SEC aims to formalize innovation exemption by early 2026SEC innovation exemption to curb brain drain

U.S. Securities and Exchange Commission Chairman Paul Atkins has confirmed that the agency wants to formalize an innovation exemption by the end of the year or early 2026 to give crypto and fintech projects a clear path to operate under regulatory supervision.

During his appearance at a Futures and Derivatives Law Report event on Oct. 7, Atkins acknowledged that the current government shutdown was hampering the commission’s work, but said finalizing the innovation exemption still remains a priority.

“As you know, we’ve had four years, at least, of repression of that industry, and with the result of pushing things abroad, rather than having innovation being done,” Atkins said at the event.

For those unaware, Atkins was referring to the previous SEC administration led by former Chair Gary Gensler, during which the agency was heavily criticised for relying on an enforcement-first approach rather than well-defined rules to oversee the crypto industry.

Many crypto advocates agree that Gensler’s highly skeptical approach to the emerging industry left the U.S. behind Europe and the UK in terms of access to cryptocurrency markets and services. However, the agency’s current stance with a pro-crypto leadership at the helm is a far cry from that approach.

“The U.S. is catching up to Europe in this regard, as the European Commission created the European Blockchain Regulatory Sandbox in 2023, which involves regulators from many European countries, such as France, Germany, Spain, Italy, and others. The benefits of this include increased legal certainty and more options for consumers,” Kadan Stadelmann, Chief Technology Officer, Komodo Platform told crypto.news.

SEC innovation exemption to curb brain drain

Atkins had been pushing this initiative since June, when he first directed SEC staff to explore a conditional relief framework that would allow crypto projects to operate under supervised conditions. Last month, he confirmed that the agency would pursue crypto rule-making in the coming months and establish an innovation exemption by year-end.

“We’ll see where that goes, but I have confidence [we’ll] be able to do it,” Atkins said at the Tuesday event.

According to the SEC Chair, the exemption is among the regulator’s top priorities, as it aims to curb the ongoing brain drain of crypto developers and startups relocating overseas in search of clearer rules and friendlier regulatory environments.

“[…] I want to be welcoming to innovators and have them feel like they can do something here in the United States, so that they don’t have to flee to some foreign jurisdiction.”

Stadelmann added that the U.S. can expect “faster adoption of technologies and regulatory tweaks and more harmonization with the state of the global crypto industry,” once the innovation exemption is in place.

Atkins, who took office earlier this year as one of President Trump’s key appointments to position the United States as a global hub for digital asset innovation, has been advocating for a balanced regulatory model that encourages progress while safeguarding investors.