On May 19, during a significant policy address at the SEC Speaks conference, U.S. Securities and Exchange Commission Chairman Paul Atkins decried the agency’s historic approach to the regulation of cryptocurrency as "reactive" and ineffective.
Atkins explained that the SEC started with an "ostrich policy" of ignoring the emergence of crypto, and then, when it engaged, utilized a harsh enforcement-first policy attitude, where engagement with the sector is about "accountability later," and is ultimately unintelligible and trust-eroding.
Atkins called for a new regulatory approach centered on transparency, dialogue, and agency adaptability.
“Old ways of doing things should not be immutable, especially if Congress has granted an agency discretion to make changes consistent with Congressional intent and in the public interest. While the SEC must be faithful to its statutes in any effort to be innovative, it should use its available authority and discretion to adapt to and accommodate new developments,” said Atkins.
While the SEC professes to be open to engagement with crypto projects, Atkins did acknowledge during the prior leadership, there was an atmosphere of unambiguity where staff were discouraged from engaging with industry participants around complex legal frameworks surrounding the crypto industry.
The SEC is currently working on formal cryptocurrency rule proposals in its policy divisions, however, much of the guidance currently available is still in the form of informal staff communications—FAQs from the Division of Trading and Markets.
Although these FAQ's are not legally binding, Atkins made clear they offered valuable guidance to the market participants. He also proposed that SEC registrants be permitted to custody and trade both securities and non-securities within a single regulatory framework.
As part of this initiative, Congress has been asked to approve the redistribution of resources and funding so that FinHub, the SEC's innovation arm, can be incorporated into all of the SEC's organizational activities.
The goal is to infuse innovation into everything that the SEC is doing, rather than relegating it to what Atkins called a small and under-resourced enforcement tool.