Fireside: SEC Chairman Paul Atkins

Chairman Atkins, thank you so much for joining us here in Las Vegas.

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My pleasure. It's good to see everybody here.

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I think this is the first time we've had the chairman of the SEC speak at the Bitcoin Conference. We're honored to have you.

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Thank you very much.

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It's been an interesting relationship between the Bitcoin community and the Securities and Exchange Commission. You have filled Gary Gensler's shoes. He was not very open or accepting toward digital assets, and really did everything possible to try to slow this innovation down. You've joined the Commission as part of the Trump administration. This is our first pro-Bitcoin, pro-crypto president, and you're really at the forefront of implementing that at the SEC. Before we get into the details, can you talk a little bit about your guiding philosophy as chairman of the SEC and how you think about digital assets?

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The way I like to frame it is that it is a new day at the SEC. If you look at the last decade or so, at first the SEC's approach was like an ostrich with its head in the sand, thinking maybe this will all go away. Then came regulation through enforcement, where I think it was a little disingenuous for the SEC to say, “Come in and talk to us. There's this easy form on our website. It's called an S-1.” That is not an easy form to fill out. It takes lots of lawyers and accountants. It's very much geared for an initial public offering, and really inapposite for something in the digital asset space, especially tokens.

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So we're taking a new approach. We're embracing innovation, and we really want to help onshore it. We're answering the president's challenge. He wants digital assets to be done here in the United States, with American technology onshore. We are really working to fulfill that.

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You just saw Mike Selig, who is at the Commodity Futures Trading Commission. He's a great guy. He was in my office, and I'm really happy the president appointed him to be chairman of the CFTC. He's doing a great job, and we're working closely. Believe it or not, in Washington, the CFTC and SEC historically have not really collaborated. I liken it to having two fortresses with a no man's land in between, and the crossfire from the fortresses kills all these new products that could have gone ahead even 40 years ago. We're out to change that now, really collaborate with each other, set a new benchmark for the country, and really embrace change.

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That's a great point. The collaboration with the CFTC is so important for regulatory clarity, innovation, market structure, and for the U.S. to lead in this industry. The way I saw it, there was really competition between the SEC and the CFTC, clamoring for jurisdiction. One agency would say, “This is in our jurisdiction,” and then the other would say, “Well, it's in ours.” Then the private sector is like, “Who's the regulator? Where do we go?” It created so much uncertainty and risk for businesses that many of them chose to either shut down or leave, for the ones who were lucky enough not to have enforcement come after them.

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And that was the strategy, exactly. The real rub is that the definition of a security is a very technical issue, but there also hasn't been a lot of guidance. The real breakthrough that we have tried to push stems from an old case from 1946 called SEC v. Howey.

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Mr. Howey had an orange grove down in Florida, and a lot of people wanted to be a part of it and own a little interest there. The securities statutes talk about different things, stocks, bonds, and whatnot, but then they put forth something called an investment contract and didn't bother to define it. In this case, the Supreme Court took a shot at trying to define that.

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What we have set out to do in applying it to digital assets is to say that, back in Mr. Howey's case, the investment contract wasn't the orange itself, which is comparable here to the token, the bitcoin, or whatever you have. The investment contract is the whole ecosystem of promises that Mr. Howey made to his investors and what his investors were expecting.

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We have now applied that to this whole digital asset space. Partnering with the CFTC, we set out with a joint release where we interpreted what is a tokenized security. That was a big breakthrough. We issued that earlier this year. Now we're going to be moving on to do other exciting things, like actually allowing firms to experiment on chain, build tokenized securities, and trade them on chain here in the United States under an innovation exemption that we plan to issue in the next few weeks. We also want to allow fundraising through the sale of tokens on chain through what we're calling Reg Crypto.

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Those things are in the offing. They'll be coming out soon. I know the discussion here just a few minutes ago was about the statute, the bill pending in Congress right now called the Clarity Act. We really need Congress to speak to this area. We're ready, willing, and able to interpret what they say and put that into rules that people can rely on and use to pursue their innovative ideas here in the United States. They don't have to go offshore. That's the vital concept here.

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There's a lot to unpack there. It's not just providing regulatory clarity and helping businesses understand where the SEC's jurisdiction begins and ends and where the CFTC's jurisdiction lies. That's been one of the most complicated and challenging questions for all of us. But you're taking that several steps forward, not just to regulatory clarity, but to being able to bring more financial applications on chain.

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Maybe starting with the token taxonomy guidance, helping clarify which agency has jurisdiction over different types of tokens, digital securities, digital commodities, digital collectibles, and so on. When it comes to digital commodities, in your token taxonomy guidance that you announced at my conference, the DC Blockchain Summit, just a couple of weeks ago, there is a list of tokens that the SEC clearly stated are digital commodities. Thank you for that. It was a very exciting announcement and something we've been talking about for a long time, having a taxonomy.

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What we've seen is that the market has reacted to that, and now those tokens are trading at a premium, particularly in Asian markets. Now that's creating some other questions. What if the token I'm interested in isn't on that list, but we think it still is because it meets all the other qualifications? What comments do you have for market participants about getting additional clarity and addressing the list?

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That's a really important question. In setting out this interpretive release, we gave a lot of examples. These are all illustrations. It wasn't meant to be a firm or immutable list. We talk about the principles behind this, going back to the Howey test. It's not about the orange itself; it's about the promises around it.

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The important thing about all of this is that things can start out with these promises and in that framework, but the promises can also be fulfilled, go away, or become impossible to perform. That's really the essence of the security analysis that we've done. That's what our approach has been.

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What we try to do is exclude these digital commodities, digital tools, digital collectibles, and then, of course, stablecoins. Stablecoins are clearly not securities because Congress adopted and the president signed the GENIUS Act, which was a huge step forward. The United States, for the first time, recognized a whole genre of digital assets and has a framework for them to be able to be traded and so forth.

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We're focused on tokenized securities, and we're trying to define them as not being in these other four buckets. The important thing is the principles-based approach. If people have questions, we're inviting them to come in to clarify. We were hoping things would be clear through the release that we did. Obviously, there's always more work to do to improve and explain further.

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Let's talk about market structure. Senator Lummis was just here moments ago and gave us an update on the timeline for the passage, hopefully, of the bill. She's expecting movement in May and potentially a vote in the Senate by June, and hopefully it will go to the president's desk shortly after passing the House. A lot of things have to happen. I was a former congressional staffer. I understand the legislative pathway, and a lot of things have to line up for all of that to happen. Of course, we're hoping that happens, but it's not guaranteed.

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In the event market structure does not pass, I know many people are concerned, especially people who have been around this block a couple of times. What happens after the Trump administration? What if a new administration comes in like the Biden administration, which was very hostile toward crypto, and we have a new SEC chairman who is like Gary Gensler and wants to shut it down? That's why a lot of people feel that market structure is so important, to future-proof all the work of this administration.

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Can you talk about that concern people have in the event market structure does not happen? What are you doing to mitigate against that? What kind of reaction is justified if the bill does not happen?

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Great question. You all should realize that elections do have consequences, and they can be huge. Who would have thought ten years ago that we would have this complete pivot, pretty much a 180-degree pivot, by the U.S. government, between us, the CFTC, the bank regulatory agencies, and Congress stepping in? That's wonderful.

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The SEC has a pretty large ambit of maneuver under the statutes, and we can be nimble, but we're bound by our existing authority, which is still basically grounded, with some amendments over the years, in a 1930s type of framework. That's why it's so important to have a statute that would future-proof what's going forward. Then we can use new authority and the flexibility that is bound up in this particular bill that's going through.

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We can work with the CFTC to coordinate and clarify definitions and build out from what we've already done. But again, nothing future-proofs things like a statute, and then good opinions from courts to chisel what a statute says in stone through the apparatus of the court system. It's all very important.

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We are focused on trying to streamline things, make things more efficient, and help innovators innovate so that they can do so with certainty and not get picked off by folks who are jealously guarding their turf or existing ways of doing things. We want to make sure that we are at the forefront of innovation here in the United States.

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Speaking of being at the forefront of innovation, an area in our markets that's very ripe to benefit from the power of blockchains is tokenized equities, which you alluded to earlier. The Commission is in a really important position to enable this innovation to take place.

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One of the challenges I see is that there are a lot of stakeholders involved in tokenized equities. There are a lot of players and a lot of steps in place between the execution of a trade and the settlement of a trade, with middlemen that collect fees along the way. Can you talk about all the stakeholders in that process? Will we be able to realize the full benefit of blockchain, which is instant settlement, while also navigating all the different players that either have to come along or whose business models are going to change or be remade through this process?

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That's a great way to end. Time flies quickly. The blockchain, distributed ledger technology, for me is the most exciting aspect about all this. I hesitate to say that at a Bitcoin Conference, but I'm basically agnostic as to the actual tokens themselves and whatnot. May the markets decide what's best.

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The prospect of having T+0, what we say is instantaneous settlement for many instruments, probably won't work for everything. But to have that delivery versus payment, receipt versus payment immediacy on chain, I think, is most exciting to de-risk our financial system. Every second that you have a difference between the transaction time and clearance and settlement is a risk that the investor and both parties bear.

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We're out to try to foster that and enable it to happen here in the United States. There are a lot of incumbent players, all the current exchanges and everything else. We want to make this open to them, too. This is a way for them to de-risk their own markets.

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There are great ideas out there from all sorts of other people in the crypto-native and blockchain-native community. We want to let all these different flowers bloom. It will strengthen the United States as a marketplace for ideas and financial innovation. That's better for the world, better for consumers, investors, and our economy as a whole. That's what we're out to do.

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I think that's a great message to close on. Chairman Atkins, thank you so much. Thank you for joining us.

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Great to see you again. Thank you all very much.