SEC's New Leadership Eyes Pro-Innovation Cryptocurrency Policy

The Securities and Exchange Commission (SEC) is poised to take a historic step towards the regulation of cryptocurrency. Taken together, this shift suggests an earnest effort to prioritize and drive innovation within the digital asset space. In addition, newly appointed SEC Chairman Paul Atkins has been very vocal in opposing the regulatory direction taken during the Biden administration. He committed to addressing what he terms “long festering issues” related to digital assets and blockchain technology.

Atkins emphasized the need for clarity and a rational regulatory framework, stating that market participants "deserve clear regulatory rules of the road." This is a reversal from the last administration’s hardline enforcement policy. It provides opportunity to create a more cooperative and innovation-friendly ecosystem.

Commissioner Hester Peirce will spearhead efforts to establish a "rational fit-for-purpose framework for crypto assets." This initiative aims to modernize regulations that currently struggle to accommodate the unique characteristics of blockchain technology and digital assets.

Unfortunately, the current regulatory framework is largely tied to physical stock certificates. This has produced huge compliance burdens for the digital asset ecosystem. At the forefront was Susan Gault-Brown, who warned against using old regulations to govern new blockchain technology. Here’s what Adam Levitin had to say about the major point. He contended that peer-to-peer payments simply don’t belong under a regulatory framework designed for centralized exchanges.

"We’re trying to fit a technology designed to be a peer-to-peer payment system into a system for centralized trading, and it’s not a good match." - Adam Levitin

Industry leaders continue to call for a clear, streamlined regulatory framework. It is essential that this framework be primarily designed to address the unique needs of the developing cryptocurrency market. Brandon Russell, CEO of Etana Custody, echoed the call for a new framework. Larry Florio, general counsel of 1kx, echoed the need for a new framework. Mark Greenberg, vice president of Kraken, reacted positively to the regulatory framework, too.

In his testimony, Mark Greenberg asserted that a principles-based rule would make more sense than a technology-based rule, given the fast pace of technological change.

"Principles-based rule is probably better than a technology-based one (since) technology is changing quickly." - Mark Greenberg

Greenberg shared more about how custody is being understood as it relates to the digital asset arena.

"Keys should be held in systems, not by people, and that means that the old rule of ‘not my keys, not my crypto’ probably doesn’t apply anymore in that respect." - Mark Greenberg

Baylor Myers, the president of BitGo, called the warning shot. Without a clear set of regulations, Mr. Toomey warned that the United States will lose its competitive advantage on blockchain innovation.

"What was probably most shameful about the last four years was that we received approvals in multiple foreign jurisdictions, and we were essentially hamstrung in our hometown." - Baylor Myers

"It was really shameful and sad, and hopefully that’s about to change." - Baylor Myers

Russell emphasized the value of seeking foreign regulation as a North Star.

"If you’re going to look to foreign regulation as some kind of guiding light, that’s probably the biggest takeaway — there was clarification pretty early on that allowed those markets to evolve." - Brandon Russell

Industry leaders are emphasizing the importance of providing clear parameters. The purpose of these guidelines should be to protect investors and foster trust in the digital asset market.

"Innovation has been stifled for the last several years due to market and regulatory uncertainty that unfortunately the SEC has fostered." - Paul Atkins