SEC's Hester Peirce Advocates for a More Cryptocurrency-favorable Reformation
The Securities and Exchange Commission (SEC) is set for a significant change in direction under the new leadership of Chairman Paul Atkins, signalling a clear shift towards clearer crypto regulation, increased transparency, and a more accommodating enforcement approach towards the crypto industry.
This departure from the prior administration’s heavy reliance on enforcement actions against crypto firms is evident in several key initiatives. The launch of "Project Crypto," a Commission-wide initiative to modernize securities rules to support on-chain markets, is a prime example. The focus is on clear guidelines classifying crypto assets, such as securities, stablecoins, and digital commodities, and creating tailored disclosures, exemptions, and safe harbours for crypto distributions.
Chairman Atkins has explicitly stated that most crypto assets are not securities, rejecting the broad application of the Howey test that had created regulatory uncertainty and driven crypto innovation abroad. The SEC is also working to adapt custody and trading rules for crypto assets, enabling intermediaries and market participants to operate under clearer and updated regulations compared with legacy rules.
Several enforcement actions initiated under the previous SEC chair were dismissed early this year, and the SEC formed a Crypto Task Force and Cyber and Emerging Technologies Unit (CETU) that emphasize judicious enforcement and fostering innovation rather than aggressive crackdowns.
Recent SEC approvals allowing in-kind creations and redemptions for crypto exchange-traded products (ETPs) constitute another regulatory accommodation that aligns crypto products with traditional commodity-based ones, facilitating a more standardized and transparent market structure.
Chairman Atkins has proposed a new “innovation exemption” that would allow novel crypto business models to enter the market quickly under principles-based, commercially viable conditions without rigid rule-fitting, including compliance mechanisms such as identity verification and transfer restrictions.
Commissioner Mark Uyeda, another key player in the new leadership, advocates for increased transparency in SEC legal proceedings, citing the Administrative Procedure Act. He also believes a responsible regulator should create room for innovation, clearly communicate rules, and provide guidance on compliance.
Commissioner Hester Peirce expects a fundamental change in the SEC's approach to enforcement with the new leadership. She hopes to return to understanding that the SEC is a regulatory agency within the executive branch of government. Both commissioners Peirce and Uyeda believe enforcement measures are not suitable for creating comprehensive regulations.
The SEC will be without a Democrat commissioner until new appointments are approved by the Senate. A coalition of U.S. organizations urged the Senate to confirm SEC Commissioner Caroline Crenshaw, a Democrat, for another term in December.
In a bid to shed its reputation as a "scolding teacher" that blocks progress, the SEC under the new leadership aims to return to its prescribed role as a regulator, focusing on clearly defining its jurisdiction. Theresa Goody Guillén, a former SEC litigation attorney, suggests that Atkins may appoint someone from another political affiliation after Senate confirmation.
Overall, under the new leadership, there is a clear policy trend towards greater regulatory clarity, enhanced transparency, flexible and principles-based rules, and a less enforcement-intensive approach that aims to balance investor protection with promoting U.S. crypto innovation and market competitiveness.
- The SEC, under the leadership of Chairman Paul Atkins, is focusing on modernizing securities rules to support on-chain markets, with a clear aim to classify crypto assets, such as securities, stablecoins, and digital commodities, and create tailored regulations for them, signalling a shift towards a more crypto-friendly finance business environment powered by technology.
- Commissioner Mark Uyeda, a key player in the new SEC leadership, advocates for increased transparency in SEC legal proceedings and believes that a responsible regulator should create room for innovation, communicate rules clearly, and provide guidance on compliance, working to bring the SEC back to its role as a regulator that promotes technology-driven business such as the crypto industry.
