SEC Chairman Discusses Encryption Asset Regulatory Framework

The chairman of the U.S. Securities and Exchange Commission recently delivered a keynote speech on the regulation of encryption assets at a tokenization roundtable. He pointed out that securities are transitioning from traditional databases to blockchain-based distributed ledger systems, and this shift could fundamentally reshape every aspect of the securities market.

The chairman emphasized that in order for the United States to become a leader in the encryption field, the SEC must keep pace with innovation and consider reforming existing rules to accommodate on-chain securities and other encryption assets. He stated that rules designed for traditional securities may not be suitable for on-chain assets and could even hinder the development of blockchain technology.

In the speech, the chairman proposed three key areas of encryption asset policy: issuance, custody, and trading.

Regarding issuance, the chairman hopes that the SEC will establish clear and reasonable guidelines for the issuance of encryption assets. He believes that the existing registration exemptions and safe harbors may not be entirely suitable for certain types of encryption asset issuance, and the SEC should consider whether additional guidance, exemptions, and safe harbors are necessary.

Regarding custody, the chairman supports providing registrants with more autonomy to decide how to custody their encryption assets. He suggested clarifying which types of custodians meet the legal requirements for "qualified custodians" and considering reasonable exceptions.

In terms of trading, the chairman supports allowing registrants to trade a wider variety of products on their platform. He urged SEC staff to explore ways to design a modernized ATS regulatory framework to better accommodate encryption assets.

The chairman stated that during the SEC's development of a comprehensive encryption asset regulatory framework, market participants should not be forced to seek blockchain technology innovation overseas. He suggested that conditional exemptions could be considered for certain new products and services.

Finally, the chairman expressed the hope to coordinate with government and congressional colleagues to make the United States the best participant in the global encryption asset market.