Full Text of SEC Chairman's "Encryption Plan" Speech: Financial Markets Fully On-Chain, Building a Global Encryption Capital

Speaker: Paul S. Atkins, Chairman of the U.S. SEC

Compiled by: Alex Liu, Foresight News

America's leadership position in the digital financial revolution

Good afternoon, everyone. Thank you Norm for your warm introduction, and I also appreciate your invitation to attend. I am very pleased to gather with all of you, especially at this critical moment when I believe the United States is demonstrating leadership in the cryptocurrency asset market. Before sharing some thoughts, I would like to thank the America First Policy Institute for convening this timely discussion. Additionally, to reassure the compliance team, I must state that the views I express today are solely my own and do not necessarily represent the position of the SEC or other commissioners.

Today, I want to talk about what Commissioner Hester Peirce and I refer to as the "Project Crypto," which will serve as the North Star for the SEC in assisting President Trump in his historic effort to make the United States the "global crypto capital." But before discussing our plans regarding the dominance of the crypto market, I would like to revisit some pivotal moments in the history of capital market development, as they are quite similar to the juncture we find ourselves in now, and the future we shape should be worthy of the legacy we inherit.

From Wutong Tree to Blockchain: The Evolution of Capital Markets

The wind of innovation has always swept through our capital markets, sometimes even sweeping through like a hurricane. In 1792, it rustled the leaves of a sycamore tree—under its shade, more than twenty stockbrokers gathered, signed an agreement, and established the predecessor of the New York Stock Exchange. That hand-written agreement on parchment, consisting of less than a hundred words, opened the door to an elegant system that has dominated the order of capital flow for generations.

For centuries, our markets have never stagnated. They expand, evolve, and reshape with contemporary ideas and technologies. The vibrancy of the market is due to human participation. Markets guide human creativity towards the most challenging social problems and reward those who develop the most valuable and popular solutions through incentive mechanisms. This is precisely the operation of what Adam Smith called the "invisible hand": even when individuals pursue their own interests, the market can direct them towards serving the public good.

The role of the SEC is to protect a market that allows human creativity and skills to benefit society. Throughout its history, the SEC has both fostered innovation and, regrettably, stifled it. Fortunately, the force of progress will ultimately prevail. When our regulatory stance can embrace innovation with prudence rather than fear, America's leadership will always rise to new heights.

The 1960s - a time when I had not yet participated - Wall Street was in a bull market, but the behind-the-scenes market operations were frequently strained. Most clearing and settlement operations still relied on expensive and cumbersome processes. Paper stock certificates piled up and had to be transported by staff using carts, shuttling back and forth between Wall Street and financial centers across the United States.

This paper-based clearing and settlement system was designed for a more gentle era and clearly struggles to handle the rapidly growing transaction volume. Delays in processing by a single company can drag down the entire chain; cases of lost or stolen securities frequently occur; transaction failures have risen significantly; some weaker capital brokers even face bankruptcy due to trading interruptions. In desperation, trading hours have been shortened, and exchanges even close on Wednesdays just to give companies time to handle the mountain of paper certificates.

The then-chairman of the SEC described this systemic collapse as "the most serious and prolonged crisis in the securities industry in 40 years... corporate bankruptcies and a sudden drop in investor confidence." It is worth noting that the SEC actively responded at that time, promoting market participants to establish what we now know as the U.S. Depository Trust & Clearing Corporation (DTCC), which completely changed the way securities are held and traded.

Since then, there is no longer a need for physical certificates to circulate between clients and brokers, or between brokers. Securities ownership began to be recorded using an electronic ledger. The certificates themselves were "frozen" and securely stored in a vault, while ownership was transferred through computer systems, laying the foundation for today's clearing and settlement systems.

Like this ticker tape machine beside me, it was a breakthrough in the dissemination of market information at the time, allowing Americans to receive trading information line by line in real time. But innovation should not just be about past glories.

By the late 1990s, electronic trading systems were all the rage, shaking many of the assumptions underlying traditional market structures. At that time, SEC Chairman Arthur Levitt also believed that the SEC had a responsibility to provide regulatory flexibility for innovations in electronic markets. Thus, the Alternative Trading System Rule (Reg ATS) was introduced in 1999, allowing these systems to be regulated as broker-dealers rather than traditional exchanges.

This brings us to today—a moment that requires American ambition, a project that can unleash that ambition.

Our regulatory framework should not be fixed in the simulation era, refusing to explore new frontiers. After all, the future is accelerating, and the world will not wait for us. The United States cannot just catch up with the pace of the digital asset revolution; we must lead it.

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

Today, I want to declare to the world that under my leadership, the SEC will not stand by and watch innovation thrive overseas while our own capital markets stagnate. To realize President Trump's vision of making the United States the global capital of cryptocurrency, the SEC must consider the potential benefits and risks of moving our markets from off-chain to on-chain as a whole.

We are standing at a new threshold in the history of the capital market. As I mentioned earlier, today I officially announce the launch of the "Crypto Initiative", a program that covers the entire SEC, aimed at modernizing securities regulations to enable a full migration of the U.S. financial markets to the blockchain.

Just a few weeks ago, President Trump signed the GENIUS Act, establishing a gold regulatory standard for stablecoins in the global payments field. After the signing, he publicly supported Congress in passing legislation on crypto market structure within the year. I appreciate the bipartisan support shown by the House of Representatives in this process and look forward to the Senate further refining the relevant laws on this basis, establishing a institutional structure to resist regulatory abuse and solidifying the United States' dominant position in the global crypto industry.

Yesterday, the President's Digital Asset Market Working Group released the "PWG Report", providing clear recommendations for the SEC and other federal agencies, aimed at establishing a framework to maintain the United States' leadership in the crypto asset market. This report serves as a blueprint intended to ensure that the U.S. remains at the forefront of blockchain and cryptocurrency technology. As the President mentioned last week, he hopes that "the entire world operates on the infrastructure of American technology." I am ready to help achieve this goal.

Therefore, I launched the cryptocurrency initiative and instructed the SEC's policy department to closely collaborate with the cryptocurrency working group led by Commissioner Peirce to swiftly formulate a plan to implement the recommendations of the PWG report. The cryptocurrency initiative will ensure that the United States continues to be the best country in the world for entrepreneurship, developing cutting-edge technology, and participating in capital markets. We will bring back the cryptocurrency companies that fled the U.S. due to the previous administration's "enforcement over regulation" policy and "Operation Chokepoint 2.0". Whether established companies or newcomers, the SEC welcomes market participants eager to innovate.

Bringing Crypto Assets Back to the U.S.: A New Era for the SEC

The crypto plan will cover a series of initiatives within the SEC.

First, we will commit to bringing the issuance of crypto assets back to the United States. Those complex offshore company structures, pseudo-decentralized performances, and the confusion over whether crypto assets are securities will become a thing of the past. President Trump has indicated that America is in its "Golden Age"—and under our new agenda, the crypto asset economy will also enter a Golden Age.

According to the recommendations 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 is at the core of the SEC's mission, but for a long time, the SEC has ignored the market's demand for choices and has suppressed crypto-based financing models. This has led the crypto market to gradually move away from asset issuance, depriving American investors of the opportunity to participate in productive economic activities through this technology. The SEC's long-standing avoidance of cryptocurrency assets, with a "shoot first and ask questions later" approach, should become a thing of the past.

Despite the SEC's past stance of viewing most crypto assets as securities, in reality, most crypto assets are not securities. However, due to the ambiguous applicability of the "Howey Test," some innovators treat all crypto assets as securities just to be safe. Entrepreneurs in the United States are leveraging blockchain technology to modernize various traditional systems and tools. For example, current U.S. Senator from Ohio and former entrepreneur Bernie Moreno founded a company before his campaign that puts automobile titles on the blockchain. He recognized the efficiency issues in property transfer and proposed practical solutions using blockchain technology.

These entrepreneurs need, and should have, a clear set of criteria to help them determine whether their business is subject to securities laws. I have instructed the committee staff to develop clear guidelines to assist market participants in determining whether a crypto asset qualifies as a security or constitutes an investment contract. Our goal is to help them classify crypto assets based on these clear criteria, such as digital collectibles, digital goods, or stablecoins, and assess the economic substance of their transactions. Through these classifications, market participants can determine whether the issuer has ongoing commitments or obligations, thereby assessing whether the asset constitutes an investment contract.

Moreover, being classified as securities should not be the original sin of development. We need a regulatory framework that adapts to crypto securities, allowing these products to thrive in the U.S. market. Many issuers will tend to leverage the product design flexibility offered by securities laws, and investors will benefit from attributes of securities such as dividends and voting rights. Project teams should not be forced to establish DAOs, create offshore foundations, or decentralize too early in non-ideal stages. I am excited about the new applications of crypto securities in business, such as participating in blockchain consensus mechanisms through tokenized stocks.

Therefore, for those cryptocurrency transactions that indeed fall under the scope of securities laws, I have asked the staff to propose specific disclosure regulations, exemption clauses, and a "safe harbor" system, including for so-called "Initial Coin Offerings (ICO)", "airdrops", and network reward programs. Our goal is to enable issuers to include U.S. users in their offerings without excluding them due to legal risks, thereby enjoying legal certainty and a friendly regulatory environment. I believe that as long as we stick to this direction, we may usher in an innovative Cambrian explosion.

In addition, many companies wish to "tokenize" securities such as common stocks, bonds, partnership interests, or securities issued by others. Due to regulatory barriers in the United States, such innovations mostly occur overseas. At the same time, our policy department has received many applications—from well-known companies on Wall Street to unicorns in Silicon Valley—seeking approval to distribute security tokens within the United States. I have requested the committee to work with these companies to provide regulatory exemptions where appropriate, ensuring that the United States is not left behind in crypto innovation.

Enhance Freedom: Provide Diverse Custody and Trading Venue Options

Second, to achieve the President's goals, the SEC must ensure that market participants have maximum freedom when choosing custody and trading platforms. As I have pointed out, the right to own and self-manage private property is one of America's core values. I firmly believe that individuals have the right to use self-custody wallets to hold their crypto assets and participate in on-chain activities such as staking. However, some investors may still choose to entrust their assets to SEC-registered intermediaries, such as brokers or investment advisors, which are subject to additional regulatory requirements when providing custody services.

During my term, implementing the recommendations of the "PWG Report" regarding the "modernization of SEC custody obligations for registered investment advisers" will be a priority. The "special purpose broker-dealer framework," the SAB 121 document, and the "Channeling Action 2.0" promoted by the previous administration have resulted in almost no compliant cryptocurrency custody service providers in the market today. The existing custody regulations do not take into account the characteristics of cryptocurrency assets. I have instructed staff to explore how to adapt the current system, including providing exemptions or modifying rules when necessary, to facilitate the development of cryptocurrency custody services.

The "PWG Report" also suggests that market participants should be allowed to conduct multi-line business under the most effective licensing structure. We cannot force them to be embedded in an outdated "Procrustean bed" regulatory system. I support allowing them to freely choose the regulatory path that best suits their business, provided that investor interests are safeguarded.

Promote super applications: achieve horizontal integration of products and services

Thirdly, another important goal of my chairmanship is to allow market participants to innovate within the framework of "Super-Apps." Many people ask me, "What is a Super-App?" It’s simple: securities intermediaries should be able to provide a diverse range of products and services on one platform, under one license. A broker-dealer with an Alternative Trading System (ATS) should be able to simultaneously offer non-securities crypto asset trading, securities crypto asset trading, traditional securities services, as well as staking, lending, and other services, without needing to apply for licenses in over fifty states or multiple federal licenses.

Currently, federal securities laws do not prohibit registered trading platforms from launching non-securities assets. I have instructed the committee staff to develop further guidance and plans to promote the implementation of such "super applications." Perhaps we will ultimately name it "Reg Super-App."

According to the recommendations of the PWG report, the SEC should collaborate with other regulatory agencies to establish the simplest and most efficient licensing system for registered intermediaries, avoiding the imposition of multiple regulations on them simultaneously. This model has been widely adopted in the banking industry, where banks generally do not need to register separately as brokers or clearing agencies. Regulators should provide oversight with the minimum necessary dosage, protecting investors while also incentivizing business growth. We should not push companies overseas with excessive, paternalistic regulation, nor should we allow regulatory burdens to favor resource-rich large companies, thereby stifling the competitiveness of small and medium-sized enterprises.

According to the specific recommendations of the PWG report, I have instructed the committee to develop a framework that allows non-securities crypto assets and securities crypto assets to trade in parallel on the same SEC regulatory platform. Additionally, I have requested an evaluation of how to utilize the committee's powers to allow certain crypto assets to be listed on non-SEC registered trading platforms. This will not only enable state-licensed platforms to offer more assets but will also provide margin functionality for CFTC-regulated platforms, even though Congress has not granted them additional authority, which will release greater liquidity.

Unlocking the potential of the U.S. market: a beautiful and powerful on-chain software system

Fourth, I have instructed the committee staff to update those outdated regulatory rules to unleash the potential of on-chain software systems in the U.S. securities market. On-chain software comes in various forms—some of these systems are truly decentralized, operating without any intermediaries; others are maintained by specific operators. Regardless of the form, they should have a place in our financial markets.

Any regulatory framework for the market structure of crypto assets must provide a clear path for on-chain software developers that do not rely on centralized intermediaries. Decentralized Finance (DeFi) software systems—such as Automated Market Makers (AMM)—can facilitate automated, non-intermediated financial market activities. U.S. federal securities law has traditionally assumed the existence of intermediaries that need regulation, but that does not mean we should force the introduction of intermediaries solely to cater to outdated regulatory logic. If the market itself can operate without intermediaries, we should respect that.

We will leave room for the development of these two models - centralized and decentralized - in the US market. We will protect developers who simply publish software code, reasonably delineate the boundaries between intermediary participation and non-intermediary activities, and establish clear and feasible regulatory rules for intermediaries wishing to operate on-chain software systems. DeFi and other on-chain software systems will become a part of our securities market, rather than being stifled by redundant or excessive regulation.

To achieve this vision, we need to modify existing rules. For example, to support on-chain trading of securities, we may need to revise the National Market System Rules (Reg NMS). In fact, twenty years ago, I co-authored a dissenting opinion against Reg NMS with then-Commissioner Cynthia Glassman, and today, the concerns we had back then seem even more relevant. Over the past two decades, the excessive requirements imposed by Reg NMS have distorted market activities and hindered the natural evolution of the U.S. securities markets. What Congress envisioned back then was for "competitive forces rather than excessive regulation" to drive the development of the national market system. I will work to steer us back to this original intention, further promoting innovation and competition in the market.

Driving Innovation: Commercial Viability is Our North Star

Finally, innovation and entrepreneurship are the engines of the American economy. President Trump once called America the "country of builders." Under my leadership, the SEC will encourage this spirit rather than suppress it with red tape and one-size-fits-all rules. The current commission is actively considering some reform proposals put forward by the industry to stimulate innovation; at the same time, we are exploring the introduction of an "innovation exemption mechanism"—allowing both registered and non-registered entities to swiftly bring new business models and services to market, even if these models do not perfectly align with existing rules.

In my envisioning, this innovative exemption mechanism will allow technological pioneers and business creators to immediately participate in the market without having to comply with cumbersome regulations that are outdated or hinder economic activity. Correspondingly, they will need to adhere to some principle-based conditions to achieve the core policy objectives of federal securities law. These conditions may include: a commitment to report regularly to the SEC, the introduction of a whitelist or "certification pool" feature, and only allowing securities tokens that meet compliance functionality standards (such as ERC3643) to circulate. I encourage market participants and SEC staff to consider "commercial viability" as a core consideration when developing models.

Conclusion

While advancing the above priorities, I look forward to collaborating with other government departments to jointly make the United States a global cryptocurrency capital. This is not only a transformation of the regulatory model but also a cross-generational opportunity.

From the paper agreements under the phoenix tree to the electronic ledger on the blockchain, the wind of innovation continues to blow strongly. Our mission is to ensure this wind keeps propelling America's leadership forward. After all, ladies and gentlemen, we have never been satisfied with following others. We will not sit on the sidelines. We will lead the way. We will build it ourselves. Furthermore, we will ensure that the next chapter of financial innovation is written in America.

Thank you very much for listening today. Please pay attention to our upcoming announcements and proposals, and we welcome your valuable suggestions and opinions as always.