SEC Chairman Calls for a Clear Regulatory Framework for Encryption Assets

At the recent tokenization roundtable meeting, the chairman of the U.S. Securities and Exchange Commission ( SEC ) delivered an important speech, calling for a reasonable regulatory framework for the encryption asset market. He emphasized that the SEC must keep pace with innovation and consider regulatory reforms to accommodate on-chain securities and other encryption assets.

The chairman pointed out that the transition of securities from traditional databases to blockchain systems is akin to the evolution of audio from vinyl records to digital files. This transformation could reshape every aspect of the securities market, bringing about entirely new ways of issuing, trading, holding, and using securities. For example, on-chain securities can leverage smart contracts to transparently distribute dividends regularly, and tokenization can convert illiquid assets into liquid investment opportunities.

In order for the United States to become a global leader in the encryption field, the SEC needs to establish clear rules to provide guidance on the issuance, custody, and trading of encryption assets while cracking down on illegal activities. The chairman stated that the SEC will no longer rely on temporary enforcement actions but will use existing rulemaking, interpretation, and exemption powers to create practical standards for market participants.

In terms of issuance, the chairman hopes that the SEC will establish clear and reasonable guidelines for encryption assets that are deemed securities or subject to investment contracts. He believes the SEC should adjust the registration forms to accommodate the characteristics of this new technology. Furthermore, it is necessary to consider whether additional guidance, registration exemptions, and safe harbors are needed to pave the way for the issuance of encryption assets within the United States.

Regarding custody, the chairman supports providing registrants with more autonomy, allowing them to decide how to custody their encryption assets independently. He proposed to clarify which types of custodians meet the qualifications of "qualified custodians" as defined by relevant laws and to consider allowing advisors and funds to self-custody in certain cases.

In terms of trading, the chairman supports allowing registrants to trade a wider variety of products on their platform and to engage in activities previously prohibited by the SEC. He urged staff to explore how to design a modernized regulatory framework for alternative trading systems to better accommodate encryption assets and to consider whether further guidance or rule-making is needed to facilitate the listing and trading of encryption assets on national securities exchanges.

Finally, the chairman expressed a willingness to coordinate with government and congressional colleagues to make the United States the best place in the world to participate in the encryption asset market. He emphasized that, while the SEC is committed to developing a comprehensive encryption asset regulatory framework, it should not force securities market participants to go overseas for blockchain technology innovation.