volumes grew 47% YoY in Q3 2025, suggesting markets won’t wait for perfect regulation.

What’s Next for Blockchain Settlement Standards?

The SEC’s response could set precedents beyond crypto. Traditional finance giants like BlackRock have tokenized funds, while DTCC tests blockchain for stock settlements. Wintermute’s proposal—if adopted—might accelerate convergence between TradFi and DeFi. But as the 2008 crisis proved, deregulation without robust safeguards invites disaster. One thing’s clear: 2025’s regulatory decisions will echo through finance for decades.

Frequently Asked Questions

What is Wintermute asking the SEC to change?

Wintermute seeks exemptions from legacy rules (like SEC Rule 15c3-3) for blockchain-based securities settlements, arguing current requirements undermine on-chain efficiency.

Could this affect Bitcoin and Ethereum regulation?

Indirectly. While focused on tokenized securities, a favorable SEC stance might influence how network tokens are classified—a debate Wintermute joined in September 2025.

How soon might the SEC respond?

No timeline exists, but with tokenization gaining traction, analysts expect clarity within 12-18 months. The SEC’s crypto working group typically moves faster than formal rulemaking.