The SEC Chairman Speaks on Tokenization and Encryption Asset Regulation

At the recent tokenization roundtable, the SEC Chairman delivered an important speech on the trend of securities migrating to blockchain systems. He compared this shift to the evolution of audio from analog to digital formats, believing that it could fundamentally change every aspect of the securities market.

The chairman pointed out that on-chain securities can bring new ways of issuing, trading, holding, and using. For example, smart contracts can achieve automated and transparent dividend distribution. Tokenization can also improve the liquidity of certain assets and promote capital formation. These innovations may lead to new market activities that traditional rules have not yet considered.

In order for the United States to become a leader in the encryption field, the SEC must keep up with the times and consider adjusting regulations to accommodate on-chain securities and crypto assets. The chairman emphasized that rules designed for traditional securities may not apply to on-chain assets and could even hinder the development of blockchain technology.

The chairman stated that the SEC will no longer rely on temporary enforcement actions, but will instead use its existing powers to establish practical standards for market participants. Enforcement will focus on combating actions that violate these defined obligations, particularly fraud and manipulation.

He also mentioned that the SEC has established a special working group on cryptocurrency to coordinate departments in formulating policies together. The chairman focuses on three areas: issuance, custody, and trading.

In terms of issuance, the chairman promised to establish clear and reasonable guidelines for the issuance of encryption assets. He criticized the SEC's past "ostrich mentality" and "shoot first, ask questions later" enforcement strategy, believing that these practices are detrimental to innovation. He stated that he would promote the SEC to develop new guidelines, considering additional guidance, exemptions, and safe harbors to pave the way for the issuance of encryption assets.

Regarding custody, the chairman supports giving registrants more autonomy. He mentioned that SEC staff recently withdrew a statement, clearing obstacles for encryption asset custody services. He believes it is necessary to clarify which custodians meet the legal qualifications and to consider allowing self-custody in certain cases.

In terms of trading, the chairman supports allowing registrants to offer a wider variety of products and services on their platform. He mentioned that some brokers are trying to launch "super apps" that provide integrated trading of securities, non-securities, and other financial services. The chairman has requested staff to explore how to design a modernized regulatory system to better accommodate encryption assets.

The chairman finally stated that he hopes to coordinate with the government and congressional colleagues to strive to make the United States the best participant in the global encryption asset market.