SEC Chairman Calls for Clear Crypto Regulations, Shifts from Enforcement to Rulemaking

Paul Atkins, the newly appointed Chairman of the U.S. Securities and Exchange Commission (SEC), has called for a more rational and clear regulatory framework for crypto assets. During his keynote address at the Crypto Task Force Roundtable, Atkins highlighted the need for precise rules governing the issuance, custody, and trading of crypto assets, moving away from the previous enforcement-driven approach.

Atkins compared the transition of securities from traditional databases to blockchain-based ledger systems to the evolution of audio recording from vinyl records to digital formats. He noted that the digital revolution in the music industry unlocked significant innovation potential, and similarly, blockchain technology is poised to transform the securities market by enabling new methods of issuing, trading, holding, and using securities.

The SEC Chairman stressed the importance of clear regulations to safeguard investors from fraud and illegal activities. He announced that the SEC would shift from relying on ad hoc enforcement actions to using existing rulemaking, interpretation, and exemptions to establish precise and applicable standards for market participants. This change aims to focus enforcement efforts on combating violations of statutory obligations, particularly those involving fraud and market manipulation.

Atkins also highlighted the need for collaboration within the SEC, mentioning the formation of the Crypto Assets Task Force by Commissioners Uyeda and Peirce. This task force is designed to break down departmental barriers and provide the public with much-needed policy clarity and certainty.

The SEC Chairman outlined three key areas of focus for crypto asset policy: issuance, custody, and trading. Regarding issuance, Atkins committed to developing clear and reasonable guidance for the issuance of crypto assets that are securities or investment contracts. He criticized the SEC's previous "ostrich policy" and "shoot first, ask questions later" approach, which he believed hindered innovation. Atkins called for the SEC to develop new guidelines and evaluate whether additional guidance, registration exemptions, and safe harbors are needed to open up new avenues for the issuance of crypto assets in the United States.

On the matter of custody, Atkins supported giving registered institutions more autonomy to choose how to custody crypto assets. He praised the recent revocation of Staff Accounting Bulletin No. 121 (SAB-121) as a step in the right direction but called for further clarification of the criteria for determining "qualified custodians" and setting reasonable exemptions for common operations in the crypto asset market. Atkins also suggested updating custody rules to allow advisors and funds to self-custody in certain circumstances and abolishing the current "special purpose broker" framework.

Regarding trading, Atkins supported allowing registered institutions to trade a wider variety of products on the platform based on market demand. He called for the modernization of the Alternative Trading System (ATS) regulatory framework to better accommodate crypto assets and evaluate whether further guidance or rules are needed to support the listing and trading of crypto assets on national securities exchanges.

Atkins concluded his speech by expressing his commitment to working with the Trump Administration and Congress to make the United States the best place to participate in the global crypto asset markets. He emphasized the need for proactive policy and urged the SEC to actively engage with market participants to foster innovation and protect investors.