Full text from SEC Chairman: Launching Project Crypto to make the United States the "World Capital of Encryption"

Author | Paul S. Atkins, Chairman of the SEC

Compilation | Wu Says Blockchain Aki Chen

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Good afternoon, everyone. Thank you to Norm for the warm introduction, and thank you for inviting me here to gather with all of you; I feel very honored—especially at such a critical moment. I believe this may become an important turning point for America's leadership position in the cryptocurrency market. Before sharing some thoughts, I would like to especially thank the America First Policy Institute for facilitating this timely dialogue. At the same time, to avoid causing concern for the compliance team, I must solemnly state that the views I express today are solely my personal views and do not represent the official position of the U.S. Securities and Exchange Commission (SEC) or any other commissioners.

Today, I want to talk about a plan that I proposed together with SEC Commissioner Hester Peirce — "Project Crypto." This plan will serve as a strategic guide for the SEC to assist President Trump in advancing the policy direction of making the United States the "global crypto capital." Before introducing our plans for the dominance of the crypto market, I would like to briefly review several key turning points in the development of the U.S. financial markets. These moments bear similarities to the current environment. Understanding these nodes will help us ensure that the future direction does not deviate from the foundation we have inherited.

The evolution of capital markets: from the Wutong Tree Agreement to the blockchain era

The wave of innovation has always run through the development of the U.S. capital markets, often with the force of a gale. In 1792, this "wind" stirred the branches and leaves under the sycamore trees. It was beneath this shade that more than twenty stockbrokers gathered and signed a brief agreement, forming the prototype of the New York Stock Exchange. This agreement, which was less than a hundred words and handwritten on parchment, initiated a lasting system design that influenced the flow of capital for generations to come.

For the next few centuries, capital markets never stagnated. They continuously expanded, evolved, and innovated themselves along with the ideas and technologies of the times. The vitality of the market is attributed to the people involved in it. The market, through incentive mechanisms, guides the wisdom of these individuals to focus on society's most challenging problems; participants who can propose innovative solutions and gain recognition and transactions from others will be rewarded. It is through this mechanism that Adam Smith's "invisible hand" is able to function — even if individuals are merely pursuing their own interests, the market will encourage them to enhance the public good.

The responsibility of the U.S. Securities and Exchange Commission (SEC) is to maintain a market environment where human creativity and professional capabilities can continuously bring value to society. Throughout its development, the SEC has played a positive role in supporting innovation, but at certain times it has also suppressed it. Fortunately, progress often triumphs over resistance. When our regulatory stance approaches technological change with caution rather than fear, the United States' leading position in the global market is continuously strengthened.

In the 1960s — I am very glad that I had not entered the industry at that time — Wall Street was in the midst of a bull market. But behind the glamorous facade, the fundamental operating system of the market was under immense pressure. The clearing and settlement process at that time was cumbersome and costly, with most transactions still relying on paper stock certificates. Piles of physical stock certificates were stacked high, needing to be transported back and forth by employees pushing carts through Wall Street and major financial districts across the U.S. This was a scene from the last century, struggling to meet the modernization demands of the securities market at that time.

In fact, the paper clearing and settlement system designed for relatively stable years has become overwhelmed in the face of increasing trading volume. A delay by one agency can disrupt the entire process of another agency; cases of securities being lost or stolen occur frequently; the number of failed trades has surged. Some brokers with limited funds have found themselves in difficulties due to the impact of canceled trades. To alleviate the chaos, the market has had to shorten trading hours, and exchanges even suspend trading every Wednesday to allow agencies to process the mountain of paper certificates.

The then-chairman of the SEC described the chaos caused by system obsolescence as "the most enduring and severe crisis in the securities industry in forty years... numerous companies collapsed, and investor confidence plummeted." It is commendable that the SEC took proactive measures to address this so-called "paperwork crisis." The regulatory agency facilitated the creation of the Depository Trust & Clearing Corporation (DTCC) by various market participants, fundamentally transforming the way securities are held and traded. Securities ownership no longer relies on the physical circulation of paper certificates between clients and brokers, but is completed through accounting methods on a computerized ledger. After physical certificates were "staticized," they were centrally stored in secure vaults, while ownership circulated electronically, thereby laying the foundation for the modern clearing and settlement system, which continues to this day.

As demonstrated by this ticker tape machine, it was a significant breakthrough of its time, fundamentally changing the way the American public accessed market information — printing each transaction record line by line. However, technological breakthroughs should not remain confined to past history. By the late 1990s, electronic trading systems rapidly became popular, breaking many assumptions of traditional market operating mechanisms. Then-chairman Arthur Levitt believed that the SEC had a responsibility to provide appropriate regulatory flexibility for innovations in electronic markets. Therefore, the SEC introduced the Regulation Alternative Trading Systems (Reg ATS) in 1999, allowing ATS (Alternative Trading Systems) to be regulated according to the standards of broker-dealers rather than the previous exchange model.

Speaking of which, we return to the present - a moment that calls for America to show its enterprising spirit again; a project that has the potential to unleash this power. Our regulatory framework should no longer be anchored in that outdated analog era that does not adapt to new frontiers. After all, the future is arriving at full speed, and the world will not wait. In the face of the transformative wave of digital assets, America cannot just passively keep up but should become a driving force behind this revolution.

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

Therefore, today I want to officially announce to the world that under my leadership, the SEC will not stand idly by while innovation continues to emerge overseas, while our capital markets stagnate. To achieve President Trump's vision of "making America the global crypto capital," the SEC must comprehensively assess the potential opportunities and risks of transitioning the market from off-chain systems to on-chain systems.

We are standing at a new threshold in the history of capital markets. As I mentioned earlier, I officially announce the launch of "Project Crypto" today—this is a strategic initiative covering the entire SEC, aimed at modernizing securities regulations and laying the institutional groundwork for the U.S. financial markets to enter the on-chain era.

Just a few weeks ago, President Trump signed the GENIUS Act, establishing a regulatory framework for stablecoins based on the "gold standard" in the United States, ensuring that America remains a leader in the global payments space. At the time of the signing of this act, I was also pleased to see President Trump support Congress's efforts to pass cryptocurrency market structure legislation by the end of the year. I appreciate the strong bipartisan support the House has garnered on this issue and look forward to working closely with the Senate to develop structural legislation that contributes to the long-term robust development of the cryptocurrency market, based on the House's existing achievements. This will help prevent regulatory arbitrage, enhance institutional foresight, and further solidify America's position as the "global crypto capital."

Just yesterday, the President's Working Group on Financial Markets released the "PWG Report," making clear recommendations to the SEC and other federal agencies, calling for the establishment of a regulatory framework to maintain the United States' dominant position in the crypto asset market. The report is viewed as a blueprint for the U.S. to achieve leadership in the blockchain and crypto technology field. Last week, President Trump stated that he wants "the whole world to run on the backbone of American technology." I am also ready to do my utmost to promote the realization of this goal.

For this reason, I am announcing the official launch of the "Project Crypto" and directing the SEC's various policy departments to work in collaboration with the cryptocurrency special working group led by Commissioner Hester Peirce to formulate and implement specific plans based on the recommendations of the "PWG Report" as soon as possible. "Project Crypto" will help ensure that the United States continues to be the most suitable country for starting businesses, developing cutting-edge technologies, and participating in capital markets. We will bring back those cryptocurrency companies that were forced to relocate, especially those that were severely impacted by the previous administration's regulatory actions of "enforcement over rule" and "Operation Chokepoint 2.0." Whether existing institutions in the industry or emerging participants that have just entered, the SEC welcomes all market entities that want to drive innovation.

In accordance with the recommendations of the PWG report, I have instructed the committee staff to draft a set of clear and concise regulatory rules regarding the issuance, custody, and trading of crypto assets, and to solicit public comments. While the committee staff advances the final rule-making, the committee and its staff will also consider the application of interpretive, exemptive, and other regulatory authorities in the coming months to ensure that outdated rules do not stifle innovation and entrepreneurial vitality in the United States. Many of the committee's existing traditional rules are no longer applicable in the 21st-century market environment, let alone for the on-chain market. The committee must undertake a comprehensive overhaul of its regulatory framework to prevent regulatory barriers from hindering progress and competition, whether from emerging market participants or existing institutions, ultimately harming only the ordinary investors.

The cryptocurrency industry returns to the U.S.: A new era for the SEC

"Project Crypto" will cover a series of key initiatives within the scope of the committee:

First, we will commit to bringing the issuance of crypto assets back to the United States. The complex offshore company structures, "decentralized performances," and ambiguous treatment of securities attributes will become history. As President Trump said, the United States is in a "golden age" — under our new policy agenda, the crypto asset economy will also enter its own golden age.

According to the direction 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 has always been one of the core missions of the SEC, but for a long time, the SEC has ignored the market's demand for choice, instead suppressing financing activities based on cryptographic technology. As a result, the cryptocurrency market has gradually moved away from asset issuance, and investors have lost the opportunity to participate in the construction of the real economy through this new technology. The SEC's past attitude of 'turning a blind eye' and its regulatory approach of 'shoot first, ask questions later' should become history.

Despite the SEC's past differing statements, in fact, most crypto assets do not fall under the category of securities. However, due to confusion over the applicability standards of the "Howey Test," some innovators have had to treat all crypto assets as securities to avoid risk. Meanwhile, entrepreneurs in the United States are leveraging blockchain technology to modernize various traditional systems and tools. For example, Senator Bernie Moreno from Ohio is one such individual—he is both a successful entrepreneur and a newly elected federal senator. Before his election, he founded a company dedicated to putting automotive ownership on the blockchain. He identified efficiency bottlenecks in the ownership transfer process and proposed practical solutions using on-chain technology. These entrepreneurs should have a clear set of enforceable standards to determine whether securities law applies to their business. They not only need such rules but also deserve them.

I have instructed the committee staff to develop a clear set of guidelines for market participants to determine whether a particular crypto asset qualifies as a security or constitutes an applicable investment contract. Our goal is to assist market participants in reasonably classifying crypto assets based on the economic substance of the transaction, such as digital collectibles, digital goods, or stablecoins, and thereby assess their attributes. This approach will enable market participants to determine based on clear standards whether the issuer has made any substantive commitments, thereby rendering the crypto asset an investment contract.

Moreover, being classified as a "security" should not be seen as a negative label for projects. We need to establish a regulatory framework applicable to crypto asset securities that allows such products to thrive in the U.S. market. Many issuers may prefer to leverage the flexibility in product design provided by securities laws; investors can benefit from profit distribution, voting rights, and other rights typically associated with securities. Projects should not be forced to establish decentralized autonomous organizations (DAOs), offshore foundations, or be compelled to "decentralize" at a stage where they are not yet ready. I am also looking forward to new application scenarios for crypto asset securities in the business sector, such as participating in blockchain network consensus mechanisms through tokenized stocks.

Therefore, for those crypto asset transactions regulated by securities laws, I have asked the staff to propose more targeted disclosure requirements, exemption mechanisms, and safe harbor provisions, covering common transaction forms such as "Initial Coin Offerings" (ICO), "airdrops," and network rewards. In such transactions, our goal should be to ensure that issuers do not choose to exclude U.S. users due to legal complexities and litigation risks, but rather, due to clear legal protections and an inclusive regulatory environment, actively choose to include the U.S. market within their issuance scope. In my view, as long as we adhere to this direction, innovation in the crypto space may experience a "Cambrian explosion."

In addition, many companies hope to tokenize their common stocks, bonds, partnership interests, and other securities, or securities issued by third parties. Currently, most of these innovative activities are taking place overseas due to regulatory barriers faced within the United States. Our policy team has also reported that both well-known financial institutions on Wall Street and unicorn tech companies in Silicon Valley are gradually submitting applications related to tokenization to the SEC. I have instructed committee staff to collaborate with companies intending to issue tokenized securities in the United States and to provide regulatory exemptions where appropriate, to ensure that the American public is not excluded from this innovative transformation.

Enhancing Freedom: Giving Choice to Custodians and Trading Venues

Second, to achieve the President's policy goals, the SEC has a responsibility to ensure that market participants have the maximum autonomy when choosing the custody and trading methods for crypto assets. As I have emphasized before, the right to own and safeguard personal property is one of the core values of the United States. I firmly support individuals holding crypto assets through self-custody digital wallets and participating in on-chain activities, such as staking. However, there are still some investors who choose to rely on SEC-registered entities (such as broker-dealers and investment advisors) to custody their assets on their behalf, and these entities will be subject to stricter regulatory requirements when providing such services. During my tenure as Chair, I will prioritize the implementation of the recommendations in the PWG report regarding "modernizing SEC custody regulatory requirements," particularly concerning registered intermediaries.

The "Special Purpose Broker-Dealer" framework implemented by the previous government, along with Accounting Bulletin No. 121 (SAB 121) and "Lockdown Action 2.0," has resulted in a severe shortage of available cryptocurrency custody service providers in the current market. The existing custody rules did not take into account the characteristics of cryptocurrency assets when they were established. I have instructed the committee staff to explore how to optimize the current regulatory framework to better support the custody arrangements for cryptocurrency assets, including possible exemption mechanisms or other flexibility arrangements, and of course, the potential for revising the existing rules themselves.

As suggested in the "PWG Report", market participants "should be allowed to engage in multiple businesses under the most efficient licensing structure". We should not regulate just for the sake of regulation, forcing the market into an outdated "Procrustean bed" approach. I support granting market participants the freedom to choose the regulatory path that best suits their business, provided that this path can offer sufficient protection for investors.

Developing Super Apps: Horizontal Integration of Product Integration Features

Thirdly, one of my focuses during my tenure as chairman has been to support market participants in innovating around the "super app" model. People often ask me, "What exactly do you mean by super app?" The answer is actually quite simple: securities intermediaries should be capable of providing a wide range of products and services in a one-stop manner under the same licensing framework. For instance, a brokerage with Alternative Trading System (ATS) qualifications should be able to offer trading services for non-securities crypto assets, crypto asset securities, and traditional securities on its platform simultaneously, as well as engage in other businesses including crypto asset staking and lending, without the need to apply for different licenses in all fifty states or hold multiple overlapping licenses at the federal level.

The current federal securities laws do not prohibit the listing of non-securities assets on SEC-registered trading platforms. In this regard, I have instructed the committee staff to further study and propose relevant guidelines and rule proposals to ultimately promote the realization of the "super application" vision. Perhaps we can also refer to this system as "Reg Super-App."

In line with the position of the "PWG Report," the SEC should collaborate with other regulatory agencies to establish the most efficient licensing structure for SEC-registered entities. Market participants should not be unnecessarily constrained by multiple regulators or overlapping regulatory frameworks. This model has been widely applied in the banking sector and has proven effective. Banks are often exempt from multiple duplicative regulatory requirements, such as the registration obligations of broker-dealers and clearing agencies. Regulators should provide a "minimum effective dose" of regulatory arrangements—protecting investor rights while allowing space for businesses and entrepreneurs to develop. We should not suppress industry vitality with "paternalistic" overregulation, nor should we push businesses overseas or undermine the competitiveness of American firms in international markets. Our regulatory system should unleash the competitive forces of on-exchange platforms and product innovation, benefiting all Americans. We should not artificially limit business models, nor should we impose duplicative regulatory costs on American companies, which would unfairly advantage larger institutions that can better absorb compliance costs.

According to the recommendations of the "PWG Report", I have instructed the committee staff to develop a regulatory framework that allows non-securities crypto assets to trade alongside crypto asset securities on SEC-regulated platforms. In addition, I have asked the staff to assess whether it is possible, under existing authority, to allow non-securities crypto assets that are bound by investment contracts to trade on trading platforms that are not registered with the SEC. I place a high value on advancing this direction, as it will not only enable crypto asset platforms that are not registered with the SEC but are licensed at the state level to launch specific assets, but will also provide a pathway for the Commodity Futures Trading Commission (CFTC) regulated platforms to trade such products, including the ability to conduct margin trading—even though Congress has not granted the CFTC additional authority, this arrangement is still expected to release greater market liquidity.

Unlocking the Potential of the U.S. Market: Building a Grand and Excellent On-Chain Software System

Fourth, I have instructed the committee staff to update the outdated rules and regulations within the institution to unlock the potential of on-chain software systems in the securities market. On-chain software comes in various forms—some of which achieve true decentralization without being operated by any intermediaries; others are maintained by specific operators. Regardless of the type of on-chain software system, they should have a place in our financial markets.

A qualified structure for the crypto asset market must provide a compliant path for on-chain software system developers who operate without centralized intermediaries. Decentralized finance (DeFi) software systems, such as automated market makers (AMMs), can achieve automated, disintermediated financial market activities. Since its inception, federal securities law has assumed that financial activities require the involvement of intermediaries and are subject to regulation. However, this does not mean that in scenarios where the market can operate autonomously, we should artificially introduce intermediaries just to impose an intermediary structure.

We will leave room for both types of models in the securities market: on one hand, to protect developers who purely release software code; on the other hand, to reasonably differentiate between mediated and non-mediated financial activities, and to establish rational and feasible regulatory rules for intermediary institutions that wish to operate on-chain software systems. Decentralized finance and other forms of on-chain software systems will become a part of our securities market, rather than being stifled by redundant or unnecessary regulation.

To achieve the vision outlined above, we need to consider adjustments to some of the current rules. For example, supporting tokenized securities trading on-chain may mean we must explore revisions to the National Market System Regulation (Reg NMS), not just the improvements we have made in our daily regulation to correct the market distortions it has caused. Many may remember that twenty years ago, I co-authored a lengthy dissenting opinion on Reg NMS with Commissioner Cynthia Glassman. Today, in light of the market distortions and hindrances to innovation caused by overly rigid institutional requirements over the past twenty years, our objections at that time are even more compelling. The legislative intent of Congress is also quite clear: the development of the national securities market system should be guided by "the forces of market competition, not unnecessary regulation." I will be committed to seeking pathways to bring our regulatory system back to this original intent, thereby promoting innovation and competition in the market.

Promoting Innovation: Guiding Principles Based on Commercial Viability

Finally, innovation and entrepreneurial spirit have always been the core driving forces of the American economy. President Trump once referred to America as the "land of builders." During my tenure as chairman, the SEC will encourage the development of this group rather than restrict it with cumbersome administrative processes or one-size-fits-all regulatory rules. Currently, the Commission is actively reviewing various proposals put forward by the industry to stimulate innovative vitality. At the same time, we are also studying the establishment of an "innovation exemption" mechanism, allowing both registered and unregistered entities to swiftly enter the market when facing new business models or services that cannot be fully accommodated by existing rules. While encouraging innovation, the SEC will also ensure that all market participants, under such exemption arrangements, must still comply with the fundamental conditions and requirements aimed at achieving the policy objectives of federal securities laws.

Under my vision of the "innovation exemption" mechanism, innovators and forward-thinking practitioners will be able to immediately bring new technologies and business models to market without having to comply with complex regulatory requirements that are incompatible or obstructive to economic activities. Accordingly, they will adhere to a set of principle-based fundamental conditions aimed at achieving the core policy objectives of federal securities law. For example, these conditions may include: a commitment to report to the SEC on a regular basis, integration of whitelist or "verification pool" features, and restrictions on tokenized securities that do not meet compliance token standards (such as ERC3643) entering the market, among others. I encourage market participants to work with SEC staff to always focus on the commercial viability when designing various models.

Conclusion

In advancing the aforementioned priorities, I look forward to working closely with colleagues from various government departments to jointly promote the United States as the global capital of crypto assets. This is not only a regulatory transformation but also a historical opportunity of an era. From the parchment agreements under the sycamore tree to the distributed ledger on the chain, the winds of innovation continue to blow — and our mission is to let this wind continue to propel the United States' leadership position forward. Ladies and gentlemen, America is never content to follow. We will not sit idly by. We will lead the way, we will continue to build, and we will ensure the next chapter of financial innovation is written right here on American soil.

Thank you very much for everyone's attention today. We welcome you to continue following our upcoming announcements and proposals, and we look forward to your insightful opinions and suggestions as always.