SEC Shifts to Notice and Comment Rulemaking for Crypto Policy

The US Securities and Exchange Commission (SEC) is set to adopt a structured approach to shaping its cryptocurrency policy, focusing on a 'notice and comment' rulemaking process rather than relying on enforcement actions. This shift was highlighted by SEC Chair Paul Atkins, who emphasized the importance of clear and rational regulations for the crypto market. Atkins' stance reflects a broader effort within the SEC to establish a more transparent and predictable regulatory framework for digital assets.
In his remarks to the Senate Appropriations Subcommittee on Financial Services, Atkins stated that the agency’s crypto policymaking “will be done through notice and comment rulemaking, not through regulation by enforcement.” This method involves publishing proposed rules and inviting public feedback before finalizing regulations, contrasting with the previous approach of using enforcement actions to regulate the crypto industry, which was seen as less transparent and more reactive. Atkins' comments suggest a move towards a more proactive and collaborative regulatory environment, aiming to protect investors while fostering innovation in the crypto space.
Atkins, a former crypto lobbyist, said that creating a “rational regulatory framework for crypto assets” will be a key priority for the SEC under his tenure. He added that the Commission will utilize its existing authorities to set fit-for-purpose standards for market participants. This approach aligns with Atkins' long-standing support for minimal oversight in the crypto sector, reflecting his belief in the importance of balancing regulation with the need for innovation. The SEC's spokesperson declined to comment on specific letters or actions, but Atkins' leadership suggests a focus on creating a regulatory environment that supports both investor protection and market growth.
The shift in the SEC's approach to crypto regulation is part of a broader effort to address the complexities of the digital asset market. By adopting a 'notice and comment' process, the SEC aims to create a more transparent and collaborative regulatory framework, reducing the reliance on enforcement actions and fostering a clearer market outlook. This approach is expected to provide a more stable and predictable environment for crypto assets, benefiting both investors and market participants.
Atkins also mentioned that the SEC’s enforcement approach will return to Congress’s original intent, which is to police violations of these established obligations, particularly as they relate to fraud and manipulation. He added the SEC will establish “clear rules of the road” for the issuance, custody, and trading of crypto while also discouraging bad actors from violating the law. “Clear rules of the road are necessary for investor protection against fraud, not the least to help them identify scams that do not comport with the law,” he said.
Atkins did not directly answer a question from Democrat Senator Chris Coons about whether he would endorse crypto exchanges handling traditional securities and digital tokens. Instead, he said the agency’s Crypto Task Force is in the process of coming up with regulations “that make sense for the industry and that allow for innovation.” Atkins previously appeared before lawmakers and said the Crypto Task Force would release its first report in the next few months. The agency’s Crypto Task Force was launched to establish a workable crypto framework for the agency to use.
Atkins also said he has sought approval from Congress to disband the agency’s Strategic Hub for Innovation and Financial Technology, which was launched to focus on fintech-related fields. “Innovation should be ingrained into the culture SEC-wide and not limited to a relatively small office,” Atkins said. “The principles and priorities under which it was established are being integrated into the very fabric of the SEC.” Since the previous chair resigned, the SEC has adopted a different approach to crypto, dismissing long-running enforcement actions against crypto firms. SEC staff have also released guidance around the most common crypto staking activities, saying they do not violate securities laws and how federal securities laws could apply to crypto.
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