SEC's New Chair's First Crypto-Themed Speech: What Signals Were Revealed?

Original Title: Keynote Address at the Crypto Task Force Roundtable on Tokenization

Original Author: Paul S. Atkins

Original Translation: Azuma, Odaily Planet Daily

Editor's Note: On May 12, US local time, the Cryptocurrency Task Force under the US Securities and Exchange Commission (SEC) held the fourth cryptocurrency roundtable meeting. The theme of this meeting was "Tokenization: On-Chain Assets - The Intersection of Traditional Finance and Decentralized Finance." It is worth mentioning that Paul Atkins, who officially took office as SEC Chairman on April 22, attended the roundtable meeting and delivered a lengthy speech on cryptocurrency for the first time as SEC Chairman (Note: During the third meeting, Paul Atkins, who had just taken office four days prior, delivered only a few words in the opening remarks).

In his speech, Paul Atkins mentioned that "securities are increasingly migrating from traditional (off-chain) databases to blockchain-based (on-chain) ledger systems. The core priority during his term is to establish a sound regulatory framework for the crypto asset market, establish clear rules for the issuance, custody, and trading of cryptocurrencies, and continue to suppress illegal activities. In addition, the SEC's regulation of cryptocurrency will no longer rely on controversial enforcement actions but will instead use its rule-making, interpretation, and exemption powers to set precise standards applicable to market participants. The following is the full text of Paul Atkins' speech, translated by Odaily Planet Daily.

Thank you, everyone, good afternoon. I am honored to speak to you distinguished individuals today at this roundtable discussion on tokenization. Thank you to all the members of the group for participating.

The topic of our discussion this afternoon is timely - securities are increasingly migrating from traditional (or "off-chain") databases to blockchain-based (or "on-chain") ledger systems.

The migration of securities from off-chain systems to on-chain systems is akin to the evolution of audio recordings decades ago from vinyl records to cassette tapes and then to digital formats. Encoding audio into digital file formats that are easily transmittable, modifiable, and storable unleashed tremendous innovation in the music industry. Audio broke free from the shackles of static, fixed formats and suddenly could achieve compatibility and interoperability across multiple devices and applications. It could be combined, split, and programmed to create entirely new products. This also gave rise to new hardware devices and streaming business models, greatly benefiting consumers and the US economy.

Just as the digital audio revolution reshaped the music industry, on-chain securities are poised to transform the securities market through a whole new way of issuance, trading, holding, and usage. For example, on-chain securities can transparently distribute dividends to shareholders periodically through smart contracts; tokenization can also transform relatively illiquid assets into liquid investment opportunities, facilitating capital formation. Blockchain technology is expected to open up a plethora of innovative applications for securities, nurturing new market activities not yet covered by current SEC regulations.

In order to fulfill President Trump's vision of "making America the global cryptocurrency hub," the SEC must keep pace with innovation, assessing whether the existing regulatory framework needs adjustment to accommodate on-chain securities and other crypto assets. Regulations designed for traditional securities may be incompatible or unnecessary for on-chain assets, potentially hindering the development of blockchain technology.

A core priority during my tenure is to establish a sound regulatory framework for the cryptocurrency market, setting clear rules for issuance, custody, and trading while continuously combating illicit activities. Clear rules are crucial to protect investors from fraud—especially in helping them identify illegal schemes and violations.

The SEC has entered a new era. Policy-making will no longer be achieved through ad hoc enforcement actions but will utilize existing rulemaking authority, interpretive guidance, and waivers to set precise standards applicable to market participants. Enforcement efforts will return to the original intent of Congressional mandates—focusing on combatting conduct that violates the law, especially in cases involving fraud and market manipulation.

This work requires collaboration among multiple divisions within the SEC, and I am pleased that Commissioners Uyeda and Peirce have jointly formed the Crypto Asset Working Group. For far too long, the SEC has struggled with policy silos, and this working group demonstrates how we can break down interdivisional barriers to provide the long-awaited policy clarity and certainty to the public.

Next, I will outline the three key areas of focus for cryptocurrency policy—issuance, custody, and trading.

Issuance

First, I will urge the SEC to develop clear and reasonable guidance for the issuance of security-based cryptocurrency assets or investment contract-based cryptocurrency assets. Currently, only four crypto asset issuers have completed fundraising through registered offerings or Regulation A exemptions. Issuers generally avoid this issuance route, in part because it is challenging to meet the corresponding disclosure requirements. If the issuing entity does not intend to issue common securities such as stocks, bonds, or notes, then the issuer also struggles to determine whether the crypto asset constitutes a "security" or is bound by an investment contract.

Over the past few years, the SEC first adopted what I call an "ostrich policy" response — imagining that crypto assets would disappear on their own; and then turned to a "shoot first, ask questions later" enforcement approach. While they claim to be willing to communicate with potential registrants ("welcome to come for consultation"), the reality has proven this to be at best a flash in the pan, more often than not even misleading — as the SEC has not made the necessary adjustments to registration forms to accommodate new technology. For example, the S-1 form still requires detailed disclosure of executive compensation and use of funds, information that may be neither relevant nor important to crypto asset investment decisions. Although the SEC has adjusted registration forms for asset-backed securities and real estate investment trusts, it has not taken similar steps for crypto assets that investors have become increasingly interested in in recent years. We cannot encourage innovation through a "one-size-fits-all" approach.

I am committed to urging the SEC to develop new guidelines. SEC staff has recently issued a statement on specific registration issuance and disclosure obligations, clearly stating that the issuance of certain crypto assets does not involve federal securities laws. I hope that staff will continue to follow my instructions in clarifying other types of issuances and assets. However, existing registration exemptions and safe harbor rules may not fully apply to the issuance of certain crypto assets. I believe that relying on staff statements is extremely temporary — SEC-level action is crucial and necessary, and I have requested staff to assess whether additional guidance, registration exemptions, and safe harbor rules are needed to open up new avenues for the issuance of crypto assets in the United States. I believe that the SEC has ample discretion under the securities law framework to embrace the crypto industry, and I will certainly push for implementation.

Custody

Next, I support granting registered entities more autonomy in choosing crypto asset custody solutions. Recently, staff took a significant misstep by revoking Staff Accounting Bulletin No. 121 (SAB-121), eliminating a key hurdle for companies providing crypto asset custody services. This bulletin was a significant error — staff did not have the authority to substitute committee action on such a broad scale without going through the notice and comment rulemaking process. Not only did this cause unnecessary confusion, but its impact went far beyond the SEC's authority. However, in addition to repealing SAB-121, we can take further steps to promote competition in the compliant custody services market.

It is necessary to clarify the standards for identifying "qualified custodians" under the Investment Advisers Act and the Investment Company Act, and to establish reasonable exemptions for common operations in the crypto asset market. Many advisers and funds have used self-custody solutions that are more advanced technologically than those used by some custodians in the market, which can more effectively secure assets. Therefore, custody rules may need to be updated to allow advisers and funds to engage in self-custody in specific circumstances.

In addition, it may be necessary to abolish the current "Special Purpose Broker-Dealer" framework and establish a more reasonable system. Currently, only two Special Purpose Broker-Dealers are in operation, a situation clearly stemming from significant restrictions imposed by this model. Broker-Dealers have never been prohibited from custodying non-security or security token assets, but SEC action may be needed to clarify the application standards of customer protection rules and net capital rules to such activities.

Trading

In addition, I support allowing registered entities to trade a broader range of products on their platforms based on market demand—a business that past SEC administrations prohibited. For example, some broker-dealers are attempting to launch "super apps" that integrate securities, non-securities, and other financial services. Current securities laws do not prohibit registered broker-dealers with alternative trading systems from offering non-securities trading services, including securities and non-securities "matched trades." I have requested staff to explore how to modernize the ATS regulatory regime to better accommodate crypto assets while assessing whether further guidance or rules are needed to support the listing and trading of crypto assets on national securities exchanges.

As the SEC constructs a comprehensive regulatory framework, market participants should not be compelled to seek blockchain innovation overseas. I will explore whether conditional exemptions can be granted to both registered and unregistered entities seeking to introduce new product services—innovations that may not fully meet current regulatory requirements.

I look forward to collaborating with colleagues in the Trump administration and Congress to make the United States the premier destination for participation in the global crypto asset market.

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