Atkins, the new SEC chairman, gave a first long speech: Reconstructing the crypto asset regulatory framework and promoting the revolution in securities on the chain in three major areas

Source: SEC

Compiled by: Azuma, Odaily Planet Daily

Editor's note: On May 12, local time in the United States, the crypto Assets Task Force under the Securities and Exchange Commission (SEC) held the fourth cryptocurrency roundtable meeting. The theme of this meeting is "Tokenization: Assets on the Chain - the intersection of traditional finance and decentralized finance."

It is worth mentioning that Paul Atkins, who officially served as SEC chairman on April 22, attended the roundtable and delivered a long speech on cryptocurrency as the SEC chairman for the first time (Note: At the third meeting, Paul Atkins, who had just been in office for four days, delivered an opening speech, but only a few words).

In his speech, Paul Atkins mentioned that “Securities are increasingly migrating from traditional (off-chain) databases to blockchain-based ledger systems. The core priority during their term is to establish a reasonable crypto asset market supervision framework, establish clear rules for issuance, custody and transactions of cryptocurrencies, and continue to curb illegal activities. In addition, the SEC’s regulation of cryptocurrencies will no longer rely on criticized law enforcement actions, but will use existing rule-making rights, interpretation rights and immunities to set precise applicable standards for market participants.

The following is the full text of Paul Atkins' speech, compiled by Odaily Planet Daily.

Thank you everyone, good afternoon. I am honored to address the outstanding people at this roundtable on tokenization today. Thank you to all the team members for their participation.

The topic discussed this afternoon is right at the right time - Securities is increasingly moving from traditional (or off-chain) databases to blockchain (or on-chain) ledger systems.

The migration of securities from off-chain systems to on-chain systems is comparable to the evolution of audio records from vinyl records to cassette tapes to digital software decades ago. Encoding audio into digital file formats that can be easily transferred, modified and stored has unlocked huge innovation potential for the music industry. Audio breaks through the shackles of static fixed formats and is suddenly able to achieve compatibility and interoperability across multiple devices and applications. It can be combined, split and programmed to create entirely new products. This has also given birth to new hardware devices and streaming business models, greatly benefiting consumers and the US economy.

Just as the digital audio revolution has reshaped the music industry, securities on the chain is expected to transform the securities market through new issuance, trading, holding and use methods. For example, on-chain securities can use smart contracts to distribute dividends transparently to shareholders on a regular basis; tokenization can also convert relatively non-current assets into current investment opportunities and promote capital formation. Blockchain technology is expected to open up a large number of innovative application scenarios for securities and cultivate new types of market activities that are not yet covered by current SEC regulations.

To realize President Trump’s vision of making the United States a global crypto asset hub, the SEC must keep pace with innovation and evaluate 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 do not need to be applied to on-chain assets, which will instead curb the development of blockchain technology.

The core priority during my tenure is to establish a reasonable crypto asset market supervision framework, formulate clear rules for issuance, custody and transactions, and continue to curb illegal acts. Clear rules are essential to protecting investors from fraud – especially to help them identify illegal and irregular scams.

SEC has ushered in a new era. Policy formulation will no longer be achieved through temporary law enforcement actions, but will use existing rule-making power, interpretation power and immunity to set precise applicable standards for market participants. Law enforcement will return to the original intention of Congress legislation - focusing on cracking down on violations of statutory obligations, especially involving fraud and market manipulation.

This work requires multi-departmental collaboration within the SEC, so I am pleased that the Uyeda and Peirce have formed the cryptoassets working group together. The SEC has long been struggling with policy silos, and the working group demonstrates how we can break down sectoral barriers and provide the public with the long-awaited policy clarity and certainty.

Next, I will elaborate on the three key areas of crypto asset policy -issuance, custody and trading.

issued

First, I will promote the SEC to develop clear and reasonable guidance for the issuance of securities-type crypto assets or investment contract-type crypto assets. Currently, only four crypto asset issuers have completed financing through registration issuance or Ordinance A exemption. Issuers generally avoid this issuance method, partly because it is difficult to meet the corresponding disclosure requirements. If the issuer does not intend to issue ordinary securities, such as stocks, bonds or notes, it will also be difficult for the issuer to determine whether crypto assets constitute "securities" or are subject to an investment contract.

In the past few years, the SEC has first adopted what I call the “ostrich policy”—that fantasize that crypto assets will disappear on their own; then turn to the “law enforcement and regulatory model of shooting first and then asking questions. Although they claim to be willing to communicate with potential registrants (“Welcome to consult”), it turns out that this is at best a flash in the pan and more often misleading—because the SEC has not made necessary adjustments to the registration form to adapt to new technologies. For example, Form S-1 still requires detailed disclosure of executive compensation and funding purposes, which may be neither relevant nor important for crypto investment decisions. Although the SEC has adjusted the registration form for asset-backed securities and real estate trusts, it has not taken the same steps for crypto assets that investors have increasingly paid attention to in recent years. We cannot encourage innovation by “slashing the footprint”.

I am committed to promoting the SEC to develop new guidelines. SEC staff have recently issued a statement on the obligation to issue and disclosure of a specific registration, clarifying that the issuance of certain crypto assets does not involve federal securities laws. I hope the staff will continue to follow my instructions to clarify other types of offerings and assets. However, existing registration exemptions and safe harbor rules may not apply completely to the issuance of certain crypto assets. I think this approach of relying on staff statements is extremely temporary – SEC-level action is crucial and necessary, and I have asked 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 full discretion to accept the crypto industry under the framework of the Securities Law, and I will definitely promote implementation.

Hosting

Secondly, I support giving registered institutions more independent choices for crypto asset custody methods. The staff recently removed the important obstacles to the provision of crypto-asset custody services by revoking the Employee Accounting Bulletin No. 121 (SAB-121). The communiqué was a major mistake—the staff did not have the right to replace the Commission’s actions on such a broad scale without notice of the rules-making process. This move not only caused unnecessary confusion, but also exceeded the scope of SEC’s authority. But in addition to abolishing SAB-121, we can also take more measures to promote competition in the compliant custody services market.

It is necessary to clarify the criteria for the "qualified trustees" under the Investment Advisor Law and the Investment Company Law, and set reasonable exemptions for common operations in the crypto asset market. Many consultants and funds use self-custody programs, which are more advanced than the technology used by some custodian institutions on the market, and can more effectively ensure the security of assets. Therefore, custody rules may need to be updated to allow advisors and funds to self-custody in certain situations.

In addition, it may be necessary to repeal the existing "special purpose broker framework" and establish a more reasonable system. Currently there are only two special purpose brokers operating, which is clearly due to the significant restrictions imposed by this model. Brokers have never been banned from custody of non-securities or securities-type crypto assets, but SEC actions may be required to clarify the applicable standards of client protection rules and net capital rules for such activities.

trade

In addition, I support allowing registration agencies to trade more diverse product varieties on the platform based on market demand – these businesses have been banned by previous SECs. For example, some brokers are trying to launch "super applications" that integrate securities, non-securities and other financial services. The current securities laws do not prohibit registered brokers with alternative trading systems from providing non-securities trading services, including "matched trading" between securities and non-securities. I have asked staff to study how to modernize the ATS regulatory system to better accommodate crypto assets, while evaluating whether further guidance or rules are needed to support crypto assets listed and traded on national stock exchanges.

In the process of SEC building a comprehensive regulatory framework, securities market participants should not be forced to go overseas to conduct blockchain innovation. I will explore whether conditional exemptions can be given to registered and non-registered agencies that attempt to launch new product services—these innovations may not fully comply with current regulatory requirements.

I look forward to working with colleagues from the Trump administration and Congress to make the United States the best place to participate in the global crypto asset market.