SEC Chair Discusses Encryption Asset Regulatory Framework

At a recent tokenization roundtable, the chairman of the U.S. Securities and Exchange Commission ( SEC ) delivered an important speech on the regulatory framework for encryption assets. He emphasized the importance of the migration of securities from traditional databases to blockchain-based distributed ledger systems, comparing this transition to the evolution of audio from analog to digital format.

The chairman pointed out that on-chain securities could completely change all aspects of the securities market, bringing new ways of issuance, trading, holding, and usage. For example, smart contracts can enable the automatic and transparent distribution of dividends, and tokenization can also enhance asset liquidity. He believes that in order for the United States to become a global encryption center, the SEC must keep pace with innovation and consider regulatory reforms to accommodate on-chain securities and other encryption assets.

The chairman emphasized that the SEC will no longer rely on temporary enforcement actions, but will establish practical standards. He stated that he will focus on three areas: issuance, custody, and trading.

Regarding issuance, the chairman promised to establish clear and reasonable guidelines for the issuance of encryption assets. He pointed out that currently only a few encryption asset issuing institutions have registered, mainly because the disclosure requirements are difficult to meet. The SEC will consider adjusting the registration forms and exploring additional guidance, exemptions, and safe harbors.

Regarding custody, the chairman supports granting registrants more autonomy. He stated that it is necessary to clarify which custodians meet the qualifications of "qualified custodians" and to consider allowing self-custody in certain cases. Additionally, he proposed to abolish the "special purpose broker-dealer" framework and adopt a more reasonable system.

In terms of trading, the chairman supports allowing registrants to trade a wider variety of products on their platform. He asked staff to explore how to design a modern alternative trading system ( ATS ) regulatory framework to better accommodate encryption assets. At the same time, he is also considering measures to promote the listing and trading of encryption assets on national stock exchanges.

The chairman stated that while the SEC is formulating a comprehensive regulatory framework, it may consider granting conditional exemptions for innovative products and services. He hopes to coordinate with the government and Congress to make the United States the best place in the world for participation in the encryption asset market.