The Crypto Asset Special Task Force under the U.S. Securities and Exchange Commission (SEC) held its fourth cryptocurrency roundtable earlier this week, with the theme "Tokenization: Asset on Chain - The Convergence of Traditional and Decentralized Finance".
SEC's new chairman Paul Atkins also attended the meeting and delivered a lengthy speech, which is the full text of the speech provided by the SEC official and translated by BlockTempo.
Thank you all, good afternoon. I am honored to be able to exchange ideas with such an outstanding group at this roundtable on "Asset Tokenization". I also thank all the participants for today's discussion.
Today's afternoon topic is quite timely, as securities are gradually migrating from traditional (or "off-chain") databases to blockchain-based (or "on-chain") ledger systems.
This transition from off-chain to on-chain is similar to the process of music recording evolving from analog vinyl records to cassettes and then to digital files decades ago. When audio could be easily encoded into digital format and transmitted, modified, and stored, this digitization unleashed the innovative potential of the music industry.
Music was no longer limited to static, fixed formats of creation, but could cross different devices and applications, achieve interoperability and combination, be disassembled and reassembled, thereby giving birth to entirely new products. This also drove the emergence of new hardware devices and streaming content business models, ultimately benefiting both consumers and the American economy.
Similarly, the development of on-chain securities has the potential to reshape various aspects of the securities market, including new ways of issuance, trading, holding, and use. For example, on-chain securities can distribute dividends to shareholders regularly and transparently through smart contracts. Asset tokenization can also transform originally illiquid assets into liquid investment opportunities. Blockchain technology brings broad new application scenarios to the securities market, and these innovative activities often exceed the imagination and coverage of existing securities regulatory frameworks.
To realize President Trump's vision of "making the United States the global capital of crypto assets", the Securities and Exchange Commission (SEC) must keep up with the pace of innovation and examine whether regulatory rules need to be adjusted to accommodate on-chain securities and other crypto assets. The regulatory system designed for off-chain securities may not be applicable to on-chain assets and could even become an obstacle to blockchain technology development.
One of the most important tasks during my chairmanship will be to establish a rational and clear crypto asset regulatory framework, setting clear rules for the issuance, custody, and trading of crypto assets while continuing to crack down on bad actors who break the law. Transparent and clear rules help protect investors from fraud and make it easier for them to identify illegal fraudulent activities.
The SEC will enter a new era. Future policy-making will no longer be through random enforcement actions to "regulate by punishment". Instead, we will make good use of existing rule-making, interpretation, and exemption powers to establish practical standards for market participants. Enforcement actions will return to the original legislative intent of Congress - focusing on addressing violations of established obligations, especially those involving fraud and market manipulation.
This task requires collaboration across multiple departments within the SEC. Therefore, I am very pleased that Commissioners Uyeda and Peirce have jointly established the "Crypto Task Force". In the past, the SEC has been hindered by departmental "silo mentality" in policy-making, and the task force is the best example of breaking down departmental barriers and quickly providing clear direction for the market and the public.
I mentioned three key points of crypto asset regulation - issuance, custody, and trading - and I will now explain each of them.
Issuance
First, I hope the SEC can develop clear and logical guidelines for the issuance of crypto assets that are "securities or investment contracts".
To date, only four crypto asset issuers have conducted registered issuance or issuance under Rule A. Most issuers avoid such issuance, partly because the related disclosure obligations are too cumbersome and difficult to adapt to the characteristics of crypto assets. When the issued asset is not a traditional stock, bond, or note, it becomes more difficult for issuers to determine whether their crypto asset constitutes a "security" or involves an investment contract.
In the past few years, the SEC first adopted an "ostrich" strategy of turning a blind eye, seemingly hoping the crypto industry would disappear on its own. Then it shifted to an enforcement approach of "shoot first, ask questions later", claiming to encourage businesses to "come and chat", but in reality never adjusting registration documents for new technologies.
For example, Form S-1 still requires detailed disclosure of executive compensation and fundraising purposes, which may not be substantively meaningful for crypto asset investment decisions. The SEC has adjusted forms for asset-backed securities and Real Estate Investment Trusts (REITs), but has never made changes for the crypto asset field that investors have been highly focused on in recent years. We cannot force new things into traditional frameworks, trying to make square pegs fit round holes.
I am determined to lead the SEC down a new path. The SEC team recently released statements on disclosure obligations for some registrations and issuances and clarified views on certain distribution behaviors that do not involve federal securities laws. I will continue to guide the team to provide further clarification for other distributions and asset types. However, existing registration exemptions and safe harbor rules are not entirely applicable to some crypto asset issuances. I believe these departmental statements can only serve as transitional solutions, and the SEC must take formal action. Therefore, I have instructed the team to assess whether additional guidelines, exemptions, or safe harbors need to be issued to pave a legal and compliant path for crypto asset issuance. I firmly believe that the SEC has sufficient discretion under securities laws to support the development of the crypto industry, and I will push to ensure this happens.
Custody
Secondly, I support giving registrants more choice in determining the custody method for crypto assets. The SEC team recently revoked Staff Accounting Bulletin No. 121, which was initially a major mistake, lacking committee authorization and formal consultation, ultimately creating market confusion beyond the SEC's jurisdiction. However, the SEC should not only abolish SAB 121 but also take further action to promote a legal and compliant custody market competition.
We need to clearly define which institutions qualify as "eligible custodians" and reasonably adjust the applicability of qualified custody for common practices in the crypto market. Many investment advisors and funds already have self-custody capabilities that are even more advanced than some traditional custody institutions, so current custody rules need to be updated to allow self-custody under specific circumstances.
At the same time, the existing "special purpose broker-dealer" framework may need to be abolished and rebuilt. Currently, only two special purpose broker-dealers are operational, clearly due to excessive institutional restrictions. In fact, broker-dealers have never been prohibited from providing custody services for non-securities crypto assets or crypto asset securities, but the SEC may need to further clarify the applicability of rules related to "customer asset protection" and "net capital".
Trading
Third, I support allowing registrants to trade more diverse products on their platforms, which the SEC has been hindering in the past. For example, some brokers wish to launch an all-in-one "super app" offering both securities and non-securities trading, along with other financial services. Federal securities laws do not prohibit registered broker-dealers with alternative trading systems (ATS) from facilitating "pairs trading" between securities and non-securities. I have requested the team to help design a modernized ATS regulatory framework to better incorporate crypto assets. Additionally, we will assess whether further guidance or legislative amendments are needed to list and trade crypto assets on national securities exchanges.
While the SEC and its team work to develop a comprehensive crypto asset regulatory framework, market participants should not be forced to "go overseas" to seek blockchain innovation space. I intend to explore providing conditional exemptions for registered and unregistered entities to legally launch new products and services under the current imperfect rules.
I look forward to working closely with the Trump administration and congressional colleagues to make the United States the best country for participating in the crypto asset market.
Thank you for listening, and I look forward to the upcoming discussion.
