Author: Liu Honglin, Shao Jiayi
In the past two years, if you say that the US SEC has a good relationship with the crypto industry, it is basically like saying that Tiger is a Buddhist and loves to eat vegetarian food. Most of the time, the SEC's attitude is either "Don't do it first" or "If you dare to do it, I dare to sue." But now the picture seems to have changed a bit.
On May 12, Paul S. Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC), gave a highly content-intensive speech at the Crypto Asset Roundtable. At first glance, it was an industry exchange, but in fact it was a systematic reflection on the SEC's crypto regulatory model over the past few years. More importantly, he spent nearly an hour re-explaining the regulatory logic of "on-chain securities."
If I were to summarize the tone of his speech in one sentence, it would be: rules should be clearly written, and people should not be scared by law enforcement.
This is the first time in recent years that the SEC has explicitly proposed to establish a "specialized regulatory framework" for the issuance, custody and trading of crypto assets, and acknowledged that the current rules do not apply to on-chain assets. This is a signal that cannot be ignored for the entire Web3 industry.
Issuance: It’s not “not allowed to issue”, it’s “you can’t fill out this form”
In recent years, the SEC’s strategy for token issuance has been to “default illegal” but not provide a legal path. Most projects that dare to touch American investors must be prepared to respond to lawsuits. Even if you want to comply with regulations and take the S-1 or Reg A registration path, you are often stuck because the form itself is not applicable.
S-1 is a standard registration document that US companies fill out when they go public, requiring detailed disclosure of executive compensation, fund use, corporate governance structure, etc.; Reg A (Regulation A) is a lightweight registration exemption mechanism designed for small and medium-sized issuers. However, for most Web3 projects, these two sets of tools are too cumbersome or even unsuitable. For example, Token projects do not have a traditional corporate structure, and the use of funds is often automatically executed on the chain, and many core contents cannot be "pre-written".
Chairman Atkins was very straightforward this time: the current disclosure requirements for securities issuance should not be forced on on-chain assets. "Square pegs should not be forced into round holes," he said directly in his speech. He proposed to promote registration exemptions, disclosure templates and safe harbor clauses specifically applicable to crypto assets to explore a more realistic regulatory path.
He also pointed out the SEC's past "ostrich-like management": at first, it pretended not to see it, hoping that the industry would die on its own, and then it plunged into law enforcement, using individual cases to create deterrence, but never established unified rules. Now he made it clear - the rules must be passed by the committee, and no longer rely on "improvisational law enforcement."
Trusteeship: Technology is not the problem, the problem is the system that blocks the technology
The custody issue of crypto assets in recent years is actually the question of "who will take care of it". Traditional financial institutions were scared off by SAB 121, and self-custody has no legal status. As a result, many funds and institutions that want to participate in on-chain asset allocation are stuck in the custody link.
SAB 121 is an accounting announcement issued by SEC staff in 2022, requiring companies to include the client crypto assets they hold in custody in their balance sheets, resulting in a sharp increase in regulatory risks. Its original intention was to protect user assets, but the actual effect was to make most banks and securities firms withdraw from the crypto custody market.
Now that SAB 121 has been revoked, the chairman has also made it clear that the document is "illegal, unapproved, and has a bad impact." But more importantly, he began to discuss how to revise it next.
He pointed out: As long as the security is sufficient, technical capabilities can replace traditional custody qualifications. Under certain conditions, self-custody can also be a compliance option. This actually opens up the possibility of compliance for DeFi platforms, wallet manufacturers, and even on-chain asset management projects.
In addition, he also criticized the failure of the design of the "Special Purpose Broker-Dealer" system, which only approved two companies and had poor results. He hinted that this mechanism needs to be restructured, that is, the compliance path of custody and trading in the future may be reorganized and the threshold lowered.
Trading: From "trading is against the law" to "limited exemption pilot"
The SEC has long maintained a strong regulatory stance on on-chain asset transactions, especially on the issue of "whether it is a security", which has led most token projects into a vicious cycle of "not landing, not complying with regulations, and not daring to go online".
In this speech, Chairman Atkins' statement was clear in his relaxation of restrictions. He proposed that the ATS (Alternative Trading Systems) platform should support mixed trading of securities and non-securities.
ATS is a classification of securities trading platforms under the US regulatory system, which can be understood as "unlisted exchanges". Many digital asset platforms have tried to register as ATS to provide compliant trading capabilities. However, the current ATS system does not provide a clear definition for crypto assets, which has deterred most platforms.
The chairman also emphasized the necessity of the "exemption mechanism". That is to say, if a project cannot meet all compliance requirements temporarily due to technological innovation or special structure, the SEC may provide testing space under certain conditions. This is not laissez-faire, but a conditional, supervised, trial-and-error compliance channel.
Industry impact: Regulatory boundaries are no longer a matter of guesswork, and compliance space is beginning to emerge
The greatest significance of this speech is that it is not a case law explanation of a certain project, nor is it the personal opinion of a certain committee member. Instead, it is the first time that the SEC Chairman, under the authorization of the committee, has fully expressed the logic that crypto asset regulation should follow.
The policy background behind this is also very clear: the Trump administration hopes that the United States will become the "global crypto capital", and the SEC, as a core financial regulatory agency, can no longer pretend that crypto assets are a marginal business.
In the next few years, on-chain securities, stablecoins, RWA, and token payment platforms may become pilot windows under the SEC's new rules. Entrepreneurs and project owners must also switch from the original "circumventing regulation" mode to the "design-inherent compliance" state.
Advice from a Web3 lawyer: It’s not “you can do it”, but “do it according to the law”
From a practical perspective, we would recommend:
First, pay attention to the structural adjustments of issuance paths such as S-1 and Reg A. If the SEC promotes crypto-specific disclosure rules, project owners can reasonably choose registration exemptions instead of having to circumvent them by issuing coins outside the United States every time.
Second, pay attention to the preparation of custody compliance. Whether it is an on-chain wallet, a self-custody system, or relying on a third-party service provider, it is necessary to evaluate its compliance boundaries under the new rules as soon as possible.
Third, pay attention to the policy adjustments of ATS and related trading platforms. If you are working on an exchange or a matching product project, now may be the window period for re-designing the structure.
Fourth, carefully evaluate whether the project is suitable for the "conditional exemption" mechanism. Some early projects may not be suitable for full registration, but they can obtain a landing path through rule exemptions. This is a compliance route, not a gray channel.
This speech is not an announcement that the crypto industry "can be done", but rather provides a way to do it that can be discussed.
