Introduction
On May 12, SEC Chairman Paul Atkins delivered remarks following the fourth crypto roundtable, indicating that the future regulatory policy direction for crypto assets will focus on three aspects: 'Issuance', 'Custody', and 'Trading', showing that the specific compliance solutions for the crypto industry are gradually becoming clear. This article will summarize the key points of Paul Atkins's remarks and explore the impacts of the regulatory direction from the perspectives of crypto native projects, traditional financial institutions, and the general public.
Summary of Paul Atkins's remarks
Paul Atkins uses the evolution of the music industry as an analogy to explain that the migration of securities and other assets to on-chain may reshape the operation of the securities market, including using smart contracts to distribute dividends and tokenization to increase investment opportunities for liquidity.
However, regulations designed for off-chain securities cannot be fully applied to on-chain assets, leading to fraudulent and market manipulation activities that hinder the development of blockchain technology. Therefore, Paul Atkins announced that future crypto-related policies will no longer rely on temporary enforcement actions, but will be guided by the SEC to formulate appropriate regulatory guidelines for market participants, focusing primarily on three aspects: Issuance, Custody, and Trading.
Issuance
Current challenges
There is no clear definition of whether crypto assets can be considered 'securities', leaving issuers uncertain about which regulations they are subject to.
There is a lack of a registry designed for crypto assets, and the disclosure information required by the IPO's S-1 form and Regulation A for small-scale financing is not applicable.
In the past, the SEC adopted an 'ostrich mentality', unwilling to face the regulatory issues of crypto assets.
Solutions
Statements issued by SEC staff continue to clarify that specific crypto assets do not involve the federal securities laws.
These statements cannot be fully applied to all crypto assets, and broader guidelines need to be established.
Custody
Current challenges
SAB-121* accounting announcement hinders the development of crypto asset custody services.
No specific standards and types for becoming a qualified custodian of crypto assets.
'Special Purpose Broker-Dealer*' system greatly limits the scope of business for crypto assets.
SAB-121*: An accounting guideline issued by the SEC in March 2022 that treats crypto assets held in custody for users as liabilities, which must be presented on the balance sheet, thereby reducing the willingness of companies to offer crypto asset custody services.
Special Purpose Broker-Dealers*: SEC established broker-dealer licenses for specific financial activities like cryptocurrency, whose business scope is strictly regulated, thus limiting the development of the crypto field in Web2.
Solutions:
Revoke SAB-121.
Update custody rules applicable to crypto assets based on the Investment Advisers Act and the Investment Company Act.
Abolish the 'Special Purpose Broker-Dealer' framework and replace it with a more reasonable system.
Trading
Current challenges: In the past, the SEC prevented registrants from trading a wide range of cryptocurrency products on the platform.
Solutions:
The statement (Federal Securities Law) does not prohibit paired trading between securities and non-securities assets.
Update the regulatory system for ATS to accommodate crypto assets.
Develop further guidelines and principles to explore whether crypto assets can be listed and traded on national securities exchanges.
In summary, Paul Atkins has proposed a clear execution framework and direction for crypto asset policy aimed at supervising illegal activities in the crypto market through comprehensive regulatory norms to maintain market stability and security while promoting innovation and development in blockchain technology. For the complete content of Paul Atkins' speech, please refer to the SEC official documents.
What impacts will the new regulatory direction bring?
The approval of Bitcoin and Ethereum ETFs last year can be seen as a form of government recognition of crypto assets, but aside from these two tokens, it has not provided substantial help to the overall industry.
According to Paul Atkins's speech, the future of the crypto industry will have credible legal support as it expands its business, and there will be more opportunities for cooperation rather than confrontation with traditional finance. This signals that the industry is about to enter a stage of maturity and large-scale adoption. In this context, what impacts will it bring to 'Web3 native industries' and 'traditional financial institutions & Web2 companies'?
Web3 native industry
Firstly, after crypto assets are formally included in regulation, it is expected that there will be more comprehensive specifications and standards regarding initial distribution, liquidity, market making, contract security, etc., which can prevent malicious market manipulation and protect the rights and interests of asset holders.
Moreover, its functionality can be expanded as much as possible within the limits allowed by regulatory frameworks, not just confined to the commonly seen functions like payment, ecosystem incentives, governance, staking, etc., but can even combine with the real world to create entirely new application scenarios. For example, sending concert tickets in the form of soulbound NFTs to the purchaser's wallet address, making the tickets non-transferable to avoid scalping issues.
Furthermore, the implementation of regulations means that off-chain and on-chain assets can circulate and convert more freely, which is very beneficial for the current RWA track, that is, tokenization of real-world assets. Standard Chartered Bank boldly predicts in its RWA report issued in June 2024 that by 2034, the RWA market size is expected to reach $30 trillion, which is 300 times the current DeFi market size (Figure 1). With the added benefits of regulation, there may be even greater growth.
For further understanding of the RWA track, refer to DA Labs' article: (【2025】What is RWA? What tracks & projects should be focused on?)
Figure 1, Total locked value of DeFi, source: DefiLlama
Ultimately, the Web3 industry will inevitably attract a large number of Web2 users after compliance, which not only tests the transaction speed and system stability of various public chains but also needs to overcome user experience issues.
Understanding the operating model of blockchain requires a certain knowledge threshold. It is essential to present concepts like Gas, cross-chain, addresses, and private keys in an easy-to-understand manner so that new Web2 users can easily grasp them and design more intuitive wallet interfaces to simplify the operation process, thereby lowering the entry barrier for new users. In this regard, the development of Account Abstraction is particularly important.
In simple terms, account abstraction can simplify the wallet operation process, allowing users to log into their wallets and confirm transaction execution using biometric, social login, and other authentication methods, with transaction Gas Fees paid by third parties so that users do not need to exchange corresponding tokens to pay fees through cumbersome processes before transactions.
Additionally, account abstraction allows users to develop custom functions based on their needs, making operations more flexible and greatly enhancing user experience. Through account abstraction, new users can seamlessly transition from Web2 to the Web3 ecosystem, playing an important role in the popularization of the crypto industry.
Currently, the most representative account abstraction product is the Universal Account launched by Particle Network. Users can create new wallets using Google, X, and Discord accounts, and then directly purchase and recharge cryptocurrencies with credit cards, executing cross-chain transactions without needing to exchange Gas Fees beforehand, supporting multiple public chains like Ethereum, Solana, and BSC, providing a very smooth user experience.
Figure 2, Executing cross-chain transactions using Universal Account, source: UniversalX
Traditional financial institutions & Web2 companies
The implementation of regulation means that traditional financial institutions and Web2 companies can also begin to enter the Web3 market on a large scale, and compared to native Web3 projects, these companies have a larger scale of capital and user base, thus having advantages in development speed and potential over most crypto native projects. The opening of the Web3 market will also bring them more opportunities, for example:
Provide cryptocurrency services
Concrete regulatory guidelines provide clear directions for entering the cryptocurrency market, reducing compliance risks. Banks and other financial institutions can safely offer services such as trading, custody, and lending of crypto assets, including crypto asset funds, ETF products, and crypto asset insurance, and can utilize blockchain technology to provide faster and cheaper cross-border payment solutions.Innovative financial products
Combining traditional finance and native crypto assets to develop entirely new financial products. For instance, these institutions can combine cryptocurrencies with existing asset classes (such as stocks, bonds, funds, etc.) to create hybrid investment products, expanding the diversity of financial products to attract more institutional and retail investors.Decentralized digital identity and data management
Whether traditional financial institutions or other Web2 companies, they can utilize the decentralized and immutable characteristics of blockchain to establish safer and more flexible identity verification methods and data management on-chain. For example, combining NFTs and zero-knowledge proofs to create a personal on-chain identity system, or integrating traditional supply chain data onto the blockchain to provide rapid and transparent information updates.
Overall, as the regulatory norms of the crypto market become increasingly concrete, traditional financial institutions and Web2 companies have the opportunity to find potential opportunities different from traditional markets and quickly expand their businesses by leveraging their existing capital, technology, and user base, rapidly capturing market share and further promoting the expansion of their global business.
What can general investors prepare for?
At this early stage of regulation, the specifics of how to implement crypto policies are still in a chaotic state, and there may be situations where regulations are sometimes lenient and sometimes strict, leading to significant market fluctuations. As general investors, one should maintain a healthy asset allocation, and in addition to keeping an eye on the latest regulatory trends, also pay attention to Web3 tracks that benefit from regulation.
Figure 3, On-chain data provided by RWA.xyz, source: RWA.xyz
Taking the aforementioned RWA track as an example, RWA.xyz aggregates on-chain data of various tokenized assets in this track, including stablecoins, bonds, private credit, commodities, and real estate. General users can obtain the latest data and reports on the RWA track from this website, gaining deeper insights and analyses of the current market situation and uncovering potential emerging projects.
In addition, the implementation of regulations not only allows traditional institutions to enter the Web3 market unilaterally but also enables established on-chain DeFi projects like Uniswap, AAVE, and Sky (formerly MakerDAO) to expand their businesses to traditional financial markets. These projects optimize the trading experience while integrating RWA into their asset reserves and lending systems, preparing for future large-scale adoption.
Therefore, in addition to the RWA track, attention can also be paid to the latest developments of these established projects, and tools like Universal Account or OKX Wallet can be used more frequently to enhance interaction convenience and efficiency.
In the future, DA Labs will continue to track the latest developments in SEC crypto policies monthly, providing first-hand news aggregation and market analysis to help retail investors quickly understand the current regulatory situation. Therefore, remember to follow DA Labs to stay informed about the latest trends in the Web3 industry.