5 Key Quotes to Understand the Cryptocurrency Regulation Direction of the New SEC Chairman

On May 12, 2025, the U.S. SEC once again hosted a Crypto Task Force roundtable meeting in Washington, D.C., with the theme "Tokenization: The Intersection of On-Chain Asset Transfer, Traditional Finance, and Decentralized Finance." SEC Chairman Paul S. Atkins delivered a speech focusing on "tokenization."

The meeting centered around how tokenization bridges Traditional Finance (TradFi) and Decentralized Finance (DeFi), the potential of blockchain technology in asset management, capital market efficiency, and regulatory frameworks, as well as the compliance, market structure, and investor protection issues related to tokenized assets (such as real estate and private equity).

This roundtable brought together heavyweight participants from both traditional finance and the crypto industry, including BlackRock, Fidelity, Nasdaq, Robinhood, Securitize, demonstrating the growing interest and attention to tokenization on Wall Street.

Tokenization: A Key Trend of the Era

“Just as the shift to digital audio revolutionized the music industry, the migration to on-chain securities has the potential to remodel aspects of the securities market by enabling entirely new methods of issuing, trading, owning, and using securities.”

Atkins likened the migration of securities from traditional "off-chain" databases to on-chain blockchain systems to the music industry's transition from vinyl records to digital audio. Through smart contracts, asset fractionalization, and blockchain technology, tokenization has brought increased liquidity, transparency, and innovation potential to the securities market. Just as digital audio gave rise to streaming and new hardware, tokenization could also reshape how securities are issued, traded, and held.

Atkins clearly points out the following advantages of tokenization:

· Enhanced Liquidity: Tokenizing illiquid assets such as real estate or private equity to attract more investors.

· Smart Contract Automation: Automatically executing dividends or voting to reduce intermediary costs.

· New Market Activities: Supporting new security use cases to create more market opportunities.

However, the SEC's existing rules are mostly designed for traditional securities and conflict with the characteristics of on-chain assets. To realize former President Trump's vision of making the U.S. the "Global Crypto Capital," the SEC must quickly adjust its regulatory framework.

SEC's New Regulatory Direction

In the past, the SEC went through phases of "ostrich policy" and "shoot first, ask questions later" in regulating crypto assets. Initially, the SEC tried to ignore the existence of crypto assets; then, it regulated through enforcement actions without providing clear guidance. This approach made issuers hesitant and hindered innovation. Atkins criticized the SEC for inviting issuers to "come talk," but since the registration forms were not adjusted for crypto assets, the so-called open-mindedness was a facade.

Atkins promises that the SEC will usher in a "new day" by focusing on three main areas—issuance, custody, and trading—through rulemaking, interpretive guidance, and waiver authority to develop a regulatory framework suitable for crypto assets and abandon the reliance on ad hoc enforcement.

Issuance

“We cannot encourage innovation by trying to fit a square peg into a round hole.”
“We cannot encourage innovation by trying to fit a square peg into a round hole.”

In his speech, Atkins emphasized the urgent need to establish a "rational regulatory framework" to facilitate the migration of securities to the blockchain. Additionally, he strongly criticized the SEC's past approach of "regulating through enforcement" and announced specific guidance for the issuance, custody, and trading of crypto assets.

The core issue facing crypto asset issuance is: how to determine whether an asset is a "security" or bound by an "investment contract"? Currently, only four issuers have completed registered offerings or Regulation A offerings, with most avoiding it due to complex disclosure requirements. Atkins criticized the SEC for not adjusting registration forms for crypto assets, such as the Form S-1 requiring disclosure of executive compensation and use of funds, which may not be crucial information for crypto asset investment decisions.

In fact, as early as the second day of Atkins' tenure, the SEC issued a non-binding guidance statement, stating: "These issuances and registrations may involve issuers' equity or debt securities related to networks, applications, and/or cryptographic assets. These issuances and registrations may also involve cryptographic assets held as part of or bound by an investment contract (such cryptographic assets are referred to as 'referenced cryptographic assets')." The SEC urged companies issuing or handling tokens that may be considered securities to provide detailed disclosures, including business content, token roles, network development milestones, and token holder rights.

Although the guidance did not explicitly clarify which cryptocurrencies are considered securities, it was based on the SEC's observation of disclosure information from existing companies, attempting to provide a clearer reference framework for the industry. In this speech, Atkins further clarified that the SEC will:

· Issue clear disclosure guidelines to clarify that certain distributions do not involve securities law.

· Explore new registration exemptions and safe harbors to create pathways for cryptographic asset issuance.

· Utilize the flexibility of securities laws to support the development of the crypto industry.

Custody

“That pronouncement was a grave error. The staff had no place to act so broadly in place of Commission action and without notice-and-comment rulemaking.”
“That pronouncement was a grave error. The staff had no place to act so broadly in place of Commission action and without notice-and-comment rulemaking.”

Custody is another major bottleneck in the cryptocurrency asset market, with currently only two institutions in the U.S. holding a "special-purpose broker-dealer" license. On January 24 of this year, the SEC rescinded Staff Accounting Bulletin No. 121 (SAB 121), issued SAB 122, formally revoking SAB 121, which impeded banks from custodying cryptocurrency.

SAB 121 was a guidance issued by the U.S. SEC in 2022, requiring companies holding cryptocurrency to record these assets on their balance sheets and disclose related risks. The announcement applied to all SEC-regulated entities, especially banks and financial institutions, which could lead to higher capital requirements that could affect their ability to provide cryptocurrency custody services. Jeremy Allaire, CEO of Circle, also expressed dissatisfaction with this guidance, believing that SAB 121 "effectively penalized banks, financial firms, and companies, even banning them from holding cryptocurrency on their balance sheets."

Related Readings:《a16z: 5 Principles of Cryptocurrency Asset Custody》

Atkins called the reversal of SAB 121 a "significant correction." However, he believes that merely reversing SAB 121 is not enough to unleash the market potential. Today, he proposed the following reforms:

· Define the Standard for "Qualified Custodians": Provide exemptions for common custody practices in the cryptocurrency asset market.

· Support Self-Custody: Allow the use of technologically advanced secure self-custody solutions.

· Reform the Special Purpose Broker-Dealer Framework: Replace current overly restrictive rules and clarify the role of broker-dealers in cryptocurrency asset custody.

Atkins has requested SEC staff to explore establishing a new regulatory path for cryptocurrencies, including researching whether to amend custody rules to allow hedge funds, trading firms, and investment advisors to implement digital asset self-custody.

Trading

「There is no provision in the federal securities laws that prohibits a registered broker-dealer from facilitating trading in non-securities through an alternative trading system, including 'pairs trading' between securities and non-securities.」
「Nothing in the federal securities laws prohibits registered broker-dealers with an alternative trading system from facilitating trading in non-securities, including via 'pairs trading' between securities and non-securities.」

In the trading field, the SEC has historically restricted broker-dealers and trading platforms' functions, such as prohibiting platforms from offering both securities and non-securities trading simultaneously. Atkins believes that these restrictions are inconsistent with securities laws and hinder market innovation. He supports the following reforms:

· Enablement of "Super App" Mode: Support for broker-dealers to develop platforms integrating securities, non-securities, and other financial services.

· Modernization of Alternative Trading System (ATS) Rules: Adjust rules to accommodate cryptocurrency asset trading.

· Support for Cryptocurrency Asset Exchange Listings: Explore guidance or rulemaking to facilitate the listing and trading of cryptocurrency assets.

He also proposed providing "conditional exemptions" for innovative products to encourage market testing of new business models.

Closely Aligned with the Trump Administration and Congress

“I am eager to coordinate with colleagues in President Trump's Administration and Congress to make the United States the best place in the world to participate in crypto asset markets.”
“我渴望与特朗普总统政府和国会的同事们协调，使美国成为全球参与加密资产市场的最佳地点。”

Atkins takes over from Mark Uyeda, who served as Acting Chair following Gensler's resignation in January. Under the Trump administration's "crypto-friendly" stance, Uyeda's brief tenure paved the way for SEC transformation, such as the dismissal of multiple crypto-related enforcement actions and the repeal of internal rules under SAB 121 restricting public companies' custody of crypto assets. Atkins's appointment has accelerated the trend of regulatory easing, and his term extends until June 2026. Over a year, he may drive significant changes to the cryptocurrency regulatory policy framework.

To drive reform, Atkins highly commended the crypto task force established by Commissioners Uyeda and Peirce. Historically, the SEC suffered from interdepartmental isolation leading to inefficiency. The crypto task force integrated resources from multiple departments to provide clarity and certainty to the market, showcasing a new model of internal SEC collaboration.

Atkins emphasized that he will work closely with the Trump administration and Congress to jointly establish the United States as the preferred destination in the global cryptocurrency asset market. He urged market participants not to move innovation overseas, as the SEC will support domestic blockchain technology development through a flexible regulatory framework. Tokenization is not just a technological shift but a historic opportunity to reshape the securities market. Through clear issuance guidelines, flexible custody rules, and open trading policies, the SEC is striving to pave the way for the market.

However, how to balance innovation and investor protection? How to establish long-lasting rules in a rapidly changing technological environment? These questions require continuous collaboration between the SEC, the industry, the public, and the government. Atkins' commitment indicates that the SEC is ready to face the challenge and lay the foundation for the prosperity of the U.S. cryptocurrency market.

Overall, this speech marks a significant shift in SEC's approach to cryptocurrency asset regulation, aiming to support the development of blockchain technology and tokenized securities through clear rules and drive innovation through reforms in the issuance, custody, and trading areas, paving the way for the U.S. to become the "Global Capital of Cryptocurrency." From issuance to custody to trading, the SEC is injecting vitality into the cryptocurrency asset market through comprehensive reform. The establishment of the Crypto Task Force and cooperation with the government further indicate that the SEC is embracing the future of blockchain technology with an open and collaborative attitude.

As the wave of tokenization sweeps in, the U.S. securities market may be at the beginning of a new era. As Atkins put it, this is a "new beginning." What changes will clearer rules, flexible policies, and steadfast innovation support bring to the U.S. cryptocurrency asset market? Let's wait and see.