Author: Paul S. Atkins (Chairman of the SEC)
Source: Observing Blockchain
Good afternoon, everyone. Thanks to Norm for the warm introduction, and I appreciate the invitation to be here with all of you. I feel very honored — especially at such a critical moment, which I believe may represent a significant turning point in America's leadership position in the crypto asset market. Before sharing some thoughts, I want to express my special gratitude to the America First Policy Institute for facilitating this timely dialogue. Also, to avoid concerns from the compliance team, I must state clearly: the views I express today are solely my personal position and do not represent the official stance of the U.S. Securities and Exchange Commission (SEC) or other commissioners.
Today, I want to talk about a plan I proposed together with SEC Commissioner Hester Peirce — 'Project Crypto.' This plan will serve as the SEC's strategic guidance to assist President Trump in advancing the policy direction of making America the 'global crypto capital.' Before introducing our plans for maintaining dominance in the crypto market, I would like to briefly review several key turning points in the development of American financial markets. These moments bear similarities to the current environment. Understanding these nodes will help us ensure that our future direction does not deviate from the foundation we have inherited.
The evolution of the capital markets: from the Sycamore Tree Agreement to the blockchain era
The wave of innovation has always run through the development of the American capital markets, often like a gale. In 1792, this 'wind' stirred the leaves under the sycamore tree. It was under this shade that more than twenty stockbrokers gathered to sign a brief agreement, becoming the embryo of the New York Stock Exchange. This agreement, fewer than a hundred words, handwritten on parchment, opened a set of enduring institutional designs that influenced the flow of capital for generations to come.
In the following centuries, capital markets have never stagnated. They have expanded, evolved, and continuously reinvented themselves with the ideas and technologies of the times. The vitality of the market is due to the people involved. The market guides the wisdom of these people through incentive mechanisms to focus on society's most challenging problems; anyone 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 interests, the market will drive them to enhance the public good.
The responsibility of the U.S. Securities and Exchange Commission (SEC) is to maintain a market environment that allows human creativity and expertise to continually bring value to society. Throughout its development, the SEC has played a positive role in supporting innovation, but it has also suppressed innovation during certain periods. Fortunately, progress often overcomes resistance. When our regulatory stance faces technological changes with prudence rather than fear, America's leading position in the global market continues to be consolidated.
In the 1960s — I’m glad I wasn’t in the industry then — Wall Street was in a bull market. But behind the glamorous facade, the fundamental operational systems of the market were under immense pressure. The clearing and settlement processes at that time were cumbersome and costly, with most transactions still relying on paper stock certificates. Piles of physical stock certificates were stacked high, needing staff to push carts back and forth across Wall Street and major financial districts nationwide. This was a scene from the last century, struggling to meet the modernization demands of the securities market at that time.
In fact, the paper clearing and settlement system designed for relatively stable years has become overwhelmed by the growing trading volume. A delay by one institution can disrupt the entire process of another institution; instances of securities being lost or stolen are frequent; and the number of failed transactions has surged. Some less affluent broker-dealers have struggled under 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 deal with the backlog of paper certificates.
The then-chairman of the SEC described the chaos caused by system aging as: 'the most enduring and severe crisis in the securities industry in forty years... many companies went bankrupt, and investor confidence plummeted.' 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), fundamentally transforming the way securities are held and traded. Securities ownership no longer relied on the physical transfer of paper certificates between clients and brokers, but is completed through bookkeeping on a computer ledger. After physical certificates were 'staticized' and securely stored in vaults, ownership flowed electronically, laying the foundation for the modern clearing and settlement system that continues to this day.
As demonstrated by this ticker tape machine, it was a significant breakthrough of that era, fundamentally changing the way the American public accessed market information — printing each transaction record line by line. However, technological breakthroughs should not only be confined to the past. By the late 1990s, electronic trading systems rapidly gained popularity, breaking many assumptions of traditional market operations. Then-chairman Arthur Levitt believed that the SEC had the responsibility to provide appropriate regulatory flexibility for innovations in electronic markets. Therefore, in 1999, the SEC launched the (Regulation Alternative Trading Systems, abbreviated as 'Reg ATS'), allowing ATS (alternative trading systems) to be regulated by broker-dealer standards rather than the previous exchange model.
At this point, we return to the present — a moment calling for America to reassert its spirit of enterprise; a project that has the potential to unleash this power. Our regulatory framework should no longer be anchored in an analog age 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, America cannot merely passively keep up; it 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 by and allow innovation to flourish overseas while our capital markets stagnate. 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 systems 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 American financial market to transition to the on-chain era.
Just a few weeks ago, President Trump signed the (GENIUS Act), establishing a stablecoin regulatory framework based on a 'gold standard' for the U.S., ensuring that America maintains its leading position in the global payments landscape. 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 appreciate the strong bipartisan support the House has garnered on this issue and look forward to working closely with the Senate to develop structural legislation that aids the long-term sound development of the crypto market based on the House's existing achievements. This will help prevent regulatory arbitrage, enhance the foresight of the system, and further consolidate America's position as the 'global crypto capital.'
Just yesterday, the President's Digital Asset Market Working Group released the (PWG report), making 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 making the U.S. a leader 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 push for the realization of this goal.
For this reason, I am announcing the formal launch of 'Project Crypto' and directing all policy departments of the SEC to work collaboratively with the cryptocurrency task force led by Commissioner Hester Peirce to swiftly develop and implement specific plans based on the recommendations of the (PWG report). 'Project Crypto' will help ensure that America continues to be the best place in the world to start a business, develop cutting-edge technologies, and engage in capital markets. We will bring back those crypto companies that were forced to relocate, especially those severely impacted by the previous administration's regulatory actions that replaced rules with enforcement and 'Operation Chokepoint 2.0.' Whether existing institutions in the industry or new emerging participants entering the scene, the SEC welcomes all market participants who seek to promote innovation.
According to the relevant recommendations of the (PWG report), I have instructed the commission staff to draft a set of clear and concise regulatory rules regarding the issuance, custody, and trading of crypto assets, and to issue a public request for comments. While the commission staff work towards finalizing these rules, in the coming months, the commission and its staff will also consider using interpretive, exemptive, and other regulatory powers to ensure that outdated rules do not stifle innovation and entrepreneurial vitality in the United States. Many of the commission's current traditional rules are no longer applicable in the twenty-first-century market environment, especially regarding the on-chain market. The commission must undertake a comprehensive revision of its regulatory framework to prevent regulatory barriers from hindering progress and competition, whether from emerging market participants or existing institutions, ultimately harming only ordinary investors.
The crypto industry returns to the United States: 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 corporate structures, 'decentralized performances,' and ambiguous treatment of securities attributes will become history. As President Trump said, America is in a 'golden age' — under our new policy agenda, the crypto asset economy will also enter its own 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 core missions of the SEC, yet for a long time, the SEC has overlooked the market's demand for choice and instead suppressed financing activities based on crypto technology. As a result, 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.
Although the SEC has previously expressed different views, in fact, most crypto assets are not classified as securities. However, due to confusion over the applicability of the 'Howey test' standards, some innovators have had to treat all crypto assets as securities to mitigate risks. Meanwhile, American entrepreneurs are modernizing various traditional systems and tools using blockchain technology. For example, Senator Bernie Moreno from Ohio is one of them — he is both a successful entrepreneur and a newly elected federal senator. Before his election, he founded a company dedicated to putting automotive property on-chain. He identified efficiency bottlenecks in the property transfer process and proposed practical solutions using on-chain technology. These entrepreneurs deserve a clear and enforceable set of standards 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 clear guidelines for market participants to determine whether a particular crypto asset qualifies as a security or constitutes an applicable 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 thereby determine their attributes. This approach will enable market participants to make judgments based on clear standards regarding whether the issuer has made any substantive commitments, thus making the crypto asset constitute an investment contract.
Additionally, being classified as a 'security' should not be viewed as a negative label for projects. We need to establish a regulatory framework applicable to crypto asset securities so that such products can thrive in the American market. Many issuers may prefer to leverage the design flexibility offered by securities laws; investors can benefit from profit sharing, voting rights, and other rights typical of securities. Projects should not be forced to establish decentralized autonomous organizations (DAOs), offshore foundations, or be compelled to 'decentralize' before they are 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 enable issuers to include American users in their offerings not because of legal complexity and litigation risks but 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 field may usher in 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, most of these innovative activities occur overseas due to the 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 increasingly 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 to provide regulatory exemptions when appropriate, ensuring that the American public is not excluded from this wave of innovation.
Enhancing freedom: empowering custodians and trading venues with choice
Secondly, to achieve the president's policy goals, the SEC has the responsibility to ensure that market participants have the maximum autonomy in choosing the custody and trading methods for crypto assets. As I emphasized earlier, the right to own and safeguard personal property is one of America's core values. I firmly support individuals holding crypto assets through self-custodied digital wallets and participating in on-chain activities such as staking. However, some investors will still choose to rely on SEC-registered institutions (such as broker-dealers and investment advisors) to custody their assets, and these institutions will apply stricter regulatory requirements when providing such services. During my tenure as chairman, I will prioritize implementing the (PWG report) recommendations regarding 'modernizing SEC custody regulatory requirements,' particularly for registered intermediaries.
The previous administration's implementation of the 'special purpose broker-dealer' framework, (Accounting Bulletin No. 121) (SAB 121), and 'Operation Chokepoint 2.0' have resulted in a severe shortage of available crypto asset custody service providers in the current market. The current 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 existing regulatory framework to better support the custody arrangements for crypto assets, which may include possible exemption mechanisms or other flexibility arrangements, as well as the potential for revising the current 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 just for the sake of regulation, forcing the market into an outdated 'Procrustean bed.' I support granting market participants the freedom to choose the regulatory path that best suits their business, provided that path offers sufficient protection for investors.
Developing super applications: horizontal integration of product functionalities
One of my key focuses during my chairmanship is to support market participants in innovating around the 'super application' model. People often ask me: 'What exactly do you mean by a super application?' The answer is quite simple: securities intermediaries should be able to offer a variety of products and services in one-stop fashion 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 their platform simultaneously, without needing to apply for different licenses in fifty states or hold multiple redundant licenses at the federal level.
Current federal securities laws do not prohibit non-security assets from being listed on SEC-registered trading platforms. In this regard, I have instructed the commission staff to further research and propose relevant guidelines and rule proposals to ultimately promote the vision of 'Super App.' Perhaps we can also refer to this system as 'Reg Super-App.'
In line with the (PWG report), the SEC should collaborate with other regulatory agencies to establish the most efficient licensing structure for SEC-registered institutions. Market participants should not be unnecessarily constrained by multiple regulatory agencies or overlapping regulatory systems. This model has been widely applied in the banking sector and has yielded positive 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 regulatory arrangements of 'minimum effective dose' — safeguarding investor rights while providing space for enterprises and entrepreneurs to develop. We should not suppress industry vitality with 'paternalistic' overregulation, nor should we push businesses offshore or weaken the competitiveness of American businesses in international markets. Our regulatory system should unleash the competitive forces of innovation in on-site platforms and products so that all Americans can benefit.
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 staff to assess whether, based on existing authority, they can allow non-security crypto assets bound by investment contracts to trade on unregistered SEC trading platforms. I attach great importance to advancing this direction, as it will not only enable unregistered SEC platforms, but also those licensed at the state level, to launch specific assets, but will also provide a path for products traded on Commodity Futures Trading Commission (CFTC) regulated platforms, including the ability to engage in margin trading — even if Congress has not yet granted CFTC additional authority, this arrangement is expected to release greater market liquidity.
Unleashing the potential of the American market: constructing a grand and excellent on-chain software system
Fourth, I have instructed the commission staff to update outdated internal rules and regulations to unleash the potential of on-chain software systems in the securities market. On-chain software takes various forms — some systems achieve true decentralization and are not operated by any intermediary; others are maintained by specific operators. Regardless of the type of on-chain software system, they should have a place in our financial markets.
A qualified crypto asset market structure must provide a compliance path for on-chain software system developers that do not require centralized intermediaries. Decentralized finance (DeFi) software systems, such as automated market makers (AMMs), can achieve automated, de-intermediated financial market activities. Since the inception of federal securities laws, it has always assumed that financial activities must involve intermediaries and be regulated. But this does not mean that in scenarios where the market can self-operate, we should artificially introduce intermediaries just to impose intermediary structures.
We will make room in the securities market for both models: on one hand, protecting developers who purely release software code; on the other hand, reasonably distinguishing between intermediary and non-intermediary financial activities, and crafting 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 aforementioned vision, we need to consider adjustments to some existing rules. For example, supporting on-chain tokenized securities trading may mean we must explore revising the (National Market System Regulation) (Reg NMS), not only limited to the improvements we have made in our daily regulation to correct the market distortions it has caused. Many may recall that twenty years ago, I co-wrote a lengthy dissent regarding (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 two decades, our reasons for opposition at that time are even more compelling. The legislative intent of Congress is also very clear: the development of the national securities market system should be guided by 'market competitive forces, not unnecessary regulation.' I will work to seek paths that return our regulatory system to this original intent, thereby promoting innovation and competition within the market.
Promoting innovation: guided by commercial viability
Finally, innovation and entrepreneurial spirit have always been the core driving forces of the American economy. President Trump once called America a 'nation of builders.' During my tenure as chairman, the SEC will encourage the development of this group rather than restrict it with cumbersome administrative processes or 'one-size-fits-all' regulatory rules. Currently, the commission is actively reviewing various proposals put forth by the industry to stimulate innovation vitality. At the same time, we are also studying the establishment of an 'innovation exemption' mechanism to allow both registered and unregistered entities to quickly enter the market when facing new business models or services that cannot fully comply with existing rules. While encouraging innovation, the SEC will also ensure that all market participants must still adhere to the basic conditions and requirements aimed at achieving the policy goals of federal securities laws under such exemption arrangements.
Under my vision for the 'innovation exemption' mechanism, innovators and forward-thinking practitioners will be able to bring new technologies and business models to market immediately without having to comply with complex regulatory provisions that are incompatible with or obstruct economic activities. Accordingly, they will adhere to a set of principle-based basic 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 regularly, integrating whitelist or 'verification pool' functionalities, and restricting non-compliant token standards (like ERC 3643) tokenized securities from entering the market, etc. I encourage market participants to always prioritize their commercial viability when designing various models with SEC staff.
Conclusion
In advancing these priorities, I look forward to working closely with colleagues across government agencies to help make America the global capital of digital assets. This is not only a regulatory transformation but also a once-in-a-lifetime historical opportunity. From the parchment agreement under the sycamore tree to the distributed ledger on-chain, the winds of innovation continue to blow — and our mission is to ensure that this wind keeps propelling America's leadership position forward. Ladies and gentlemen, America does not settle for following. We will not stand by. We will lead, we will continue to build, and we will ensure that the next chapter of financial innovation is written right here in America.
Thank you very much for your attention today. Please continue to pay attention to our upcoming announcements and proposals, and I look forward to your insightful opinions and suggestions as always.
