The Securities and Exchange Commission (SEC) is already considering a new framework. This first-of-its-kind initiative should provide the conditional exemptions needed to spur innovation in the cryptocurrency space. Paul Atkins is spearheading this new initiative, which would be a remarkable departure in the SEC’s long-standing strategy to regulate digital assets. Now the emphasis is on collaborative policy-making—not only enforcement actions. The SEC aims to accelerate the development and launch of onchain products and services by providing clear guidelines and accommodations for innovators.
Atkins broke the news that the SEC plans to use “notice and comment” rulemakings to set its policy agenda for crypto. The SEC's initiative includes the use of notice-and-comment rulemaking to shape crypto policies, a departure from the previous administration's approach under Gary Gensler.
Atkins Criticizes Previous Regulatory Approach
Paul Atkins, who has not shied away from publicly criticizing the previous SEC administration under Gary Gensler. The crypto industry justifiably laid waste to that administration for making bad policies through litigation and legal tabs. Atkins voiced a strong desire for a more open, inclusive process to regulatory development.
During her confirmation hearings, and under Atkins, the SEC is moving in the opposite direction. They’re looking to craft an “innovation exemption” to provide more regulatory clarity. It is hoped that this new direction will contribute towards building a more collaborative and productive relationship between the SEC and the crypto community.
Innovation Exemption Framework
The “innovation exemption” provides an incentive for developers and entrepreneurs to continue innovating with on-chain technologies within the United States. To truly unlock this opportunity, they have to do so under a set of stringent conditions. Atkins directed SEC staff to explore amendments to the Commission’s rules and regulations to accommodate issuers and intermediaries managing onchain financial systems.
"An innovation exemption could help fulfill President Trump’s vision to make America the crypto capital of the planet by encouraging developers, entrepreneurs, and other firms that are willing to comply with certain conditions to innovate with onchain technologies in the United States." - Paul Atkins
Atkins urged that existing securities rules and regulations are primarily designed for legacy financial models. They are not well-suited to the decentralized character of on-chain ecosystems. We need to adjust the regulatory framework to take into account the unique qualities of blockchain technology.
"Most current securities rules and regulations are premised upon the regulation of issuers and intermediaries, such as broker-dealers, advisers, exchanges and clearing agencies." - Paul Atkins
"The drafters of these rules and regulations likely did not contemplate that self-executing software code might displace such issuers and intermediaries." - Paul Atkins
SEC's Policy Shift
Earlier today, June 3, Paul Atkins, President of what was then called Financial Services Forum, testified before the Senate Appropriations Subcommittee on Financial Services. He stressed the SEC’s robust dedication to this new path. He discussed the SEC's policymaking shift during a crypto roundtable titled "DeFi and the American Spirit," led by the SEC’s crypto task force.
The SEC staff, as directed by Atkins, vigorously pursues amendments to the Commission’s rules and regulations. These amendments would go a long way toward providing the necessary flexibility and accommodations for issuers and intermediaries who are working within bona fide onchain financial systems.
