SEC Engages SIFMA on Crypto Regulation Amid Industry Push for Clarity

The US Securities and Exchange Commission’s (SEC) Crypto Task Force engaged in a significant dialogue with representatives from the Securities Industry and Financial Markets Association (SIFMA), a prominent trade group representing financial firms. The meeting was centered around addressing critical regulatory concerns within the cryptocurrency sector, with a particular focus on overseeing digital asset issuance, tokenized securities, and emerging digital financial products.

Prior to the meeting, SIFMA circulated an agenda that underscored the necessity for uniform regulatory standards to govern the rapidly expanding digital asset ecosystem. The group advocated for regulations that are “appropriately updated” to reflect the swift pace of technological advancements. One of the key proposals from SIFMA was to expand current disclosure requirements to encompass new types of securities, especially those innovative financial products built on digital asset infrastructure.

SIFMA recommended a comprehensive approach to legislation on digital assets, suggesting that the SEC should separate certain functions for digital commodities and tokenized securities. This includes keeping exchange, broker-dealer, trading, and custody functions distinct while fostering competition and cooperation among service providers. Additionally, SIFMA proposed placing restrictions on direct involvement in trading digital securities and commodities.

The industry trade group emphasized the need for an open, transparent framework for issuing and trading digital securities. This framework should be constructed with a cautious approach to defining the “foundational” aspects of securities and digital commodities. SIFMA also recommended that legislation on digital assets should include technology-focused improvements to legal documents and considerations for cross-border applicability.

SIFMA’s argument highlighted the importance of rulemaking that considers transitional and hybrid arrangements, noting the increasing interest among traditional finance companies in incorporating digital assets into their offerings. The trade group represents hundreds of firms that offer financial services, including broker-dealers, investment banks, and asset management companies. According to SIFMA’s website, broker-dealer members account for approximately 80% of financial advisors managing $13 trillion in client assets and 90% of market share in the US in terms of revenue.

This week, the trade association urged the SEC to deny requests from digital asset firms seeking to offer tokens with equity features via tailored exemptive relief. SIFMA expressed concern that companies dealing with digital assets are exploring the issuance of tokenized stocks without any action or special permission, effectively seeking freedom from SEC enforcement actions. The group urged the regulatory watchdog to deny these requests, advocating for a strong public process that allows for public input before decisions are made about new trading and issuance models.

SIFMA’s stance aims to ensure that with open, transparent regulations, crypto markets will be safe and investors will be protected, marking a significant milestone in the crypto sector. The newly appointed chairman of the SEC, Paul Atkins, recently criticized the agency for stifling innovation in the cryptocurrency sector through years of “regulatory uncertainty.” Atkins emphasized that market participants engaging in this technology deserve clear regulatory rules of the road, signaling a shift in tone from the agency.

Atkins, who has previously advised several crypto firms, is expected to adopt a more industry-friendly approach. His predecessor, Gary Gensler, had taken an aggressive enforcement stance, accusing the sector of widespread noncompliance with US securities laws. Even before Atkins took office, the SEC had begun softening its posture, moving to develop clearer regulations for the crypto sector and slowing—or entirely dropping—certain enforcement actions. This shift in regulatory approach is seen as a positive step towards fostering innovation and protecting investors in the digital asset space.