This article is from: SEC

Compiled by: Odaily Planet Daily (@OdailyChina); Translator: Azuma (@azuma_eth)

Editor's Note: On May 12, U.S. time, the Special Working Group on Crypto Assets under the U.S. Securities and Exchange Commission (SEC) held its fourth cryptocurrency roundtable meeting, themed "Tokenization: On-Chain Assets - The Intersection of Traditional Finance and Decentralized Finance."

Notably, Paul Atkins, who officially took office as SEC Chairman on April 22, attended the roundtable and delivered a lengthy speech on cryptocurrency for the first time in his capacity as SEC Chairman (Note: At the third meeting, Paul Atkins, who had just been in office for four days, gave an opening speech but only said a few words).

In his speech, Paul Atkins mentioned that "securities are increasingly migrating from traditional (off-chain) databases to blockchain-based (on-chain) ledger systems, and a core priority during his term is to establish a reasonable regulatory framework for crypto asset markets, setting clear rules for the issuance, custody, and trading of cryptocurrencies, while continuously curbing illegal activities. Furthermore, SEC's regulation of cryptocurrencies will no longer rely on controversial enforcement actions but will use existing rule-making, interpretive, and exemption powers to set precise applicable standards for market participants.

Below is the full text of Paul Atkins' speech, translated by Odaily Planet Daily.

Thank you all, good afternoon. I am honored to speak today at this roundtable on tokenization with such distinguished individuals. Thank you to all the panel members for your participation.

The topic we are discussing 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 comparable to the evolution of audio recordings from vinyl records to cassette tapes and then to digital software decades ago. Encoding audio into a digital file format that can be easily transmitted, modified, and stored has unleashed tremendous innovative potential for the music industry. Audio broke free from the constraints of static fixed formats and suddenly became compatible and interoperable across various devices and applications. It can 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 U.S. economy.

Just as the digital audio revolution reshaped the music industry, the on-chain securities movement is expected to transform the securities market through entirely new methods of issuance, trading, holding, and usage. For example, on-chain securities can utilize smart contracts to transparently distribute dividends to shareholders periodically; tokenization can also convert relatively illiquid assets into liquid investment opportunities, facilitating capital formation. Blockchain technology is expected to open up numerous innovative application scenarios for securities, nurturing new market activities that current SEC regulations do not yet cover.

To realize President Trump's vision of "making America the global center for crypto assets," the SEC must keep pace with innovation and assess whether the existing regulatory framework needs to be adjusted to accommodate on-chain securities and other crypto assets. Regulations designed for off-chain securities may be incompatible or unnecessary for on-chain assets, and may instead stifle the development of blockchain technology.

A core priority during my term is to establish a reasonable regulatory framework for crypto asset markets, setting clear rules for issuance, custody, and trading, while continuously curbing illegal activities. Clear rules are crucial for protecting investors from fraud — especially in helping them identify illegal schemes.

The SEC has entered a new era. Policy-making will no longer be achieved through ad hoc enforcement actions but will use existing rule-making, interpretive, and exemption powers to set precise applicable standards for market participants. Enforcement will return to the original intent of congressional legislation — focusing on actions that violate legal obligations, particularly those involving fraud and market manipulation.

This work requires collaboration across multiple departments within the SEC, so I am pleased that Commissioners Uyeda and Peirce have jointly formed the Crypto Assets Working Group. For a long time, the SEC has suffered from policy silos, and this working group demonstrates how we can break down departmental barriers to provide the public with the long-awaited policy clarity and certainty.

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

Issuance

First, I will advocate for the SEC to establish clear and reasonable guidelines for the issuance of securities-like crypto assets or investment contract-like crypto assets. Currently, only four crypto asset issuers have completed financing through registered offerings or Regulation A exemptions. Issuers generally avoid this method of issuance, partly due to the difficulty in meeting the corresponding disclosure requirements. If an issuing entity does not intend to issue traditional securities, such as stocks, bonds, or notes, it is also challenging for the issuing entity to determine whether the crypto asset constitutes a "security" or is subject to investment contract obligations.

In recent years, the SEC first adopted what I call an "ostrich policy" — fantasizing that crypto assets would disappear on their own; then it shifted to a "shoot first, ask questions later" enforcement model. While they claim to be willing to communicate with potential registrants ("welcome to consult"), this has proven to be at best a fleeting moment, and more often misleading — because the SEC has not made the necessary adjustments to registration forms to accommodate new technologies. For example, the S-1 form still requires detailed disclosure of executive compensation and the use of funds, information that may be neither relevant nor important for 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 actions for crypto assets, which have increasingly drawn investor attention in recent years. We cannot encourage innovation by "cutting corners."

I am committed to pushing the SEC to develop new guidelines. SEC staff recently issued a statement regarding specific registration and disclosure obligations, clarifying that the issuance of certain crypto assets does not involve federal securities laws. I hope the staff will continue to clarify other types of issuances and assets as per my instructions. However, existing registration exemptions and safe harbor rules may not fully apply to the issuance of certain crypto assets. I believe this reliance on staff statements is extremely temporary — action at the SEC level is crucial and necessary, and I have asked the staff to assess whether additional guidance, registration exemptions, and safe harbor rules are needed to open new pathways for crypto asset issuance within the United States. I believe the SEC has ample discretion under the securities law framework to embrace the crypto industry, and I will certainly push for its implementation.

Custody

Second, I support granting registered entities more autonomy in choosing custody methods for crypto assets. Recently, staff eliminated a significant barrier to companies providing crypto asset custody services by rescinding Staff Accounting Bulletin No. 121 (SAB-121). This bulletin was a major mistake — staff had no authority to replace committee actions with such a broad measure without going through the notice-and-comment rulemaking process. This not only caused unnecessary confusion but also exceeded the SEC's jurisdiction. However, beyond the repeal of SAB-121, we can take further steps to promote competition in the compliant custody services market.

It is necessary to clarify the identification standards for "qualified custodians" under the Investment Advisers Act and the Investment Company Act, and to set reasonable exemptions for common operations in the crypto asset market. Many advisors and funds have used self-custody solutions that are more advanced than the technologies employed by some custodians in the market, providing more effective asset security. Therefore, custody rules may need to be updated to allow advisors and funds to self-custody under certain circumstances.

Additionally, 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 operating, clearly due to the significant restrictions imposed by this model. Broker-dealers have never been prohibited from custodying non-securities crypto assets or securities crypto assets, but SEC action may be needed to clarify the applicable standards of customer protection rules and net capital rules for such activities.

Trading

Furthermore, I support allowing registered entities to trade a wider variety of products on platforms based on market demand — these activities have been prohibited by previous SEC administrations. For example, some broker-dealers have attempted 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 providing non-securities trading services, including "pair trading" of securities and non-securities. I have asked the staff to study how to modernize the ATS regulatory framework 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.

In the SEC's construction of a comprehensive regulatory framework, market participants in the securities market should not be forced to go overseas for blockchain innovation. I will explore whether conditional exemptions can be granted to registered and non-registered entities attempting to launch new product services — these innovations may not fully comply with current regulatory requirements.

I look forward to collaborating with colleagues in the Trump administration and Congress to make the United States the best participant in the global crypto asset market.

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