SEC Crypto Policy: Crucial Shift Towards Clear Rules Under Paul Atkins

Significant news is emerging from Washington D.a.C. regarding the future of SEC crypto policy. The U.S. Securities and Exchange Commission appears to be charting a new course under Chair Paul Atkins, promising a departure from previous approaches that drew heavy criticism from the digital asset industry.

A New Era for Crypto Regulation? Paul Atkins Speaks

Speaking before a Senate subcommittee on June 3, SEC Chair Paul Atkins outlined his intended strategy for handling digital assets. He stated unequivocally that the agency’s approach to crypto “will be done through notice and comment rulemaking, not through regulation by enforcement.” This statement signals a potentially transformative shift, moving away from setting precedents primarily through legal actions and settlements, a method often criticized during the tenure of former Chair Gary Gensler.

Atkins emphasized that the commission intends to use its existing authorities to establish “fit-for-purpose standards for market participants.” As a former crypto lobbyist, his priority is clear: creating a “rational regulatory framework for crypto assets.”

Understanding ‘Notice and Comment Rulemaking’ vs. ‘Regulation by Enforcement’

What’s the difference, and why does it matter for crypto regulation?

• Regulation by Enforcement: This involves the regulator bringing lawsuits against companies or individuals, effectively defining what is permissible or not through legal proceedings and their outcomes. Critics argue this lacks clarity and can be unpredictable for the broader market.
• Notice and Comment Rulemaking: This is a formal process where a government agency proposes a new rule, publishes it for public review (the “notice”), and allows interested parties (industry, public, experts) to submit feedback (the “comment”). The agency then considers this feedback before issuing a final rule. This process is generally seen as more transparent, predictable, and allows for industry input.

The commitment from Paul Atkins SEC suggests a move towards a more collaborative and transparent method for developing crypto rules.

Setting Clear Rules and Policing Bad Actors

Atkins articulated that the SEC’s enforcement efforts will return to their original purpose: policing violations of established obligations, particularly focusing on fraud and manipulation. He stressed the importance of establishing “clear rules of the road” for issuing, custodying, and trading crypto assets. This clarity is deemed necessary not only to guide legitimate actors but also to help investors identify scams that don’t comply with the law.

What About Crypto Exchanges and the Crypto Task Force?

During the hearing, Senator Chris Coons raised a question about whether Atkins would endorse crypto exchanges handling both traditional securities and digital tokens. Atkins did not provide a direct yes or no, instead referring to the agency’s Crypto Task Force. He stated this task force is actively working on regulations that are intended to “make sense for the industry and that allow for innovation.”

The Crypto Task Force was initiated in January under acting SEC chair Mark Uyeda to develop a workable framework for the agency. Atkins previously mentioned in May that the task force’s first report was expected in the coming months.

Changes Afoot: Disbanding FinHub and Shifting Focus

In addition to the regulatory approach, Atkins also revealed plans to disband the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub), established in 2018. Atkins believes innovation should be integrated throughout the SEC, rather than confined to a single office. The principles FinHub focused on are being incorporated into the broader operations of the agency.

Since the departure of the previous chair, the SEC has shown some signs of a different posture towards crypto, including dismissing certain long-standing SEC enforcement actions and releasing guidance on topics like crypto staking, indicating they may not violate securities laws under certain conditions.

Conclusion: A Promising Outlook for SEC Crypto Policy?

Paul Atkins’ statements before the Senate subcommittee offer a glimpse into a potential future where SEC crypto policy is shaped through transparent rulemaking rather than litigation. This pivot towards “notice and comment rulemaking” is a significant development that the crypto industry has long advocated for. While the specifics of future regulations remain to be seen, the stated intention to provide clear rules and foster a “rational regulatory framework” suggests a more predictable and potentially more collaborative environment for digital assets in the United States. The industry will be watching closely as the Crypto Task Force releases its findings and the SEC begins to implement this new approach.