SEC Shifts Crypto Approach: Tokenization & New Market Rules

SEC Signals Shift in Crypto Regulation

Securities and Exchange Commission (SEC) Chairman Paul Atkins has announced a significant shift in the agency's approach to cryptocurrency regulation. In a keynote address at the Commission's May 12 roundtable on tokenization and digital assets, Atkins declared a move away from what he called “ad hoc enforcement actions” towards a framework of clear rules.

Atkins emphasized the potential of blockchain technology to revolutionize securities markets. He stated that blockchain could enable "a broad swath of novel use cases for securities" and facilitate "new kinds of market activities" not covered by existing regulations. This new approach aims to provide a "rational regulatory framework" for crypto asset markets, establishing clear rules for issuance, custody, and trading.

Focus Areas for the SEC

• Establishing clear guidelines for crypto assets considered securities.
• Allowing brokers to offer a wider range of investment products, including those combining securities and non-securities.

This strategy marks a departure from the previous SEC chair's approach, which was criticized for its reliance on enforcement actions rather than proactive rulemaking.

Tokenization: The Evolution of Securities

Atkins compared the tokenization of securities to the evolution of audio formats, noting how each shift improved accessibility and interoperability. He suggested that securities tokenization could similarly benefit consumers and the economy through new business models.

Several firms are already exploring tokenization. BlackRock and Franklin Templeton have launched tokenized US treasury funds, and Robinhood is considering building a blockchain for European investors to trade tokenized US securities.

Benefits of Tokenized Securities

• Faster settlement times
• Reduced reliance on traditional financial infrastructure
• Improved accessibility
• Increased liquidity for illiquid assets

Data from RWA.xyz indicates that $22.6 billion of real-world assets are now onchain, a 7.6% increase in the past 30 days. This doesn't include the $243 billion market capitalization of stablecoins as of May 12 (according to DefiLlama), with Tether's USDT alone holding a market cap of $150.6 billion.

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