Full text of SEC Chairman: Launch Project Crypto to make the U.S. the "World Capital of Encryption".

Author: Paul S. Atkins (Chairman of the U.S. SEC)

Source: Visit Blockchain

Good afternoon, everyone. Thank you, Norm, for the warm introduction, and I also appreciate the invitation to be here with all of you. I feel very honored — especially at such a critical moment. I believe this could be an important turning point for the United States in terms of leadership in the cryptocurrency asset market. Before sharing some thoughts, I would like to especially thank the America First Policy Institute for facilitating this timely dialogue. At the same time, to avoid raising concerns from the compliance team, I must formally state: the views I express today represent my personal stance and do not reflect the official position of the U.S. Securities and Exchange Commission (SEC) or any other commissioners.

Today, I want to talk about a plan I proposed together with SEC Commissioner Hester Peirce — "Project Crypto". This plan will serve as a strategic guide for the SEC to assist President Trump in advancing the policy direction of making the United States the "global crypto capital". Before introducing our plans for the dominance of the crypto market, I would like to briefly review several key turning points in the development of the U.S. financial markets. These moments bear similarities to the current environment. Understanding these nodes will help us ensure that the future direction does not deviate from the foundation we have inherited.

The Evolution of Capital Markets: From the Wutong Tree Agreement to the Blockchain Era

The wave of innovation has always run through the development of the U.S. capital markets, often like a fierce wind. In 1792, this "wind" stirred the branches and leaves under the sycamore tree. It was under this shade that more than twenty stockbrokers gathered and signed a brief agreement, becoming the prototype of the New York Stock Exchange. This agreement, which was less than a hundred words and handwritten on parchment, initiated a timeless system design that influenced the flow of capital for generations to come.

For several centuries thereafter, capital markets have never stagnated. They continuously expand, evolve, and innovate themselves alongside the ideas and technologies of the times. The vibrancy of the market comes from the people involved in it. The market guides the wisdom of these individuals to focus on society's most challenging problems through incentive mechanisms; anyone who can propose innovative solutions and gain recognition and transactions from others will be rewarded. It is through this mechanism that Adam Smith's "invisible hand" is able to function — even if individuals are merely pursuing their own interests, the market will drive them to enhance the public good.

The responsibility of the U.S. Securities and Exchange Commission (SEC) is to maintain a market environment that allows human creativity and professional capabilities to continuously bring value to society. Throughout its development, the SEC has played an active role in supporting innovation, but it has also suppressed innovation at certain times. Fortunately, progress often overcomes resistance. When our regulatory stance approaches technological change with caution rather than fear, America's leading position in the global market is continuously strengthened.

In the 1960s — I am very grateful that I had not yet entered the industry at that time — Wall Street was in the midst of a bull market. But behind the glamorous facade, the basic operating system of the market was under tremendous pressure. The clearing and settlement processes at that time were cumbersome and costly, and most transactions still relied on paper stock certificates. Piles of physical stock certificates were stacked high and had to be transported back and forth on Wall Street and in major financial districts across the United States by employees pushing carts. This was a scene from the last century, struggling to cope with the modernization demands of the securities market at that time.

In fact, the paper-based settlement and clearing system designed for relatively stable years has become overwhelmed in the face of increasing trading volumes. A delay from one institution can disrupt the entire process of another institution; instances of securities being lost or stolen occur frequently; and the number of failed trades has surged. Some brokers with limited funds have found themselves in difficulty due to the impact of canceled trades. To alleviate the chaos, the market has had to shorten trading hours, and exchanges even suspend trading every Wednesday to allow institutions to deal with the backlog of paper certificates.

The then-chairman of the SEC described the chaos caused by the aging system as: "the most enduring and severe crisis in the securities industry in forty years... many companies went bankrupt, and investor confidence plummeted." It is commendable that the SEC took proactive measures in response to this so-called "paperwork crisis." The regulatory agency facilitated the creation of the Depository Trust & Clearing Corporation (DTCC) by various market participants, fundamentally transforming the way securities are held and traded. Securities ownership no longer relies on the physical transfer of paper certificates among clients and brokers but is completed through bookkeeping on a computer ledger. After physical certificates were "stabilized," they were centrally stored in secure vaults, while ownership flowed electronically, thus laying the foundation for the modern clearing and settlement system, which continues to this day.

As demonstrated by this ticker tape machine, it was a significant breakthrough of its time, fundamentally changing the way the American public accessed market information—printing each transaction record line by line. However, technological breakthroughs should not be confined to past history. By the late 1990s, electronic trading systems rapidly became widespread, breaking many assumptions of traditional market mechanisms. Then-Chairman Arthur Levitt believed that the SEC had a responsibility to provide appropriate regulatory flexibility for innovations in electronic markets. Therefore, in 1999, the SEC introduced Regulation Alternative Trading Systems (Reg ATS), allowing ATS (Alternative Trading Systems) to be regulated by broker-dealer standards rather than the previous exchange model.

Speaking of this, we return to the present — a moment calling for America to once again demonstrate its spirit of initiative; a project with the potential to unleash this power. Our regulatory framework should no longer be anchored in that outdated analog era that does not adapt to new frontiers. After all, the future is arriving at full speed, and the world will not wait. In the face of the transformative wave of digital assets, America cannot merely passively keep up with the pace, but should become a driving force behind this revolution.

Forging the Future: America's Leadership in the Financial Gold Era

Therefore, today I want to officially announce to the world that under my leadership, the SEC will not stand by and allow innovation to continue to flourish overseas while our capital markets stagnate. To realize President Trump's vision of "making America the global crypto capital," the SEC must comprehensively assess the potential opportunities and risks of transitioning the market from off-chain systems to on-chain systems.

We are standing at a new threshold in the history of the capital markets. As I mentioned before, today I officially announce the launch of "Project Crypto" — a strategic initiative covering the entire SEC, aimed at modernizing securities regulations and laying the institutional groundwork for the American financial market to enter the on-chain era.

Just a few weeks ago, President Trump signed the GENIUS Act, establishing a regulatory framework for stablecoins based on the "gold standard" in the United States, ensuring that the U.S. continues to maintain its leading position in the global payments arena. At the time of the signing of this act, I was also pleased to see President Trump supporting Congress's efforts to pass legislation on cryptocurrency market structure by the end of the year. I appreciate the strong bipartisan support the House has garnered on this issue and look forward to closely collaborating with the Senate to create structural legislation that will help the long-term healthy development of the cryptocurrency market, based on the achievements already made by the House. This will help prevent regulatory arbitrage, enhance the forward-looking nature of the system, and further consolidate the U.S. position as the "global crypto capital."

Just yesterday, the President's Digital Asset Market Working Group released the "PWG Report", which made clear recommendations to the SEC and other federal agencies, calling for the establishment of a regulatory framework to maintain the United States' leading position in the cryptocurrency market. The report is seen as a blueprint for making the U.S. a leader in the field of blockchain and cryptocurrency technology. Last week, President Trump stated that he hopes "the whole world runs on the backbone of American technology." I am also ready to do my utmost to promote the realization of this goal.

For this reason, I formally announce the launch of the "Crypto Project" and instruct the SEC's various policy divisions to collaborate with the cryptocurrency special working group led by Commissioner Hester Peirce to quickly formulate and implement specific plans based on the recommendations of the "PWG Report." The "Crypto Project" will help ensure that the United States continues to be the best country in the world for starting businesses, developing cutting-edge technologies, and participating in capital markets. We will bring back those cryptocurrency companies that were forced to relocate, especially those that were severely impacted by the previous administration's regulatory actions of "enforcement over rules" and "Operation Chokepoint 2.0." Whether existing institutions in the industry or emerging participants just entering the market, the SEC welcomes all market players who want to drive innovation.

According to the relevant recommendations of the PWG report, I have instructed the committee staff to draft a clear and concise set of regulatory rules regarding the issuance, custody, and trading of crypto assets, and to release a public consultation. As the committee staff advances the final rule-making process, over the next few months, the committee and its staff will also consider utilizing interpretive, exemptive, and other regulatory authorities to ensure that outdated rules do not stifle innovation and entrepreneurial vitality in the United States. Many of the committee's existing traditional rules are no longer applicable in the 21st-century market environment, let alone in the context of on-chain markets. The committee must undertake a comprehensive revision of its regulatory framework to prevent regulatory barriers from hindering progress and competition, whether from emerging market participants or established institutions; ultimately, it is ordinary investors who will be harmed.

The cryptocurrency industry returns to the United States: A new era for the SEC

The "Project Crypto" will cover a series of key initiatives within the scope of the committee:

First, we will focus on promoting the issuance of crypto assets back to the United States. The past complicated offshore company structures, "decentralized performances," and the ambiguous treatment of securities attributes will become history. As President Trump said, America is in a "golden age" — under our new policy agenda, the crypto asset economy will also enter its own golden age.

According to the direction of the "PWG Report", one of my top priorities is to establish a regulatory framework for cryptocurrency asset issuance in the United States as soon as possible. Capital formation has always been one of the core missions of the SEC; however, for a long time, the SEC has ignored the market's demand for choice and instead suppressed financing activities based on cryptographic technology. As a result, the cryptocurrency market has gradually moved away from asset issuance, and investors have lost the opportunity to participate in the construction of the real economy through this new technology. The SEC's past attitude of "turning a blind eye" and its regulatory approach of "shoot first, ask questions later" should become history.

Despite the SEC's differing statements in the past, in fact, most crypto assets do not fall under the category of securities. However, due to confusion over the applicability standards of the "Howey Test", some innovators have had to treat all crypto assets as securities to avoid risks. Meanwhile, entrepreneurs in the United States are leveraging blockchain technology to modernize various traditional systems and tools. For example, Bernie Moreno, a senator from Ohio, is one of them—he is both a successful entrepreneur and a newly elected federal senator. Before being elected, he founded a company dedicated to putting automotive ownership on the blockchain. He recognized the efficiency bottlenecks in the transfer of ownership and proposed practical solutions using on-chain technology. These entrepreneurs deserve a clear and enforceable set of standards to determine whether securities laws apply to their businesses. They not only need such rules, but they also deserve them.

I have instructed the committee staff to develop a clear set of guidelines for market participants to determine whether a particular crypto asset qualifies as a security or constitutes an investment contract. Our goal is to assist market participants in reasonably classifying crypto assets based on the economic substance of the transaction, such as digital collectibles, digital goods, or stablecoins, and to assess their attributes accordingly. This approach will enable market participants to determine based on clear standards whether the issuer has made any substantial commitments, thus making the crypto asset an investment contract.

In addition, being classified as a "security" should not be viewed as a negative label for a project. We need to establish a regulatory framework suitable for crypto asset securities, allowing such products to thrive in the U.S. market. Many issuers may prefer to leverage the design flexibility provided by securities laws; investors can benefit from profit distribution, voting rights, and other rights typically associated with securities. Projects should not be forced to establish decentralized autonomous organizations (DAOs), offshore foundations, or be compelled to become "decentralized" before they are ready. I am also looking forward to new application scenarios for crypto asset securities in the business field, such as participating in blockchain network consensus mechanisms through tokenized stocks.

Therefore, for those cryptocurrency transactions regulated by securities laws, I have asked the staff to propose more targeted disclosure requirements, exemption mechanisms, and safe harbor provisions, covering common transaction forms such as "Initial Coin Offerings" (ICOs), "airdrops", and network rewards. In such transactions, our goal should be to ensure that issuers do not exclude U.S. users due to legal complexities and litigation risks, but rather choose to include the U.S. market in their offerings due to clear legal protections and an inclusive regulatory environment. In my view, as long as we adhere to this direction, innovation in the cryptocurrency sector may usher in a "Cambrian explosion".

In addition, many companies wish to "tokenize" their common stock, bonds, partnership interests, and other securities, or securities issued by third parties. Currently, most of these innovative activities are happening overseas due to regulatory hurdles faced within the United States. Our policy team has also reported that both well-known financial institutions on Wall Street and unicorn tech companies in Silicon Valley are gradually submitting "tokenization" related applications to the SEC. I have asked the committee staff to collaborate with companies interested in issuing tokenized securities within the United States and to provide regulatory exemptions where appropriate, to ensure that the American public is not excluded from this innovative transformation.

Enhance freedom: Give the choice to custodians and trading venues

Secondly, to achieve the President's policy goals, the SEC has a responsibility to ensure that market participants have the greatest degree of autonomy when choosing the custody and trading methods for crypto assets. As I have emphasized before, the right to own and safeguard personal property is one of the core values of the United States. I strongly support individuals holding crypto assets through self-custody digital wallets and participating in on-chain activities such as staking. However, some investors will still choose to rely on SEC-registered entities (such as broker-dealers and investment advisors) to custody their assets, and these entities will be subject to stricter regulatory requirements when providing related services. During my tenure as chair, I will prioritize the implementation of the recommendations in the PWG report regarding "Modernizing SEC Custody Regulatory Requirements," particularly concerning registered intermediary firms.

The framework of "Special Purpose Broker-Dealers" implemented by the previous government, along with Accounting Bulletin No. 121 (SAB 121) and "Operation Lockdown 2.0", has led to a severe shortage of available cryptocurrency custody service providers in the current market. The existing custody rules did not take into account the characteristics of cryptocurrency assets when they were formulated. I have instructed the committee staff to explore ways to optimize the existing regulatory framework to better support the custody arrangements for cryptocurrency assets, which includes possible exemption mechanisms or other flexibility arrangements, and of course, the possibility of revising the existing rules themselves.

As suggested in the "PWG Report", market participants "should be allowed to engage in multiple businesses under the most efficient licensing structure." We should not regulate just for the sake of regulation, forcing the market into an outdated "Procrustean bed" to make it fit. I support granting market participants the freedom to choose the regulatory path that best suits their business, provided that this path offers sufficient protection for investors.

Developing Super Apps: Horizontal Integration of Product Integration Features

Thirdly, one of my key focuses during my tenure as chairman is to support market participants in innovating around the "super application" model. People often ask me, "What do you mean by super application?" The answer is quite simple: securities intermediaries should be able to provide a variety of products and services in a one-stop manner under the same licensing framework. For example, a brokerage firm with alternative trading system (ATS) qualifications should be able to offer trading services for non-securities crypto assets, crypto asset securities, and traditional securities on its platform simultaneously, as well as engage in other businesses including crypto asset staking and lending, without having to apply for different licenses in all fifty states or hold multiple redundant licenses at the federal level.

The current federal securities laws do not prohibit the listing of non-securities assets on SEC-registered trading platforms. In this regard, I have instructed the committee staff to further study and propose relevant guidelines and rule proposals to ultimately promote the realization of the "super application" vision. Perhaps we can also refer to this system as "Reg Super-App."

In line with the stance of the PWG report, the SEC should collaborate with other regulatory agencies to establish the most efficient licensing structure for SEC-registered entities. Market participants should not be unnecessarily constrained by multiple regulatory bodies or overlapping regulatory systems. This model has been widely applied in the banking industry and has achieved good results. Banks are often exempt from multiple duplicate regulatory requirements, such as the registration obligations for broker-dealers and clearing agencies. Regulators should provide a "minimum effective dose" of regulatory arrangements — safeguarding investor rights while allowing space for businesses and entrepreneurs to develop. We should not stifle industry vitality with "parental" overregulation, nor should we push businesses overseas or weaken the competitiveness of U.S. companies in international markets. Our regulatory system should unleash competitive forces for on-site platforms and product innovation, benefiting all Americans. We should not artificially restrict business models, nor should we impose duplicate regulatory costs on U.S. companies, thus giving larger institutions that can better bear compliance costs an unreasonable advantage.

According to the recommendations in the "PWG Report," I have instructed the committee staff to develop a regulatory framework that allows non-securities crypto assets and crypto asset securities to be traded on SEC-regulated platforms in parallel. Additionally, I have asked the staff to assess whether, under existing authority, non-securities crypto assets subject to investment contracts can be traded on platforms not registered with the SEC. I place a high importance on advancing this direction, as it will not only enable crypto asset platforms that are not registered with the SEC but are state-licensed to launch specific assets, but it will also provide a pathway for platforms regulated by the Commodity Futures Trading Commission (CFTC) to engage in such product trading, including the ability to conduct margin trading— even if Congress has not granted the CFTC additional authority, this arrangement is still expected to unlock greater market liquidity.

Unlocking the Potential of the U.S. Market: Building a Grand and Excellent On-Chain Software System

Fourth, I have instructed the committee staff to update outdated rules and regulations within the organization to unleash the potential of on-chain software systems in the securities market. On-chain software comes in various forms—some systems achieve true decentralization and are not operated by any intermediaries; others are maintained by specific operators. Regardless of the type of on-chain software system, they should have a place in our financial markets.

A qualified market structure for crypto assets must provide a compliance path for developers of on-chain software systems that do not require centralized intermediaries to operate. Decentralized finance (DeFi) software systems, such as automated market makers (AMM), can facilitate automated and disintermediated financial market activities. Since its inception, federal securities law has assumed that financial activities require the involvement of intermediary institutions and are subject to regulation. However, this does not mean that in scenarios where the market can operate autonomously, we should artificially introduce intermediaries merely to impose an intermediary structure.

We will leave room for both types of models in the securities market: on one hand, to protect developers who purely publish software code; on the other hand, to reasonably distinguish between intermediary and non-intermediary financial activities, and to formulate rational and feasible regulatory rules for intermediary institutions that wish to operate on-chain software systems. Decentralized finance and other forms of on-chain software systems will become part of our securities market, rather than being stifled by redundant or unnecessary regulation.

To achieve the vision outlined above, we need to consider making adjustments to some existing rules. For instance, supporting tokenized securities trading on-chain may mean we must explore revisions to the National Market System Regulation (Reg NMS), going beyond the improvements we make in our daily oversight to correct the market distortions it has caused. Many may recall that twenty years ago, I co-authored a lengthy dissenting opinion on Reg NMS with Commissioner Cynthia Glassman. Today, the reasons for our opposition are even more compelling, given the market distortions and hindrances to innovation caused by two decades of overly rigid regulatory requirements. The legislative intent of Congress is also very clear: the development of the national securities market system should be guided by "market forces, not unnecessary regulation." I will work to find pathways to bring our regulatory system back to this original intent, thereby promoting innovation and competition in the market.

Promoting Innovation: Guiding Principles Based on Commercial Viability

Ultimately, innovation and entrepreneurship have always been the core driving forces of the American economy. President Trump once referred to America as a "nation of builders." During my tenure as chairman, the SEC will encourage the development of this community rather than restrict it with cumbersome administrative processes or "one-size-fits-all" regulatory rules. Currently, the Commission is actively reviewing various proposals put forth by the industry to stimulate innovative vitality. At the same time, we are also exploring the establishment of an "innovation exemption" mechanism, allowing both registered and unregistered entities to rapidly enter the market when facing new business models or services that cannot fully comply with existing rules. While encouraging innovation, the SEC will also ensure that all market participants under such exemption arrangements must still adhere to the basic conditions and requirements aimed at achieving the policy objectives of federal securities laws.

Under my vision of the "Innovation Exemption" mechanism, innovators and forward-thinking practitioners will be able to bring new technologies and business models to market immediately, without having to comply with complex regulatory requirements that are incompatible or obstructive to economic activities. Accordingly, they will adhere to a set of principle-based fundamental conditions aimed at achieving the core policy objectives of federal securities laws. For example, these conditions may include: a commitment to report regularly to the SEC, integration of whitelist or "verification pool" features, and restrictions on the entry of tokenized securities that do not meet compliance token standards (such as ERC 3643) into the market. I encourage market participants to always focus on the commercial viability when working with SEC staff in designing various models.

Conclusion

In advancing the above priorities, I look forward to working closely with colleagues from various government departments to jointly promote the United States as the global capital of crypto assets. This is not only a regulatory transformation but also a historic opportunity of an era. From the parchment agreements under the phoenix trees to the distributed ledger on the chain, the winds of innovation continue to blow — and our mission is to keep this wind propelling the United States' leading position forward. Distinguished guests, America has never been content to follow. We will not stand idly by. We will lead the way, we will continue to build, and we will ensure that the next chapter of financial innovation is written right here on American soil.

Thank you very much for listening today. We welcome you to continue following our upcoming announcements and proposals, and we look forward to your insightful opinions and suggestions as always.