SEC Chairman Paul Atkins recently emphasized the importance of innovation at the SEC Speaks conference, particularly highlighting strong support for cryptocurrency development to provide clear regulatory rules for the market and investors.
This article is based on Paul Atkins' original speech, compiled and translated by Block Tempo.
Thank you, Cicely, for the warm introduction. Ladies and gentlemen, I am delighted to participate in the SEC Speaks conference for the first time as the SEC Chairman, although I have been a regular attendee for the past 15 years.
[The rest of the translation continues in the same professional manner, maintaining the original structure and meaning while translating to English.]Entering the new century, the market proposed another innovation: gold funds, the first commodity ETF. This concept bounced back and forth among various departments within the SEC, even crossing over to the Commodity Futures Trading Commission (CFTC). Although it took some time, innovation ultimately prevailed, giving investors the option to invest in gold without actually holding it.
Cryptocurrency Innovation
Today, the cryptocurrency market has been lingering in the SEC's gray area for years.
Initially, the SEC adopted an "ostrich mentality," seemingly hoping cryptocurrencies would disappear on their own. Later, it shifted to "shoot first, ask questions later" enforcement actions. So-called "welcome visits" were often actually taking a subpoena home.
This environment does not help build trust. The actual message became: "Figure it out yourself." This is fine, but on the premise that regulators actively interact with the market, encourage solutions, and appropriately adjust existing rules.
If existing systems are outdated, they should not be seen as immutable truths. As long as Congress authorizes changes, the SEC should adjust in accordance with the law and in the public interest.
In the past, the SEC claimed to be willing to communicate with registration applicants, but in reality, never adjusted registration forms or regulatory requirements to accommodate new technologies. Companies thought they were attending policy meetings, only to end up receiving enforcement investigations, a culture that is frustrating.
Worse, senior management even prohibited staff from communicating with market participants when facing complex legal issues.
However, I am pleased to announce that I have instructed Corporation Finance staff to maintain transparent interaction with the public. When staff can openly dialogue with the industry, the market can allocate capital more flexibly.
The SEC is ushering in a new era. I have instructed staff in various policy departments to begin drafting rule proposals related to cryptocurrencies.
For example, last week, the Trading and Markets division released a Q&A about brokers and transfer agents. Although staff opinions are not formal regulations, they still hold reference value for the public.
Ultimately, the SEC itself must respond positively to these issues and provide the market with clear rules.
I also hope the SEC can allow registered entities to simultaneously custody and trade both securities and non-securities. This can reduce investor costs and accelerate the integration of non-securities trading into the federal regulatory environment, moving towards the vision of a "super app".
Thank you to Commissioner Hester Peirce, the cryptocurrency working group, and the Trading and Markets division for their continued efforts.
FinHub
Continuing the theme of innovation and the crypto working group, we have applied to Congress to merge the SEC's Strategic Center for Innovation and Financial Technology (FinHub) into other departments of this institution.
FinHub was established in 2018 at a critical moment in response to emerging technologies. With the rapid development of blockchain, digital assets, AI, and machine learning, the SEC needs a central unit to build internal understanding.
However, FinHub was later viewed by many industry participants as an enforcement tool rather than a platform for promoting innovation. Moreover, the current FinHub is too small to operate effectively, and its professional personnel should be more appropriately allocated to other departments.
I will ensure that FinHub's original principles and priorities are integrated into the entire SEC culture, rather than being limited to a small office.
Private Fund Investment
Financial innovation sometimes means making capital markets more free and allowing all investors to participate.
Since 2002, SEC staff have stipulated that closed-end funds investing 15% or more of their assets in private funds must set a minimum initial investment threshold of $25,000 and are only available to qualified investors.
This has caused many retail investors to miss opportunities to invest in funds like hedge funds and private equity.
However, since 2002, the private market has grown significantly, and regulation has been strengthened. In the past decade, private fund assets have grown from $11.6 trillion to $30.9 trillion.
Therefore, I intend to promote the SEC's review of this 23-year-old policy to allow closed-end funds to invest in private funds. This will provide new diversification options for all investors while maintaining investor protections for registered funds.
We must address disclosure issues for such products, especially exchange-traded products, considering potential conflicts of interest, liquidity risks, and fees.
CAT
Lastly, I want to mention the widely discussed Consolidated Audit Trail (CAT).
This "cat" has a huge appetite, with extremely high demands for data and computing power, costing nearly $250 million annually. These costs will ultimately be borne by investors.
The financial industry and Congress have expressed concerns about its endless cost increases and centralized data risks.
Therefore, I have instructed staff to conduct a comprehensive review of the CAT system. We will not only examine costs but also re-evaluate its reporting requirements and collection scope. I look forward to the SEC fully communicating with the public on this matter.
Conclusion
As the new chairman, I can assure everyone that we are returning to our original purpose: promoting innovation, not suppressing it.
Markets will innovate, and the SEC should not tell them to stop.
The SEC is entering a new day, and I look forward to the achievements we can realize for investors and the market.
Thank you.
