Thank you all, good afternoon. I am honored to speak to these distinguished individuals at today's roundtable discussion on tokenization. Thank you to all group members for your participation.
The topic discussed 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 to on-chain systems is comparable to the evolution of audio recordings from vinyl records to cassette tapes to digital software decades ago. Encoding audio into a digital file format that can be easily transmitted, modified, and stored unleashed massive innovation potential for the music industry. Audio broke free from static fixed formats, suddenly becoming compatible and interoperable across multiple devices and applications. It could be combined, split, and programmed to create entirely new products. This also gave birth to new hardware devices and streaming business models, greatly benefiting consumers and the American economy.
Just as the digital audio revolution reshaped the music industry, securities on-chain are poised to transform the securities market through entirely new methods of issuance, trading, holding, and usage. For example, on-chain securities can use smart contracts to transparently distribute dividends to shareholders on a regular basis; tokenization can also convert relatively illiquid assets into liquid investment opportunities, promoting capital formation. Blockchain technology is expected to open up numerous innovative application scenarios for securities, nurturing new market activities not yet covered by current SEC regulations.
To realize President Trump's vision of "making the United States the global center of crypto assets," the SEC must keep pace with innovation, assessing whether existing regulatory frameworks need adjustment to accommodate on-chain securities and other crypto assets. Regulations designed for off-chain securities may be incompatible or unnecessary for on-chain assets, potentially suppressing blockchain technology development.
My core priority during my tenure is to establish a reasonable crypto asset market regulatory framework, defining clear rules for issuance, custody, and trading while continuously curbing illegal activities. Clear rules are crucial to protecting investors from fraud - especially helping them identify illegal scams.
The SEC has entered a new era. Policy-making will no longer be achieved through ad hoc enforcement actions, but by using existing rule-making, interpretive, and exemption powers to set precisely applicable standards for market participants. Enforcement will return to the original intent of congressional legislation - focusing on addressing violations of statutory obligations, particularly those involving fraud and market manipulation.
This work requires collaboration across multiple SEC departments, so I am pleased that Commissioner Uyeda and Commissioner Peirce jointly established the crypto asset 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 long-awaited policy clarity and certainty to the public.
Next, I will elaborate on three key policy areas for crypto assets - issuance, custody, and trading.
Issuance
First, I will push the SEC to develop clear and reasonable guidelines for the issuance of securities-type or investment contract-type crypto assets. Currently, only four crypto asset issuers have completed financing through registered issuance or Regulation A exemption. Issuers generally avoid this method, partly due to difficulty meeting corresponding disclosure requirements. If an issuing institution does not intend to issue traditional securities like stocks, bonds, or notes, it becomes challenging to determine whether a crypto asset constitutes a "security" or is subject to an investment contract.
In recent years, the SEC first adopted what I call an "ostrich policy" - fantasizing that crypto assets would disappear on their own; then shifted to an "shoot first, ask questions later" enforcement approach. While they claim willingness to communicate with potential registrants ("welcome to consult"), this has proven to be at best fleeting and often misleading - because the SEC has not made necessary adjustments to registration forms to adapt to new technologies. For instance, the S-1 form still requires detailed disclosure of executive compensation and fund usage, 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 steps for crypto assets that investors have increasingly focused on in recent years. We cannot encourage innovation by "cutting feet to fit shoes".
I am committed to pushing the SEC to develop new guidelines. SEC staff recently issued a statement clarifying that certain crypto asset issuances do not involve federal securities laws. I hope staff will continue to provide clarification on other types of issuances and assets as per my instructions. However, existing registration exemptions and safe harbor rules may not fully apply to certain crypto asset issuances. I consider reliance on staff statements extremely temporary - SEC-level action is critical and necessary, and I have requested 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 sufficient discretion within the securities law framework to accommodate the crypto industry, and I will definitely push for its implementation.
Custody
Second, I support granting registered institutions more autonomy in crypto asset custody methods. Staff recently eliminated a significant obstacle to corporate crypto asset custody services by withdrawing Staff Accounting Bulletin No. 121 (SAB-121). This bulletin was a major mistake - staff had no right to substitute committee actions with such broad strokes without notifying and allowing comment on the rule-making process. This not only caused unnecessary confusion but also far exceeded the SEC's jurisdiction. However, beyond abolishing SAB-121, we can take more steps to promote competition in compliant custody service markets.
It is necessary to clarify the standards for recognizing "qualified custodians" under the Investment Advisers Act and Investment Company Act, and establish reasonable exemptions for common operations in the crypto asset market. Many advisers and funds use self-custody solutions more advanced and potentially more effective at securing assets than some existing custody institutions. Therefore, custody rules may need updating to allow advisers and funds to self-custody under specific circumstances.
Additionally, the current "special purpose broker" framework might need to be abolished and replaced with a more reasonable system. Currently, only two special purpose brokers are operating, clearly resulting from significant limitations imposed by this model. Brokers have never been prohibited from custody of non-securities crypto assets or securities-type crypto assets, but the SEC may need to take action to clarify the application of customer protection rules and net capital rules to such activities.
Trading
Furthermore, I support allowing registered institutions to trade a more diverse range of products on their platforms based on market demand - business previously forbidden by previous SEC administrations. For example, some brokers have attempted to launch "super apps" integrating securities, non-securities, and other financial services. 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 requested staff to investigate how to modernize ATS regulatory systems to better accommodate crypto assets, while evaluating whether further guidance or rules are needed to support crypto asset listing on national-level securities trading platforms.
In constructing a comprehensive regulatory framework, the SEC should not force securities market participants to go overseas for blockchain innovation. I will explore potential conditional exemptions for registered and unregistered institutions attempting to launch new products and services - innovations that may not fully comply with current regulatory requirements.
I look forward to collaborating with Trump administration colleagues and Congress to make the United States the best place to participate in the global crypto asset market.
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