In his keynote address at the tokenisation roundtable organised by the Crypto Taskforce, Paul Atkins, chairman of the US Securities and Exchange Commission (SEC), declared that it’s “a new day” at the regulator. The full transcript was published by Traders Magazine. Instead of “regulation-by-enforcement”, Atkins will be steering the commission towards an approach that utilises “its existing rulemaking, interpretive, and exemptive authorities to set fit-for-purpose standards for market participants “ – a 180 on the approach taken by Gary Gensler, his predecessor.
Atkins claimed that his approach will “return to Congress’ original intent”, which is to police violations of SEC’s established obligations, especially in relation to fraud and manipulation. The commission has identified three areas of focus for crypto asset policy – issuance, custody, and trading.
A softer approach
To tackle issuance, the SEC intends to “establish clear and sensible guidelines for distributions of crypto assets that are securities or subject to an investment contract”.
Atkins criticises the commission’s previous approach: “In the past few years, the SEC first pursued what I call the ‘head-in-the-sand’ approach – perhaps hoping that crypto would go away. Then, it pivoted and pursued a shoot-first-and-ask-questions-later approach of regulation through enforcement.” He claimed that no new adaptations were made to the registration process to accommodate the new technology.
Updates needed
Under custody, the SEC aims to “support providing registrants with greater optionality in determining how to custody crypto assets”.
“It is important to provide clarity on the types of custodians that qualify as a ‘qualified custodian’ under the Advisers Act and Investment Company Act, as well as reasonable exceptions from the qualified custody requirements to accommodate certain common practices within crypto asset markets,” says Atkins. “The custody rules may need to be updated to allow advisers and funds to engage in self-custody under certain circumstances.”
Seeking variety
In trading, Atkins is “in favour of allowing registrants to trade a broader variety of products on their platforms and in response to market demand”.
“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,” he points out.
He urged securities market participants not to go offshore to innovate with blockchain technology, saying that SEC would “explore whether conditional exemptive relief would be appropriate for registrants and non-registrants that seek to bring new products and services to market that may otherwise not be compatible with current commission rules and regulations”.
