Author: Paul S. Atkins (Chairman of the U.S. SEC)
Source: Observing Blockchain
Good afternoon, everyone. Thank you, Norm, for the warm introduction, and I am honored to be here with all of you, especially at such a critical moment that I believe could mark an important turning point for the United States' leadership in the crypto asset market. Before sharing some thoughts, I want to extend my special thanks to the America First Policy Institute for facilitating this timely dialogue. At the same time, to ease the concerns of the compliance team, I must state that the views I express today are solely my own and do not represent the official position of the U.S. Securities and Exchange Commission (SEC) or any other commissioners.
Today, I want to discuss a plan that I have proposed in collaboration with SEC Commissioner Hester Peirce — "Project Crypto." This plan will serve as a strategic guide for the SEC to assist President Trump in advancing the policy direction of making the United States the "global crypto capital." Before introducing our vision for the dominance of the crypto market, I would like to briefly review several key turning points in the development of U.S. financial markets that bear similarities to the current environment. Understanding these milestones will help us ensure that our future direction does not deviate from the foundation we have inherited.
The Evolution of Capital Markets: From the Buttonwood Agreement to the Blockchain Era
The wave of innovation has always been a constant in the development of U.S. capital markets, often moving with great speed. In 1792, this "wind" stirred the branches beneath the buttonwood tree. It was under this shade that more than twenty stockbrokers gathered to sign a brief agreement, which became the prototype of the New York Stock Exchange. This less-than-hundred-word, handwritten agreement on sheepskin paper initiated a lasting institutional design that influenced the flow of capital for generations to come.
For the next few centuries, capital markets never stagnated. They expanded, evolved, and continuously reinvented themselves with the ideas and technologies of the times. The vibrancy of the market is due to the people involved. The market guides the wisdom of these individuals to focus on society's most challenging problems through incentive mechanisms; those who can propose innovative solutions and gain recognition and transactions from others will be rewarded. It is through this mechanism that Adam Smith's "invisible hand" operates — even if individuals are merely pursuing their own interests, the market will drive them to enhance the public good.
The mission of the SEC is to maintain such a market environment: one where human creativity and expertise can continuously bring value to society. Throughout its history, the SEC has played a positive role in supporting innovation, but it has also, at times, stifled it. Fortunately, progress often triumphs over resistance. When our regulatory stance faces technological change with prudence rather than fear, the United States' leading position in the global market is continually reinforced.
In the 1960s — I am glad I was not in the industry at that time — Wall Street was in the midst of a bull market. But behind the glamorous facade, the fundamental operating systems of the market were under immense pressure. The clearing and settlement processes were cumbersome and costly, with most transactions still relying on paper stock certificates. Piles of physical stock certificates were stacked high, needing to be transported back and forth by employees pushing carts throughout Wall Street and major financial districts across the country. This was a scene from the last century, struggling to meet the modernization demands of the securities market at the time.
In fact, the paper-based clearing and settlement system designed for relatively calm times was overwhelmed by the increasing trading volume. A delay at one institution could disrupt the entire process of another; instances of securities being lost or stolen were common; the number of failed trades surged. Some undercapitalized broker-dealers found themselves in distress due to the impact of canceled trades. To alleviate the chaos, the market had to shorten trading hours, and exchanges even suspended trading every Wednesday to allow institutions to process the backlog of paper certificates.
The then-SEC Chairman described the chaos caused by system obsolescence as "the most enduring and severe crisis in the securities industry in forty years… with many firms going bankrupt and investor confidence plummeting." It is commendable that the SEC took proactive measures to address this so-called "paperwork crisis." The regulatory agency facilitated the creation of the Depository Trust & Clearing Corporation (DTCC) by market participants, fundamentally transforming the way securities are held and traded. Securities ownership no longer relied on the physical transfer of paper certificates among clients and brokers but was completed through bookkeeping on a computer ledger. Once physical certificates were "dematerialized," they were securely stored in vaults, and ownership was transferred electronically, laying the foundation for the modern clearing and settlement system that continues to this day.
As demonstrated by the ticker tape machine, a significant breakthrough of that era, it fundamentally changed how the American public accessed market information — printing each transaction record line by line. However, technological breakthroughs should not remain confined to the past. By the late 1990s, electronic trading systems rapidly proliferated, breaking many assumptions of traditional market operating mechanisms. Then-Chairman Arthur Levitt believed that the SEC had a responsibility to provide appropriate regulatory flexibility for innovations in electronic markets. Therefore, in 1999, the SEC introduced Regulation Alternative Trading Systems (Reg ATS), allowing alternative trading systems (ATS) to be regulated according to broker-dealer standards rather than the traditional exchange model.
At this point, we return to the present — a moment calling for the United States to re-embrace its spirit of enterprise; a project with the potential to unleash this power. Our regulatory framework should no longer be anchored in an analog era that does not adapt to new boundaries. After all, the future is arriving at full speed, and the world will not wait. In the face of the transformative wave of digital assets, the United States cannot merely passively keep pace but should become a driving force behind this revolution.
Shaping the Future: America's Leadership in the Financial Golden Age
Therefore, today I want to formally announce to the world that under my leadership, the SEC will not stand idly by while innovation continues to emerge overseas, leaving our capital markets stagnant. To realize President Trump's vision of "making America the global crypto capital," the SEC must comprehensively assess the potential opportunities and risks of transitioning the market from off-chain to on-chain systems.
We stand on the threshold of a new chapter in the history of capital markets. As I mentioned earlier, today I officially announce the launch of "Project Crypto" — a strategic initiative covering the entire SEC, aimed at modernizing securities regulations and laying the institutional foundation for the U.S. financial market to enter the on-chain era.
Just weeks ago, President Trump signed the GENIUS Act, establishing a regulatory framework for stablecoins based on a "gold standard," ensuring that the United States continues to maintain its leading position in the global payments arena. At the signing of this act, I was also pleased to see President Trump support Congress's efforts to pass crypto market structure legislation by the end of the year. I commend the House for garnering strong bipartisan support on this issue and look forward to closely collaborating with the Senate to develop structural legislation that aids the long-term healthy development of the crypto market, based on the House's existing achievements. This will help prevent regulatory arbitrage, enhance institutional foresight, and further solidify America's position as the "global crypto capital."
Just yesterday, the President's Working Group on Financial Markets released the PWG Report, providing clear recommendations to the SEC and other federal agencies, calling for the establishment of a regulatory framework to maintain America's dominance in the crypto asset market. This report is seen as a blueprint for achieving U.S. leadership in blockchain and crypto technology. Last week, President Trump stated that he hopes "the whole world runs on the backbone of American technology." I am also ready to do everything in my power to achieve this goal.
For this reason, I announce the formal launch of "Project Crypto" and direct the SEC's policy divisions to work collaboratively with the cryptocurrency special working group led by Commissioner Hester Peirce to quickly develop and implement specific proposals based on the recommendations of the PWG Report. "Project Crypto" will help ensure that the United States continues to be the most favorable country for starting businesses, developing cutting-edge technologies, and participating in capital markets. We will bring back those crypto enterprises that were forced to relocate, especially those severely impacted by the previous administration's regulatory actions of "enforcement over rules" and "Operation Chokepoint 2.0." Whether existing institutions in the industry or emerging participants just entering the market, the SEC welcomes all market players who wish to drive innovation.
Based on the relevant recommendations of the PWG Report, I have instructed the Commission staff to draft a clear and concise set of regulatory rules regarding the issuance, custody, and trading of crypto assets and to solicit public comments. While the Commission staff advances the final rulemaking, over the next few months, the Commission and its staff will also consider utilizing interpretive, exemptive, and other regulatory authorities to ensure that outdated rules do not stifle American innovation and entrepreneurial vitality. Many of the Commission's existing traditional rules are no longer applicable in the 21st-century market environment, let alone for on-chain markets. The Commission must undertake a comprehensive revision of its regulatory rule system to prevent regulatory barriers from hindering progress and competition, whether from emerging market participants or existing institutions, ultimately harming only ordinary investors.
The Return of the Crypto Industry to America: A New Era for the SEC
"Project Crypto" will encompass a series of key initiatives within the Commission's scope:
First, we will strive to bring the issuance of crypto assets back to the United States. The complex offshore company structures, "decentralized performances," and ambiguous treatment of securities attributes will become history. As President Trump stated, America is in a "golden age" — under our new policy agenda, the crypto asset economy will also enter its golden age.
According to the direction of the PWG Report, one of my top priorities is to establish a regulatory framework for the issuance of crypto assets in the United States as soon as possible. Capital formation has always been one of the SEC's core missions; however, for a long time, the SEC has overlooked the market's demand for choice and instead stifled financing activities based on crypto technology. The result has been that the crypto market has gradually distanced itself from asset issuance, and investors have lost the opportunity to participate in the construction of the real economy through this new technology. The SEC's past "see no evil" posture and "shoot first, ask questions later" regulatory approach should become history.
Despite the SEC's past varying statements, in fact, most crypto assets do not fall under the category of securities. However, due to confusion over the applicability of the "Howey Test," some innovators have had to treat all crypto assets as securities to avoid risk. Meanwhile, American entrepreneurs are leveraging blockchain technology to modernize various traditional systems and tools. For example, Senator Bernie Moreno from Ohio is one such individual — he is both a successful entrepreneur and a newly elected federal senator. Before his election, he founded a company dedicated to putting automobile ownership on the blockchain. He identified efficiency bottlenecks in the ownership transfer process and proposed practical solutions using on-chain technology. These entrepreneurs deserve a clear and enforceable standard to determine whether securities laws apply to their businesses. They not only need such rules but also deserve them.
I have instructed the Commission staff to develop a clear set of guidelines for market participants to determine whether a particular crypto asset is a security or constitutes an investment contract. Our goal is to help market participants reasonably classify crypto assets based on the economic substance of transactions, such as digital collectibles, digital goods, or stablecoins, and assess their attributes accordingly. This approach will enable market participants to determine, based on clear standards, whether the issuer has made any substantive commitments, thereby making the crypto asset an investment contract.
Furthermore, being classified as a "security" should not be viewed as a negative label for a project. We need to establish a regulatory framework applicable to crypto asset securities, allowing such products to thrive in the U.S. market. Many issuers may prefer to utilize the product design flexibility provided by securities laws; investors can benefit from profit distribution, voting rights, and other rights typically associated with securities. Projects should not be forced to establish decentralized autonomous organizations (DAOs), offshore foundations, or be compelled to "decentralize" at a stage when they are not ready. I am also excited about new application scenarios for crypto asset securities in the business realm, such as participating in blockchain network consensus mechanisms through tokenized stocks.
Therefore, for those crypto asset transactions regulated by securities laws, I have requested staff to propose more targeted disclosure requirements, exemption mechanisms, and safe harbor provisions covering common transaction forms such as Initial Coin Offerings (ICOs), airdrops, and network rewards. In these transactions, our goal should be to ensure that issuers no longer exclude U.S. users due to legal complexities and litigation risks, but rather actively choose to include the U.S. market in their issuance scope due to clear legal protections and an inclusive regulatory environment. In my view, as long as we adhere to this direction, innovation in the crypto space could potentially experience a "Cambrian explosion."
Additionally, many companies wish to "tokenize" their common stock, bonds, partnership interests, and other securities, or securities issued by third parties. Currently, these innovative activities mostly occur overseas due to regulatory barriers faced within the United States. Our policy team has also reported that both well-known financial institutions on Wall Street and unicorn tech companies in Silicon Valley are gradually submitting "tokenization" related applications to the SEC. I have instructed the Commission staff to collaborate with companies intending to issue tokenized securities in the U.S. and, where appropriate, provide regulatory exemptions to ensure that the American public is not excluded from this innovative transformation.
Enhancing Freedom: Empowering Custodians and Trading Venues with Choice
Secondly, to achieve the President's policy goals, the SEC has a responsibility to ensure that market participants have the maximum autonomy when choosing custodians and trading methods for crypto assets. As I have emphasized before, the right to own and safeguard personal property is one of America's core values. I firmly support individuals holding crypto assets through self-custody digital wallets and participating in on-chain activities, such as staking. However, some investors still choose to rely on SEC-registered entities (such as broker-dealers and investment advisors) to custody their assets, and these entities will be subject to stricter regulatory requirements when providing related services. During my tenure as Chairman, I will prioritize implementing the recommendations from the PWG Report regarding "modernizing SEC custody regulations," particularly concerning registered intermediaries.
The previous administration's "special purpose broker-dealer" framework, SAB 121, and "Operation Chokepoint 2.0" have led to a severe shortage of available crypto asset custody service providers in the current market. The existing custody rules were not designed with the characteristics of crypto assets in mind. I have instructed the Commission staff to explore how to optimize the current regulatory framework to better support custody arrangements for crypto assets, including possible exemption mechanisms or other flexible arrangements, as well as the potential for revising the existing rules themselves.
As suggested by the PWG Report, market participants "should be allowed to engage in multiple businesses under the most efficient licensing structure." We should not regulate for the sake of regulation, forcing the market into an outdated "Procrustean bed." I support empowering market participants with the freedom to choose the regulatory path that best suits their business, provided that path offers sufficient protection for investors.
Developing Super Apps: Horizontal Integration of Product Functionality
Thirdly, one of my priorities during my chairmanship is to support market participants in innovating around the "super app" model. People often ask me, "What do you mean by super apps?" The answer is quite simple: securities intermediaries should have the capability to provide a variety of products and services in a one-stop shop under the same licensing framework. For example, a broker-dealer qualified as an alternative trading system (ATS) should be able to offer trading services for non-security crypto assets, crypto asset securities, and traditional securities on its platform, as well as engage in other activities, including crypto asset staking and lending, without needing to apply for different licenses in all fifty states or hold multiple redundant licenses at the federal level.
Current federal securities laws do not prohibit registered trading platforms from listing non-security assets. In this regard, I have instructed the Commission staff to further study and propose relevant guidelines and rule proposals to ultimately realize the vision of "super apps." Perhaps we can even call this system "Reg Super-App."
In line with the PWG Report's stance, the SEC should collaborate with other regulatory agencies to establish the most efficient licensing structure for SEC-registered entities. Market participants should not be unnecessarily constrained by multiple regulatory agencies or overlapping regulatory systems. This model has been widely applied in the banking industry with good results. Banks are often exempt from multiple redundant regulatory requirements, such as the registration obligations of broker-dealers and clearing agencies. Regulatory agencies should provide a "minimum effective dose" of regulatory arrangements — ensuring investor rights while allowing space for businesses and entrepreneurs to grow. We should not suppress industry vitality with "paternalistic" overregulation, nor should we push businesses overseas or weaken the competitiveness of American companies in the international market. Our regulatory system should unleash the competitive forces of on-platform and product innovation, benefiting all Americans. We should not artificially restrict business models or impose redundant regulatory costs on American companies, thereby giving larger institutions that can better absorb compliance costs an unreasonable advantage.
According to the recommendations of the PWG Report, I have instructed the Commission staff to develop a regulatory framework that allows non-security crypto assets and crypto asset securities to trade concurrently on SEC-regulated platforms. Additionally, I have asked the staff to assess whether, under existing authorities, non-security crypto assets subject to investment contract obligations can trade on trading platforms not registered with the SEC. I place great importance on advancing this direction, as it will not only enable crypto asset platforms that are not registered with the SEC but have state-level licenses to list specific assets but will also provide a pathway for the Commodity Futures Trading Commission (CFTC) regulated platforms to conduct trading of such products, including the ability to engage in margin trading — even if Congress has not granted the CFTC additional authority, this arrangement is still expected to release greater market liquidity.
Unlocking the Potential of the U.S. Market: Building a Grand and Excellent On-Chain Software System
Fourth, I have instructed the Commission staff to update outdated internal rules and regulations to unlock the potential of on-chain software systems in the securities market. On-chain software comes in various forms — some systems achieve true decentralization without being operated by any intermediaries; others are maintained by specific operators. Regardless of the type of on-chain software system, it should have a place in our financial markets.
A qualified crypto asset market structure must provide a compliance pathway for developers of on-chain software systems that do not require centralized intermediary operations. Decentralized finance (DeFi) software systems, such as automated market makers (AMMs), can facilitate automated, disintermediated financial market activities. Since its inception, federal securities law has assumed that financial activities must involve intermediaries that are subject to regulation. However, this does not mean that in scenarios where the market can operate independently, we should artificially introduce intermediaries solely to impose a structure of intermediation.
We will leave space in the securities market for both types of models: on one hand, protecting developers who purely release software code; on the other hand, reasonably distinguishing between intermediation and non-intermediation financial activities, and establishing rational and feasible regulatory rules for intermediaries wishing to operate on-chain software systems. Decentralized finance and other forms of on-chain software systems will become part of our securities market rather than being stifled by redundant or unnecessary regulation.
To achieve the above vision, we need to consider adjustments to some existing rules. For example, supporting tokenized securities trading on-chain may mean we must explore revisions to Regulation National Market System (Reg NMS), not limited to the improvements we have made in our daily regulation to correct the market distortions it has caused. Many may remember that twenty years ago, I co-authored a lengthy dissent on Reg NMS with Commissioner Cynthia Glassman. Today, in light of the market distortions and impediments to innovation caused by overly rigid institutional requirements over the past twenty years, our reasons for opposition are even more compelling. Congress's legislative intent is also very clear: the development of the national securities market system should be guided by "market competitive forces, not unnecessary regulation." I will strive to seek pathways to return our regulatory system to this original intent, thereby promoting innovation and competition in the market.
Promoting Innovation: Guiding Principles Based on Commercial Viability
Finally, innovation and entrepreneurial spirit have always been the core driving forces of the American economy. President Trump has referred to America as "a nation of builders." During my tenure as Chairman, the SEC will encourage the development of this group rather than restrict it with complex administrative processes or "one-size-fits-all" regulatory rules. Currently, the Commission is actively reviewing various proposals put forth by the industry to stimulate innovative vitality. At the same time, we are exploring the establishment of an "innovation exemption" mechanism, allowing both registered and unregistered entities to quickly enter the market when facing new business models or services that cannot be fully accommodated by existing rules. While encouraging innovation, the SEC will also ensure that all market participants under such exemption arrangements must still comply with the basic conditions and requirements aimed at achieving the policy goals of federal securities laws.
Under my vision for the "innovation exemption" mechanism, innovators and forward-thinking practitioners will be able to immediately bring new technologies and business models to market without having to comply with complex regulatory requirements that are incompatible or obstructive to economic activities. Correspondingly, they will adhere to a set of principle-based fundamental conditions designed to achieve the core policy goals of federal securities laws. For example, these conditions may include: a commitment to report to the SEC on a regular basis, integration of whitelist or "verification pool" functions, and restrictions on the entry of tokenized securities that do not meet compliance token standards (such as ERC3643) into the market. I encourage market participants to always focus on the commercial viability when designing various models in collaboration with SEC staff.
Conclusion
In advancing the above priorities, I look forward to working closely with colleagues across government departments to promote the United States as the global capital of crypto assets. This is not just a regulatory transformation; it is a historic opportunity of a new era. From the parchment agreements under the sycamore tree to distributed ledgers on the blockchain, the winds of innovation continue to blow — and our mission is to ensure that this wind propels America's leadership position forward. Ladies and gentlemen, America has never been content to follow. We will not stand by idly. We will lead the way, we will continue to build, and we will ensure that the next chapter of financial innovation is written right here in the United States.
Thank you very much for your attention today. We welcome you to stay tuned for our upcoming announcements and proposals, and we look forward to your insightful comments and suggestions as always.
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