SEC Chair Calls for a Reasonable Regulatory Framework for Encryption Assets

The SEC Chairman recently delivered an important speech at a tokenization roundtable, emphasizing the necessity of establishing a reasonable encryption asset regulatory framework. He pointed out that securities are migrating from traditional databases to blockchain-based distributed ledger systems, and this shift could fundamentally reshape all aspects of the securities market.

The chairman likened this transformation to the evolution of audio from analog to digital formats, believing it will bring a completely new way to issue, trade, hold, and use securities. For example, on-chain securities can utilize smart contracts to periodically allocate dividends to shareholders, and tokenization can also enhance asset liquidity and facilitate capital formation.

In order for the United States to become a global leader in the encryption field, the SEC must keep pace with innovation and consider regulatory reforms to accommodate on-chain securities and other encryption assets. The chairman emphasized that rules designed for traditional securities may not be applicable to on-chain assets and could even stifle the development of blockchain technology.

The chairman stated that the SEC will no longer rely on temporary enforcement actions, but will use its existing powers to establish practical standards for market participants. He announced the formation of a special task force for cryptocurrency to coordinate the work of various departments within the SEC and provide the public with the clarity and certainty that has long been needed.

On the issue of issuance, the chairman called for clear and reasonable guidelines for the issuance of encryption assets. He acknowledged that the current registration and disclosure requirements are difficult to meet and instructed staff to consider additional guidance, exemptions, and safe harbors to pave the way for the issuance of encryption assets within the United States.

Regarding custody, the chairman supports providing more autonomy to registrants. He believes it is necessary to clarify which custodians are qualified and to consider allowing advisors and funds to self-custody in certain cases. The chairman also proposed abolishing the "special purpose broker-dealer" framework, replacing it with a more reasonable system.

In terms of trading, the chairman supports allowing registrants to trade a wider variety of products on their platform. He has asked staff to explore ways to design a modern ATS regulatory system, as well as the possibility of facilitating the listing and trading of encryption assets on national securities exchanges.

The chairman also stated that he is considering granting conditional exemptions to market participants seeking to launch new products and services that may be incompatible with existing regulations.

Finally, the chairman stated that he would coordinate with government and congressional colleagues to strive to make the United States the best participant in the global encryption asset market.