SEC Chair Calls for Comprehensive Reform of U.S. Encryption Asset Policy

SEC Chairman Paul Atkins recently proposed a three-part reform strategy for the regulation of encryption asset issuance, custody, and trading, calling for a comprehensive modernization of U.S. encryption asset policy.

On May 12, Atkins delivered a keynote speech at the latest roundtable meeting of the SEC's special working group on encryption assets, discussing tokenization and its potential to enhance the capital markets. He compared the transformation of blockchain-based securities to the digital revolution in the music industry, believing that "on-chain" assets could fundamentally change the landscape of capital markets, just as MP3s reshaped the way audio is distributed.

Atkins stated that the SEC's primary task is to tailor a "reasonable regulatory framework" for the digital asset market, breaking away from the unpredictable enforcement patterns of the past. He promised that future policymaking would be conducted through formal channels rather than taking ad hoc actions. Atkins emphasized: "The SEC has entered a new phase."

Three Major Key Reform Plans

Atkins has set forth an ambitious reform agenda focused on promoting compliant encryption asset issuance, expanding legitimate custody options, and modernizing trading frameworks.

In terms of issuance, considering that currently only a few projects have successfully registered through the traditional SEC process, regulators will consider establishing more appropriate exemption provisions, safe harbor rules, and disclosure guidelines for digital native assets.

Regarding custody, Atkins supports the repeal of provisions that impose restrictive measures on the holding of encryption assets. He calls for a broader clarification of the qualifications for "qualified custodians" and states that custody rules should keep pace with the times to reflect self-custody solutions and emerging best practices in the industry.

In terms of trading, Atkins stated support for allowing brokers and proprietary traders to offer integrated services that include both encryption assets and non-encryption assets on a unified platform. He also proposed the possibility of conditional exemption relief to allow the launch of new products that may not yet comply with existing regulations.

Consolidating the United States' leadership position in encryption

Atkins echoed the vision of making the U.S. the "global encryption capital" and warned that if the SEC cannot adapt to the evolving landscape, innovation will move overseas. He praised the co-leaders of the newly established Special Working Group on Crypto Assets, Mark Uyeda and Commissioner Hester Peirce, which aims to break down internal barriers and expedite the issuance of guidance documents across the agency.

Atkins emphasized the necessity of establishing rules that can both protect investors and support innovation. He stated that combating fraud remains a top priority, but the SEC's enforcement approach will return to its "original intention," which is to regulate violations of defined obligations rather than to make policy through enforcement.

The SEC is expected to continue advancing additional rule-making, staff guidance, and interagency coordination in the coming months, aiming to position the United States as a leader in the tokenized financial infrastructure space.