(Article from Registered Funds Regulatory Update, July 2025)
For more information, please visit the Registered Funds Resource Center.
At his first SEC townhall meeting on May 6, 2025, SEC Chair Paul Atkins criticized the SEC under his predecessor, Gary Gensler, for its “ambiguous and nonexistent regulations” in the cryptocurrency space. Atkins stated this lack of regulatory framework created uncertainty and invoked distrust in the SEC, while also foregoing innovation. He noted also that the lack of regulation invited fraud and underscored the need for “a rational, coherent, principled approach” in regulation. He praised the efforts of the Crypto Task Force and its roundtables held to gain industry feedback, applauding further cooperation with industry participants.
As part of the Crypto Task Force Roundtable discussion series on May 12, 2025, Atkins again spoke about crypto asset regulation. Atkins stated that “securities are increasingly migrating from traditional (or ‘off-chain’) databases to blockchain-based (or ‘on-chain’) ledger systems[,]” and compared this innovation to the “transition of audio recordings from analog vinyl records to cassette tapes to digital software decades ago.” Atkins emphasized how crypto ad hoc regulations must be stopped, and urged the SEC Staff to utilize its existing rulemaking, interpretive, and exemptive authorities to set “clear and sensible guidelines” for market participants. He highlighted three areas of focus for crypto regulation—issuance, custody, and trading.
On the issuance of crypto assets that are securities, Atkins stated that he has asked the Staff to consider additional guidance, registration exemptions, and safe harbors “to create pathways for crypto asset issuances.” Atkins referred to the SEC’s approach to crypto regulation over the past few years as a “‘head-in-the-sand” approach—perhaps hoping that crypto would go away,” followed by “a shoot-first-and-ask-questions-later approach of regulation through enforcement.” Atkins noted that while the SEC has “previously adapted its forms for offerings,” such as for asset-based securities and REITs, “it has not done so for crypto assets despite increased investor interest in this space over the past few years.” He added that “[w]e cannot encourage innovation by trying to fit a square peg into a round hole” and reiterated his commitment to a new approach, recognizing that “rules and regulations designed for off-chain securities,” generally more traditional securities, “…may be incompatible with or unnecessary for on-chain assets and stifle the growth of blockchain technology.” Atkins pointed to a number of clarifications already provided, such as with respect to “the view that certain distributions and crypto assets do not implicate the federal securities laws”, and confirmed his expectation that such clarifications will continue. He confirmed that the SEC has broad discretion under the Securities Acts to accommodate the crypto industry, and that he “intend[s] to get it done.”
With respect to custody, Atkins recognized the importance of providing registrants with greater optionality in determining how to custody crypto assets and addressed (i) the special purpose broker-dealer framework; (ii) the types of custodians that may qualify as “qualified custodians” for 1940 Act and Advisers Act purposes; and (iii) self-custody solutions for crypto assets.
On the trading of crypto products, Atkins noted that he is in favor of allowing registrants to trade a broader variety of products on their platforms and confirmed that he has asked the Staff to look into the Alternative Trading System regulatory regime to identify opportunities for modernization “to better accommodate crypto assets” and explore whether there are opportunities for guidance or rulemaking that may enable the listing and trading of crypto assets on national securities exchanges. Further, Atkins noted his interest in exploring the availability of conditional exemptive relief for registrants and non-registrants seeking to bring new products and services into the financial marketplace, which may not otherwise be compatible with the SEC’s existing regulatory framework. Atkins emphasized that he is eager to work with President Trump’s administration to make the United States “the best place in the world to participate in crypto asset markets.”
Paul S. Atkins, SEC Chair, Speech, Opening Remarks at the SEC Town Hall (May 6, 2025), available at: https://www.sec.gov/newsroom/speeches-statements/atkins-townhall-05062025.
Paul S. Atkins, SEC Chair, Speech, Keynote Address at the Crypto Task Force Roundtable on Tokenization (May 12, 2025), available at: https://www.sec.gov/newsroom/speeches-statements/atkins-remarks-crypto-roundtable-tokenization-051225-keynote-address-crypto-task-force-roundtable-tokenization.