If you were to claim in the past two years that the U.S. Securities and Exchange Commission (SEC) has maintained a favorable relationship with the crypto industry, that would be akin to saying a tiger believes in Buddhism and adheres to a vegetarian diet. For the most part, the SEC’s stance has been either “refrain from proceeding” or “if you dare to proceed, we will bring enforcement actions.” However, the tone now appears to be shifting.
On May 12, Paul S. Atkins, Chair of the U.S. Securities and Exchange Commission (SEC), delivered a substantive address at the “Crypto Asset Roundtable.” While superficially an industry dialogue, it constituted a systematic reflection on the SEC’s regulatory approach to crypto assets over the past several years. More importantly, over the course of nearly one hour, he reiterated the regulatory logic governing “on-chain securities.”
If one were to summarize the tenor of his remarks in a single sentence, it would be:Rules should be clearly articulated, rather than relying on enforcement actions to intimidate.
This marks the first time in recent years that the SEC has explicitly proposed establishing a “specialized regulatory framework” for the issuance, custody, and trading of crypto assets, while acknowledging that existing rules are ill-suited to on-chain assets. For the entire Web3 industry, this constitutes a signal that cannot be ignored.
Issuance: It is not that issuance is prohibited; rather, “you cannot complete these forms.”
In recent years, the SEC’s strategy regarding token issuances has been effectively to presume illegality, without providing a clear pathway to compliance. Most projects that engage U.S. investors must be prepared to face litigation. Even if a project seeks compliance by pursuing registration pathways such as Form S-1 or Regulation A, it often encounters obstacles because the forms themselves are inapplicable.
Form S-1 is the standard registration document filed by U.S. companiesIPOrequiring detailed disclosure of executive compensation, use of proceeds, corporate governance structures, and other matters;Reg A（Regulation ARegulation A is a streamlined registration exemption mechanism designed for small and medium-sized issuers. However, for mostWeb3crypto asset projects, both instruments appear overly cumbersome or even incompatible. For example,Tokenmany crypto asset projects lack a traditional corporate structure, their use of proceeds is often executed automatically on-chain, and many core elements cannot be “predetermined in writing.”
AtkinsThe Chairman was unequivocal this time: the disclosure requirements applicable to conventional securities offerings should not be forcibly imposed on on-chain assets. “A square peg should not be forced into a round hole,” he stated directly in his speech. He proposed advancing registration exemptions, disclosure templates, and safe harbor provisions specifically tailored to crypto assets, thereby exploring more pragmatic regulatory pathways.
He also specifically highlighted the SEC’s past “ostrich-style management”: initially feigning ignorance in the hope that the industry would wither away on its own, and later plunging headlong into enforcement actions to create deterrence through individual cases, all without establishing uniform rules. Now he has made it clear—Rules must be adopted by the Commission, rather than relying on “ad hoc enforcement.”
Custody: Technology Is Not the Issue; Institutional Barriers Are Impeding Technological Solutions
In recent years, the custody issue for crypto assets has essentially boiled down to the question of “who is responsible for custody.” Traditional financial institutions were deterred by Staff Accounting Bulletin (SAB) 121, while self-custody lacked legal recognition. As a result, many funds and institutions seeking to participate in on-chain asset allocation were ultimately stalled at the custody stage.
SAB 121 is an accounting bulletin issued by SEC staff in 2022, requiring companies to record customers’ custodied crypto assets on their own balance sheets, which sharply increased regulatory risks. Although its original intent was to safeguard user assets, the practical effect was that most banks and broker-dealers withdrew from the crypto custody market.
SAB 121 has now been rescinded, and the Chairman explicitly stated during this address that the document was “unlawful, unapproved, and had adverse effects.” More importantly, he began to discusshow to proceed with amendments.
He pointed out that, provided sufficient security safeguards are in place, technological capabilities can substitute for traditional custody qualifications. Under certain premises, self-custody may also constitute a compliance option. This effectively opens up compliance possibilities for DeFi platforms, wallet providers, and even on-chain asset management projects.
Furthermore, he criticized the failed design of the “Special Purpose Broker-Dealer” framework, noting that only two such entities were approved and the results were unsatisfactory. He hinted that this mechanism needs to be restructured, meaning thatthe compliance pathways for future custody and trading services may be reintegrated and entry barriers lowered.
Trading: Moving from “Trading Constitutes a Violation” to “Limited Exemption Pilots”
The U.S. Securities and Exchange Commission (SEC) has long maintained a stringent regulatory stance toward on-chain asset transactions, particularly with respect to the threshold question of whether such assets constitute securities. This has trapped most token projects in a vicious cycle of failing to launch, lacking compliance, and hesitating to go live.
In this address, Chairman Atkins articulated a clear easing of restrictions. He proposed enabling Alternative Trading Systems (ATS) to support mixed trading in both securities and non-securities.
An ATS is a category of securities trading platforms under the U.S. regulatory framework, often understood as a "non-exchange trading venue." Many digital asset platforms previously attempted to register as ATSs to provide compliant trading capabilities. However, the current ATS regime lacks clear definitions tailored to crypto assets, causing most platforms to hesitate.
The Chairman further emphasized the necessity of an "exemption mechanism." In other words, if a project cannot temporarily meet all compliance requirements due to technological innovation or structural uniqueness, the SEC may provide a testing space under certain conditions. This is not a laissez-faire approach, but rather a conditional, supervised, and fault-tolerant pathway to compliance.
Industry Impact: Regulatory Boundaries No Longer Speculative; Compliance Space Begins to Emerge
The greatest significance of this address lies in the fact that it is neither a case-specific explanation for any particular project nor the personal opinion of an individual commissioner. Rather, it marks the first time the SEC Chairman, under the authorization of the Commission, has fully articulated the logical framework that should govern the regulation of crypto assets.
The underlying policy rationale is also clear: the Trump administration aims to position the United States as the "global capital of crypto," and the SEC, as a core financial regulator, can no longer treat crypto assets as a marginal business.
Over the next few years,on-chain securities, stablecoins,RWAand token payment platformsmay become pilot windows under the SEC's new rules. Entrepreneurs and project sponsors must therefore shift from the previous model of "evading regulation" to one of "designing inherent compliance."
Advice from Web3 Lawyers: It Is Not That You "Can Now Proceed," But That You Must "Proceed with Legal Basis"
From a practical perspective, we would advise the following:
First, monitor structural adjustments to offering pathways such as Form S-1 and Regulation A. If the U.S. Securities and Exchange Commission (SEC) advances crypto-specific disclosure rules, project sponsors may reasonably elect registration exemptions, rather than having to structure every token issuance from outside the United States to avoid compliance.
Second, prioritize preparations for custody compliance. Whether using on-chain wallets, self-custody systems, or relying on third-party service providers, it is essential to promptly assess their compliance boundaries under the new rules.
Third, keep abreast of policy adjustments by Alternative Trading Systems (ATS) and related trading platforms. If you are operating an exchange or developing matching-engine products, this may be a window of opportunity to revisit structural design.
Fourth, carefully evaluate whether your project qualifies for “conditional exemption” mechanisms. Some early-stage projects may not be suited for full registration but can secure a viable implementation pathway through rule-based exemptions. This is a compliance route, not a gray-area channel.
This speech did not announce that the crypto industry is “greenlit,” but rather indicated thatthe manner of execution is now open for discussion.
If you are a Web3 entrepreneur considering launching a U.S.-focused token project, structured real-world assets (RWA) products, or exploring compliant trading channels, we welcome you to engage with our team. Mankun Law Firm has long focused on aligning Chinese and U.S. crypto regulations, assisting projects in designing end-to-end pathways within the legal framework.
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*This article is an original work of Mankun Law Firm. It reflects solely the personal views of the author and does not constitute legal consultation or legal advice on any specific matter. We welcome contributions and insights from more Web3 practitioners. For reprints and legal inquiries, please contact our customer service at: mankunlawyer.
