New SEC Chair Paul Atkins has taken a pro-innovation approach to cryptocurrency regulation, marking a shift from the previous administration’s strict enforcement. At a recent SEC roundtable, he called for a new regulatory framework to support digital assets while enlisting Commissioner Hester Peirce to lead these efforts. Panelists highlighted challenges in existing custody frameworks for digital assets, advocating for a principles-based regulatory approach. The move towards clearer regulation is seen as essential to maintaining innovation in the U.S. cryptocurrency market.
In a significant shift in stance, the newly appointed SEC Chairman Paul Atkins has signalled a pro-innovation approach towards cryptocurrency policy. Just four days into his term, Atkins openly criticised the previous administration’s enforcement-focused strategy during a roundtable hosted by the SEC’s Crypto Task Force on April 25. He indicated a commitment to address persistent issues surrounding blockchain and digital assets, stating, “Innovation has been stifled for the last several years due to market and regulatory uncertainty that unfortunately the SEC has fostered.”
Atkins’s comments mark a pivotal moment for U.S. crypto regulation, potentially encouraging the development of domestic digital asset markets rather than driving activity overseas. He stressed that market participants require definitive regulatory guidelines, stating he intends to create a rational framework tailored for crypto assets. To that end, Commissioner Hester Peirce will spearhead this initiative, with Atkins praising her as a champion for sensible cryptocurrency policies, dubbing her the “crypto mom.”
On the topic of regulation, Atkins highlighted the need for a regulatory framework to resolve how broker-dealers and investment firms can safely manage custody of digital assets while complying with federal laws. At the roundtable, Seamus Rocca, CEO of Xapo Bank, welcomed the SEC’s renewed focus, emphasising the crucial role of secure custody in building investor trust. He pointed out that digital asset custody requires a specific infrastructure distinct from traditional finance approaches.
The existing regulatory framework, which relies on physical stock certificates, is proving inadequate in addressing the realities of the burgeoning digital assets ecosystem. Legal expert and panel participant Susan Gault-Brown remarked that current regulations do not align well with the fundamentally different structure of digital assets. Larry Florio, general counsel at 1kx, echoed this, explaining that the crypto ecosystem has developed to eliminate the need for intermediaries, which presents unique benefits and risks.
Moreover, Georgetown Law’s Adam Levitin pointed out the challenges posed by trying to force a peer-to-peer payment system into a centralized trading model, noting that traditional custodial practices do not translate well to digital assets. He described the traditional custodian’s role as focused on physical security, which is dramatically different from securing cryptocurrency.
Several panelists suggested a principles-based regulatory approach to custody, urging that regulations should encapsulate core principles rather than technology specifics. Mark Greenberg from Kraken advocated for systems that secure cryptographic keys rather than relying on individual custodians. He expressed that the familiar maxim of “not my keys, not my crypto” may need revisiting.
A common sentiment expressed by panelists was the urgency for regulatory flexibility to keep pace with rapid technological advancements. They warned that overly prescriptive custody regulations could quickly become outdated. Concerns were raised about how the lack of clear guidelines has pushed innovation offshore.
Baylor Myers from BitGo lamented that during the previous four years, despite receiving approvals abroad, domestic innovation suffered. He expressed hope that these circumstances will change under the new administration. Echoing this, Etana Custody’s Brandon Russell stated foreign regulatory clarity had enabled crypto firms to thrive, illustrating the potential positive impact of clearer domestic regulation.
