Key Takeaways
- SEC Chair Paul Atkins outlined his three areas of focus for crypto asset policy— issuance, custody and trading— in an address to the Crypto Task Force Roundtable on Tokenization.
- Chair Atkins highlighted barriers for crypto asset issuers, emphasized the need for flexibility in crypto asset custody, and supported the expansion of crypto asset products available on trading platforms.
- The first month of Chair Atkins' tenure has indicated a continued shift toward more favorable regulatory changes for the crypto industry.
In an address on May 12, 2025, Securities and Exchange Commission Chair Paul Atkins outlined the SEC's goal of developing a "rational regulatory framework" for crypto asset markets.1 Chair Atkins noted this new framework will establish clear guidelines around the issuance, custody and trading of crypto assets, while maintaining investor protections against fraud and manipulation. Chair Atkins also commended the creation of the Crypto Task Force, noting that coordination across SEC offices and divisions will be required to avoid policymaking siloes that have existed in the past.
Chair Atkins contrasted his approach to former SEC Chair Gary Gensler, whom he described as engaging in policymaking through ad hocenforcement actions. Chair Atkins stated that the SEC will use existing rulemaking, interpretive and exemptive authority to create "fit-for-purpose" standards for crypto asset market participants. Enforcement actions would return to what Chair Atkins described as Congress' original intent: the policing of established obligations, particularly those relating to fraud and manipulation.
To foster innovation and to maintain President Trump's goal of becoming the "crypto capital of the planet," Chair Atkins said the SEC must not allow legacy rules and regulations that did not contemplate on-chain securities to act as roadblocks to the growth of blockchain technology.
Below, we have summarized Chair Atkins' discussion of his three areas of focus for crypto asset policy— issuance, custody and trading.
Issuance of Crypto Asset Securities
Chair Atkins highlighted the barriers to entry for crypto asset issuers, including challenges satisfying disclosure requirements and uncertainty around whether a crypto asset constitutes a "security," especially under the Howey test for "investment contracts."2 Chair Atkins criticized the agency for not adapting registration forms for crypto assets while noting the SEC has in the past adapted such forms for the offering of other financial innovations, such as asset-backed securities and real estate investment trusts.
Chair Atkins described how the SEC is "charting a new course," pointing to recent SEC staff statements clarifying disclosure obligations for certain registrations and offerings and excluding the offering and selling of "meme coins" from the federal securities laws.3 However, Chair Atkins noted that staff statements providing registration exemptions and safe harbors are temporary. While Chair Atkins noted that he has asked SEC staff to consider additional guidance, registration exemptions and safe harbors to accommodate crypto asset issuances, he indicated a preference for formal SEC rulemaking moving forward.
Crypto Asset Custody
Registrants should have greater "optionality" in determining how to custody crypto assets, Chair Atkins stated. He commended the SEC staff in issuing Staff Accounting Bulletin ("SAB") 122, which reversed the controversial SAB 121 that required financial institutions custodying crypto assets for their customers to record the value of crypto assets custodied as a liability on their balance sheets, effectively deterring many institutions from offering crypto custody services because of the impact on their required capital.4 Chair Atkins said that the SEC staff had no authority to issue such broad guidance without notice-and-comment rulemaking.
Beyond SAB 122, Chair Atkins stated that the SEC must clarify the types of custodians that are considered to be "qualified custodians" under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. He noted that reasonable exceptions to the qualified custodian requirements can be made to accommodate common practices within crypto asset markets. Further, Chair Atkins signaled support for updating the custody rules to allow for "self-custodial solutions" by advisers and funds under certain circumstances.
Chair Atkins added that the "special purpose broker-dealer" framework, which allows only "special purpose broker-dealers" to custody crypto assets under certain regulatory conditions, including not conducting any business in traditional securities or crypto asset non-securities, may be repealed and replaced.5 He specifically noted that SEC action may be needed to clarify the application of the regulatory conditions so as not to restrict broker-dealers from acting as custodians for both security and non-security crypto assets.
Trading of Crypto Assets
Chair Atkins indicated support for registrants trading a "broader variety" of products on their platforms and in response to market demand. Further, he said that he has instructed the SEC staff to find ways to modernize the alternative trading system ("ATS") regulatory regime to accommodate crypto assets. Such modernization, he notes, could include the allowance of "super app(s)" that offer trading in securities and non-securities and other financial services under one platform. Beyond the ATS regime, Chair Atkins noted that he has instructed the staff to determine whether further guidance or rulemaking would be needed to allow for the listing and trading of crypto assets on national securities exchanges.
Chair Atkins encouraged market participants not to go offshore as the SEC develops a comprehensive regulatory framework for crypto assets. For new products and services that are currently incompatible with current SEC rules and regulations, Chair Atkins said that the SEC will explore "conditional exemptive relief" for registrants and non-registrants.
Conclusion
The SEC's regulation of crypto assets had shifted significantly from prior Chair Gensler's approach, even before Chair Atkins took office. As we have discussed in previous OnPoints, SEC staff under Acting Chair Mark Uyeda released a number of clarificatory statements relating to crypto assets, and the SEC's newly formed Crypto Task Force has undertaken a number of interactions with the crypto industry and the general public.
Since Chair Atkins' arrival, that regulatory shift has been even more pronounced. Following closely on Chair Atkins' observations, last week saw the release o f landmark guidance by the staff of the Division of Trading and Markets around broker-dealer custody of crypto assets, largely in the general direction that Chair Atkins outlined in his address.6 More regulatory guidance and other actions will undoubtedly follow in what promises to be a time of very supportive regulatory change for the U.S. crypto industry.
Footnotes
1. Paul S. Atkins, Keynote Address at the Crypto Task Force Roundtable on Tokenization, SEC (May 12, 2025).
2. SEC v. W.J. Howey Co., 328 U.S. 293 (1946). TheHoweytest examines the economic realities of a transaction and concludes that an investment contract (and therefore a security) exists where there is an investment in a common enterprise with a reasonable expectation of profits derived from the entrepreneurial or managerial efforts of others.
3. Offering and Registrations of Securities in the Crypto Asset Markets, SEC Division of Corporation Finance (Apr. 10, 2025) (see our Newsflash here); Staff Statement on Meme Coins, SEC Division of Corporation Finance (Feb. 27, 2025) (see our Newsflash here).
4. Staff Accounting Bulletin No. 122, SEC (Jan. 30, 2025); Staff Accounting Bulletin No. 121, SEC (Mar. 31, 2022).
5. Custody of Digital Asset Securities by Special Purpose Broker-Dealers, SEC (Dec. 23, 2020).
6 SEC Division of Trading and Markets and FINRA Office of General Counsel, Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities (July 8, 2019). See alsoSEC Division of Trading and Markets and FINRA Office of General Counsel, Withdrawal of Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities (May 15, 2025).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
