Wintermute Urges SEC to Exempt Blockchain Settlement from Legacy Rules in 2025
- Why Is Wintermute Challenging SEC Settlement Rules?
- How Could Blockchain Settlement Work Without Traditional Infrastructure?
- What's the DeFi Liquidity Provider Exemption Wintermute Seeks?
- Why Does This Regulatory Push Matter for Crypto Markets?
- What's Next for Blockchain Settlement Regulation?
- Frequently Asked Questions
In a bold move that could reshape crypto market infrastructure, Wintermute Trading has called on U.S. regulators to exempt broker-dealers from existing rules when settling tokenized securities on blockchain networks. The London-based OTC platform argues that decades-old regulations are stifling innovation in digital asset markets. This push comes as institutional adoption of blockchain-based settlement grows, with Wintermute positioning itself at the forefront of regulatory advocacy for crypto market structure reform.
Why Is Wintermute Challenging SEC Settlement Rules?
Wintermute's core argument centers on Rule 15c3-3, the Customer Protection Rule designed to prevent broker-dealers from misusing client assets. The firm contends that when brokers settle tokenized securities directly on blockchain with counterparties controlling their own digital wallets, they should qualify for an existing exemption that avoids maintaining special bank accounts for customer protection. "Forcing traditional banking infrastructure onto blockchain-based settlement would completely negate the efficiency benefits of on-chain settlement," Wintermute wrote in its October submission to SEC Commissioner Hester Peirce and the crypto working group.
The company emphasizes that current rules were designed for an era of multi-level intermediation that blockchain technology renders obsolete. Following its follow-up meeting with the SEC, Wintermute stated: "These legacy rules create unnecessary friction that cancels out the efficiency gains blockchain promises."
How Could Blockchain Settlement Work Without Traditional Infrastructure?
Wintermute proposes that regulated traders should develop their own clearing and settlement procedures for tokenized securities without triggering broker-dealer rules. This WOULD allow traders to settle transactions directly on blockchain with counterparties using risk-appropriate standards. The platform argues this approach maintains market integrity while removing redundant intermediation layers.
According to TradingView data, blockchain settlement could reduce post-trade processing times from days to minutes while cutting costs by up to 80% compared to traditional systems. However, reduced intermediation means fewer safeguards for investors, requiring robust blockchain mechanisms to ensure market integrity.
What's the DeFi Liquidity Provider Exemption Wintermute Seeks?
Wintermute's second request focuses on clarifying the distinction between "dealers" (who must register with SEC) and "traders" (who trade solely for their own account). The company seeks confirmation that proprietary traders and DeFi liquidity providers shouldn't be considered dealers simply for providing market liquidity.
"Proprietary trading and DeFi liquidity provision shouldn't require broker registration," Wintermute posted on X. The firm notes this aligns with the longstanding "trader exemption" for entities trading exclusively for their own accounts without client interaction.
Why Does This Regulatory Push Matter for Crypto Markets?
The exemptions Wintermute advocates could significantly reduce on-chain settlement friction while lowering operational costs and constraints. Coinmarketcap analysts suggest this might accelerate institutional adoption of tokenized securities. However, it raises important questions about investor protection in a less-intermediated environment.
This isn't Wintermute's first regulatory push. In September 2025, the firm argued that network tokens like bitcoin and Ether shouldn't be classified as securities, claiming misclassification would drive innovation offshore. The crypto industry watches closely as Wintermute continues shaping regulatory dialogue around blockchain market structure.
What's Next for Blockchain Settlement Regulation?
The SEC's response will be pivotal for digital asset markets. Wintermute praises the regulator's openness to discussing how existing rules might adapt to blockchain-based markets. As the debate continues, market participants await clarity that could determine whether blockchain realizes its potential to transform securities settlement.
This article does not constitute investment advice. Market participants should conduct their own research before making trading decisions.
Frequently Asked Questions
What rule is Wintermute challenging with the SEC?
Wintermute is primarily challenging SEC Rule 15c3-3 (the Customer Protection Rule), arguing it creates unnecessary requirements for blockchain-based settlement of tokenized securities.
How would blockchain settlement differ from traditional methods?
Blockchain settlement allows direct peer-to-peer transactions without multiple intermediaries, potentially reducing settlement times from days to minutes and cutting costs significantly.
Why does Wintermute want exemptions for DeFi liquidity providers?
Wintermute argues that proprietary traders providing liquidity on DeFi protocols shouldn't be classified as broker-dealers since they're trading for their own accounts, not servicing clients.
What impact could these changes have on crypto markets?
Successful advocacy could reduce friction in tokenized securities markets, potentially accelerating institutional adoption while raising new investor protection considerations.
