February 16: This week in digital asset federal policy
DC Decentralized: A weekly newsletter on developments in digital asset and blockchain federal policy
This week decoded
The White House convened a second roundtable with leaders from the digital asset and banking sectors to advance discussions on establishing common ground around stablecoin yields.
Speaking of stablecoins, NCUA released proposed regulations to implement sections of the GENIUS Act.
FinCEN issued an order granting exceptive relief to certain covered financial institutions from specific provisions of the 2016 Customer Due Diligence (CDD) Rule. Treasury announced a series of new initiatives aimed at combating fraud in the financial services sector.
On Capitol Hill, the House Financial Services and Senate Banking Committees held hearings with SEC Chair Paul Atkins, focusing on the dismissal of enforcement actions against digital asset companies, rebuilding momentum on the CLARITY Act, tokenization policy, and the SEC’s forthcoming innovation exemption.
Read more below
Congress
Hearings
Last week
On February 11, the House Financial Services Committee held a hearing on “Oversight of the Securities and Exchange Commission.”
On February 12, the Senate Banking, Housing and Urban Affairs Committee held a hearing on “Oversight of the U.S. Securities and Exchange Commission.”
Publications and Events
The White House hosted a second meeting of digital asset and banking industries and trades to discuss stablecoin yields. (Details @EleanorTerrett)
Trump Administration
National Credit Union Administration (NCUA)
The NCUA Board published proposed regulations to implement portions of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). The GENIUS Act charges the NCUA with licensing, regulating, and supervising payment stablecoin issuers that are subsidiaries of federally insured credit unions (FICU subsidiaries). The GENIUS Act also requires the NCUA to issue implementing regulations by July 18th, 2026. The proposed rule proposes regulations to implement the statutorily required process for approval and licensure of permitted payment stablecoin issuers (PPSIs) subject to the NCUA’s jurisdiction. It also proposes regulations limiting FICUs to investing in NCUA-licensed PPSIs. The comment period ends on April 13. (Federal Register)
Treasury Department
Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an order granting exceptive relief to covered financial institutions from certain requirements under FinCEN’s Customer Due Diligence Requirements for Financial Institutions rule (the 2016 CDD Rule). The order excepts covered financial institutions from the requirement to identify and verify the beneficial owners of a legal entity customer each time the customer opens a new account. (Order)(Press release)
Treasury’s Financial Crimes Enforcement Network (FinCEN) launched a dedicated webpage to confidentially accept whistleblower tips on fraud, money laundering, and sanctions violations. (Website)
Secretary Scott Bessent announced unveiled a series of Treasury initiatives to combat fraud, including investigating Money Services Businesses, enhancing reporting to accelerate prosecutions and recover laundered funds, and training law enforcement to better leverage financial data to combat complex fraud schemes. (Press release)
Commodity Futures Trading Commission (CFTC)
The CFTC announced the 35 members named to the Innovation Advisory Committee. (Press release)
Noteworthy Quotes and Events
ADMINISTRATION
Federal Reserve
Fed Governor Christopher Waller delivered remarks entitled “Thoughts on the Crypto Ecosystem” at the “Global Interdependence Center Conference: Digital Money, Decentralized Finance, and the Puzzle of Crypto.” He said, “I think of the crypto ecosystem as consisting of three parts: a crypto-asset, which generally refers to any digital asset implemented using cryptographic techniques that is being traded; a database management protocol used to record trades, commonly referred to as the blockchain, which includes both permissioned and permissionless distributed ledger technologies; and technology that directly facilitates trading crypto-assets; this includes smart contracts and tokenization as a form of data privacy… So far, spillovers to other parts of the financial system from the stress in the crypto industry have been minimal. The lack of spillovers to date may be attributable in part to the relatively limited number of interconnections between the crypto ecosystem and the banking system. While it is critical that we ensure that the financial stability risks associated with crypto-assets are mitigated, it is important that we keep the various parts of the crypto ecosystem distinct in our minds as the debate about if and how to regulate crypto rolls on. Doing so will ensure we do not unduly limit the development and potential future uses of the positive features of the crypto ecosystem.” (Remarks)
Commodity Futures Trading Commission (CFTC)
Chair Mike Selig posted “Innovators are harnessing technologies such as artificial intelligence, blockchain, and cloud computing to modernize legacy financial systems and build entirely new ones. Under my leadership, the Commission will develop fit-for-purpose market structure regulations for this new frontier of finance. The Innovation Advisory Committee will play a critical role in advising the Commission on the commercial, economic, and practical considerations of emerging products, platforms, and business models in the financial markets so that it can develop clear rules of the road for the Golden Age of American Financial Markets.”
The CFTC posted “Scammers use dating apps and social media to begin relationship scams and steal money from Americans. Help protect loved ones by encouraging them to keep their crypto in U.S.-based exchanges.”
Securities and Exchange Commission (SEC)
SEC Chair Paul Atkins posted “Today, I testified before Congress on the progress we’ve made at SECgov to protect investors & strengthen our capital markets. As we move into 2026, my colleagues and I remain committed to increasing transparency, accountability, and innovation. Here are our priorities. 1. Refocus enforcement on rooting out fraud and protecting investors. Capital markets endure on the trust of those who participate in them. Through targeted enforcement and our Cross-Border Task Force, we are working to safeguard investors in domestic and global markets. 2. Reform disclosure requirements. We must modernize, rationalize, and streamline reports so that they are meaningful, understandable, and not a repellant to investors. 3. Provide regulatory clarity for digital assets. A clear framework for crypto assets is overdue. As Congress completes its vital work, our coordination with the CFTC through Project Crypto will help deliver clarity on regulatory obligations for investors & innovators. America’s $124 trillion capital markets are the deepest & most liquid in the world. They are a marvel of human ingenuity. Working across the Trump administration, we’ll ensure the U.S. continues to be the best & most secure place in the world to invest and do business.”
Atkins also posted “The U.S. stands as the Crypto Capital of the World with transparency & innovation leading the way. As Congress works to pass the CLARITY Act, ChairmanSelig & I will provide a bridge toward this landmark legislation, ensuring clarity & certainty for innovators & investors.”
The SEC posted “SECPaulSAtkins on giving regulatory clarity for digital assets: ‘We need a good law coming out of Congress that would undergird our efforts. The SEC has pretty broad authority to interpret and have exemptions under various securities laws. That has been the missing link here.’”
White House
President’s Council of Advisors for Digital Assets Executive Director Patrick Witt posted “A big thanks to yesterday’s participants from the crypto and banking industries. We are going to get this done.”
CONGRESS
Senate Banking Committee SEC Oversight Hearing Q&A
In his opening statement, Chair Paul Atkins said, “Of course, I also support congressional efforts to enact the CLARITY Act. Upon its passage, the Commission stands ready to implement this landmark legislation. A federal framework for crypto markets is long overdue. Under Commissioner Hester Peirce, leadership of our Crypto Task Force, SEC staff has provided more clarity in the past year than in the prior decade, but there is no action we can take that future proofs our rule book more formidably than non-partisan, market structure legislation. As Congress completes its vital work, CFTC Chairman Mike Seelig and I intend to provide a bridge towards legislation through our now joint Project Crypto. We will consider a token taxonomy to offer both investors and innovators a clear understanding of their regulatory obligations. We will also look to consider exemptions that would allow market participants to move and transact on chain.”
In his opening statement, Chair Tim Scott (R-SC) said, “Thank God, under President Trump, we are refocusing on growth, opportunity and common sense. This means clarity instead of chaos, accountability instead of bureaucracy and a government that serves the American people not gets in their way. Jackson, the SEC under your leadership reflects that approach. This can be seen in how your SEC is addressing digital assets. For years under the Biden Administration, regulation of digital asset markets took the form of regulation by enforcement. Instead of clear rules, businesses, builders and investors were left with confusion subpoenas and lawsuits, and instead of innovation growing here at home, much of it was pushed overseas, that approach failed if it failed investors who deserve transparency and protection, it failed entrepreneurs trying to build the next generation of American companies, and it failed our country at a time when global competitors are racing to lead in financial innovation, Congress is now doing Its job as well, working in partnership with the SEC the Senate version of the CLARITY Act is about establishing clear rules of the road for digital assets. It defines responsibilities for regulators, protects investors and gives businesses the certainty they need to innovate in the United States, while keeping consumer protection paramount. Make no mistake, digital asset innovation will happen here.”
Sen. Tim Scott (R-SC)
Sen. Tim Scott (R-SC): “I believe that blockchain technology and digital assets are the future of finance in so many ways, in our country and around the world. Frankly, if we can set up clear rules of the road, we can drive innovation here at home and make America the crypto capital of the world, I will say, without questions. A chair of this committee, we have worked diligently together on market structure legislation for the last six months, plus Democrats, Republicans, meeting thousands of hours at this point trying to figure out the path forward. I think is incredibly important for us to do so, and I think it’s very helpful for us to have a rules of the road that are already in place. Can you speak to why providing legislative clarity for digital assets is critical for American competitiveness and protecting investors at same time?”
SEC Chair Paul Atkins: “I support your efforts, and I agree with you that you here in the Senate and your staff and those in the House have really spent a lot of time and energy to come up with a, you know, with what will be, I think, a very good bill once you iron out the details. We have been providing technical assistance to both houses and both sides of the aisle as well, and spent a lot of time ourselves to try to support your efforts and help them come out in the right place. And so the real issue that is so important about this legislation is to future proof things, so that there’s a clarity to innovators as between the SEC and the CFTC, I like to compare the past 40 some years as two fortresses on either side of a no man’s land with where you have innovators and other would be new products getting, you know, bogged down in that no man’s land with a cross fire, and then never really coming to market. We need to give people clarity as to what they need to do. And the past, which has been the problem with SEC of the past few years, is that the SEC state mum, it didn’t try to alter and accommodate its filings and its forms and rules to accommodate this new innovative technology, so we need firm grounding in statute so that we can’t have any backsliding in the future.”
Sen. Elizabeth Warren (D-MA)
Sen. Elizabeth Warren (D-MA): “These fraudsters stole millions of dollars from their investors. They were convicted of crimes, but after Trump granted them clemency, sec fell in line and dropped its pending cases against them too. You know, it’s part of a broader pattern. Just look at the crypto companies that donated a whopping $85 million to President Trump’s inauguration. They may have scammed investors and consumers, but once Trump was sworn in, the SEC started dropping these cases like hot potatoes crack and donated a million dollars. Case dismissed, Coinbase a million dollars case dismissed, Gemini donates a million dollars case dismissed Binance and a UAE company gave the Trump family stablecoin a huge boost in a $2 billion deal. The case against Binance dismissed, and a recent independent investigation found, and I’m going to quote it, the SEC no longer actively pursues any cases against firms with known Trump ties, the agency backtracked in investigating every firm that has relationships with the Trump family’s crypto business or has donated to Mr. Trump’s political causes. Chair Atkins, help me out here. Prove the outside investigators wrong. List the cases the SEC is still actively pursuing against crypto companies that have made big donations to Donald Trump or Trump businesses.”
SEC Chair Paul Atkins: “Well, so your premise again, I think is wrong. I’m not sure what…”
Warren: “Name the case we weren’t actively pursuing against people or against these giant crypto companies that have made huge contributions to Donald Trump. Are there any?”
Atkins: “I don’t know. I can’t offhand say which ones have. The ones that we’ve dropped just were on registration issues.”
Warren: “When these swindlers crash our economy and pull down retirees pension funds. It’s going to be hard working Americans who pay the price billionaires over families.”
Sen. Mark Warner (D-VA)
Sen. Mark Warner (D-VA): “I’ll jump back into the old pool now, you know, around crypto and, for all that are watching, we want to get this done. It’s got to be done safely. I appreciate folks like Senator Blunt Rochester, her work on this, and Senator Alsobrooks, and there’s a big working bipartisan group on this, and the Chairman’s leadership. So, I just, but I do feel like on DeFi, that there still is, you know, we got to make sure that we don’t set up a regime that allows bad actors or carve out enforcement, something Senator Cortez Masto is working on. Since you’ve already addressed the fact that tokenized stocks are still a stocks, and the stock is a stock is a stock. How are we thinking about this? I know in a recent speech, you said decentralized finance and other forms of on chain software systems will be part of our securities and markets and not drowned out by duplicative or unnecessary regulation. I hope that unnecessary regulation would not include things like AML rules.”
SEC Chair Paul Atkins: “That’s vital and but I think maybe that context was more like looking at, you know, the potential for smart contracts. There are already developments out there to incorporate into the token itself, AML and BSA sort of concerns. ERC-3643 on the Ethereum blockchain is one example of that where people are experimenting with things that are embedded.”
Warner: “Well, we aren’t working and I want to share my Republican colleagues who work on this as well. No, we’re trying to get technical support from you how we deal with the front ends. There’s lots of expertise that we need. We definitely want to get this right, because I think getting it wrong would be a disaster.”
Sen. Bernie Moreno (R-OH)
Sen. Bernie Moreno (R-OH): “I find it a little troubling that during this entire hearing, you haven’t thanked Gary Gensler for setting such a low bar for competence. So, thank you for doing this job. And I think anybody who watched the Biden years saw an SEC that was actually a completely rogue agency. So, thank you for bringing credibility back to the agency, and thank you for your team for working so hard to make that happen. You were way in the ditch when it came to credibility, and what you’ve done just in your short-term has made a remarkable difference. Let’s talk about just some fundamental issues. I think we can lay this out the right way. How do you see the role of your team, you and your team in terms of functioning? Do you view yourselves as enforcing law, or do you view yourselves as somebody who creates laws through enforcement?”
SEC Chair Paul Atkins: “No, we should be enforcing the law, and we shouldn’t be regulating through enforcement and spring it right back into the crypto world. The reality is, this is not new technology. I mean, my son introduced me to the crypto world when he was 14 years old. He’s now 28, it’s a long time ago, and the Congress has failed miserably in creating laws to give you the proper guard rails to say this is allowed and this is not allowed. How important is it for us to finally get this done, to actually give you a regulatory framework that allows you to decide how to enforce laws and keep bad actors out and make certain that good actors are given the room they need to develop and innovate here at. America. Well, thank you, Senator Liz, so we do need, I believe, you know, a good law coming out of Congress and be enacted that would undergo gird our efforts. The SEC has pretty broad authority to interpret and to have exemptions under the various securities laws. And so that, I think, has been the missing link here, frankly, over the last years, where the SEC has not made really any attempt to accommodate this technology. And so that’s created such a gap between, you know, the possible and then what people were actually able to achieve, because SEC was just, you know, had I compared first to the ostrich or the head in the sand, and then secondly, just, you know, the regulation through enforcement views saying You, know, you can interpret the securities laws as well as we can, but then going after people, you know, with the enforcement division, I think that’s not the way for a regulator to operate. A regulator should perceive, you know, what the questions are in the industry, and then address those. And we have many tools to do it, notice and comment, rulemaking, round tables, all sorts of things like that, is the way a competent regulator should be working.”
Moreno: “Yeah. When you hear the exchange about less enforcement actions as necessarily a bad thing, the reality is during again, not to beat this to death, but for those who suffered through Gary Gensler’s reign of terror… he was a man-eating absolute devastating lion. So the enforcement actions were basically, again, enforcement, regulation through enforcement. You had just completely arbitrary, capricious views of what should happen, and what you’re doing is following the law. I just urge my colleagues that let’s get this bill across the finish line. The staff has spent thousands, literally thousands of hours getting this done, and I think it’s long overdue. Let me just ask you one question about something that a lot of people including myself, although no longer in this space, because I divested myself of all digital currencies, by the way, the low number. But what do you think about self-custody? Tell me how you view that from your perspective. Should I be able to be a custodian of my own digital assets if I ever were to get back in that space?”
Atkins: “Yes, I believe so. I think that your right to your property should determine where it should be held. And then you know the differences. You know perhaps in trading, we have to make sure that you know that there things don’t become balkanized, that we don’t have liquidity that’s atomized. But for the national market system to work and to provide, you know, the engine that we have currently, you know, we’ll take, you know, we’ll have to accommodate all sorts of different ways of doing business.”
Sen. Angela Alsobrooks (D-MD)
Sen. Angela Alsobrooks (D-MD): “Chairman Atkins, my number one priority on the Banking Committee is pursuing policies that will create real economic opportunity. And I want more of my constituents, quite frankly, not to live on the margins, but to be able to build wealth, generational wealth, for themselves and their families. And so I’m not afraid to say this, and I think it means access to capital, credit and markets, and it also means robust investor protections. I want to briefly mention a few topics surrounding the development of market structure legislation, which I believe is really important to underserved communities. Young people are extremely interested in these technologies, I think about my daughter and all of her friends, and we need to protect both consumers and our financial system by regulating them. I speak for so many of my colleagues in wanting to get to a really good, bipartisan product that protects investors and the integrity of our markets. And part of this process, like others have noted, means getting a full slate of democratic commissioners confirmed to the Commission very quickly. There’s no reason that this White House cannot nominate qualified individuals to the positions that safeguard our financial system. Now you’ve spoken at length, Chair Atkins about tokenization, the technology behind converting ownership of traditional financial assets, including securities, on a blockchain. And as this technology develops, it’s going to be really important that we ensure the owners of tokenized securities have all the same rights and protections as owners of traditional securities. This is vital for protecting investors and the capital markets that make us the envy of the world. Congress should play an important role here in providing guardrails and direction, and I’d be grateful for your continued cooperation. Do I have your commitment in this regard?”
SEC Chair Paul Atkins: “Yes, yes, Senator. Thank you very much. But I think it goes without saying that under current law that tokenized securities are securities, and we’ll treat them as such. And you have been that’s our firm position at the SEC so and I think our authority under that is clear no matter how securities are recorded, whether, like the old-fashioned paper certificates or book entry at DTCC, or whether they’re traded on chain, you know as tokenized securities. I’m happy to work with you and your colleagues to get you comfortable with that as you consider to work on market structure legislation, for example, but that’s an important precept, and we will obviously, I think that’s clear under current law.”
Sen. Dave McCormick (R-PA)
Sen. Dave McCormick (R-PA): “Financial innovations moving at a blistering pace, and lots of areas, including digital assets, I commend you on your efforts to provide the necessary rules and safeguards for digital assets, while we continue to hopefully come forward with legislation on the CLARITY Act you’ve spoken about your support for Super apps, which would allow for seamless side by side trading of different asset classes. For example, a user on one platform could buy or sell crypto alongside traditional stocks while accessing other financial services. Would you outline for us how the super act, super apps, excuse me, would increase global competitiveness for us registered financial firms and the consumer protection principles that should guide the approach to super apps?”
SEC Chair Paul Atkins: “It comes again back to harmonization with the CFTC. So here we have two agencies that should be very well knit together and so that there are no gaps. And as the markets have evolved over the last 40 years, and you know where there are actors or market participants in both markets, futures and cash markets, you know it’s really incumbent on us to help make this as efficient for them as possible, so that they can compete effectively with foreign or other sorts of firms that were in other jurisdictions, they don’t have dichotomy as between futures regulator and a cash markets regulator. That’s our goal, is to make it efficient from anywhere from cross margining and portfolio margining to just what sort of medallion you need to do, XY&Z. The more harmonized we are, the better and more efficient.”
Sen. Lisa Blunt Rochester (D-DE)
Sen. Lisa Blunt Rochester (D-DE): “So there’s been a lot of discussion about market structure, because this committee is working on that issue right now, and I want to shift specifically to crypto as it relates to this. In many crypto markets, founders or insiders can exert control or otherwise have confidential information on token supply, the schedule of token releases, governance changes or major technical decisions, especially before public trading, you would say that’s correct?”
SEC Chair Paul Atkins: “I guess it depends on the instrument and the token and right.”
Blunt Rochester: “I know it kind of depends on, but all in all, this is kind of the way it works there, case by case, this does happen, correct?”
Atkins: “Yeah, it could. Yes.”
Blunt Rochester: “Okay, and so today, I think it’s is insider trading or self-dealing, regardless of asset classification by someone with confidential information or insider control harmful to market integrity and investors?”
Atkins: “Well, we want to make sure that the markets are transparent and whatnot.”
Blunt Rochester: “I really think I tried to like, these are kind of basic, simple questions. I think what I’m trying to get at is that, to me, insider trading is bad? No, it shouldn’t happen anywhere. And I think we agree on that, right?”
Atkins: “Well, it depends on, like on the futures markets. I mean, it’s kind of talking about…”
Blunt Rochester: “That’s futures, but the concept of insider trading, this is something you’re against right?”
Atkins: “On the securities markets. Yes.”
Blunt Rochester: “Okay, I’ll just say this didn’t go the way I thought it was going to go. Because I thought these were sort of basic, all of us agree insider trading is bad and wrong. As a matter of fact, even the case that I referenced, that you did, the complaint against this was like, a guy giving his friends tips and then them passing him envelopes of cash. To me, what I think for our committee is going to be important as we look at something as consequential as market structure, is that we’re also paying attention to making sure that people don’t have this self-dealing or insider trading.”
House Financial Services Hearing on SEC Oversight Q&A
Rep. Maxine Waters (D-CA)
Rep. Maxine Waters (D-CA): “On January 15, my colleagues and I sent you a letter detailing our significant concerns about the SEC dismissal of over a dozen crypto actions. Our concerns are twofold. First, these cases were dismissed despite the fact that the SEC was winning in court, proving that the SEC crypto enforcement was well grounded. And second, the about-face on Sun, who gave millions of dollars to President Trump and his family. I am most astonished by TRX, the fall of 2024 a federal district court had the SEC state its case against Justin Sun in February 2025 to explore. Well, while you were exploring a potential resolution, Mr. Sun has been busy. He is ingratiating himself. He has invested in the World Liberty Financial token and is the top holder of the Trump meme coin, which earned him an invitation to the White House and a special dinner with the President. Just last week, a person verified to be Mr. Sun’s ex-girlfriend stated publicly that she has detailed evidence that Mr. Sun manipulated the price of TRX using fake trading accounts, and noted she is willing to provide evidence and testify in support of these allegations. Chairman Atkins, you have said that under your leadership, the SEC will focus on real fraud. Yes or no, does your statement extend to fraud in the crypto markets? Does your statement extend to fraud in the crypto market?”
SEC Chair Paul Atkins: “Well, whatever involves securities.”
Waters: “Okay, is the SEC going to continue to prosecute fraud against Justin Sun? Yes or no.”
Atkins: “Well, I can’t discuss anything about that.
Waters: “Okay. Well, will you commit to giving the committee a confidential briefing on the matter?”
Atkins: “Happy to talk to the extent I can about matter.”
Waters: “Given that courts have ruled that TRX is a security and therefore within the SEC jurisdiction, do you agree that the SEC has a responsibility to obtain additional evidence offered by Mr. Sun’s ex-girlfriend, yes or no?”
Atkins: “Well, again, I can’t comment on any ongoing matter.”
Waters: “Will you commit today that the SEC will continue to investigate and prosecute fraud, even if that fraud entails crypto assets that are securities, such as in the case of Justin Sun and TRX?”
Atkins: “Again, that’s our job, to investigate fraud that involves securities, so wherever it may be.”
Waters: “Well, I want to tell you, you made a commitment, you came in, you talked about you were going to deal with fraud. It’s right before your eyes and you will we on this committee are going to keep on until we get to the bottom of this fraud. Will you give us a confidential briefing on this matter?”
Atkins: “To the extent the rules allow me to do that, yes.”
Rep. Frank Lucas (R-OK)
Rep. Frank Lucas (R-OK): Turning to the Crypto Task Force, I understand you’ve contemplated an innovation exemption for tokenized equities. Our current capital markets are the envy of the world, and of course, must be safeguarded. Will you ensure that the Commission seeks broad and diverse stakeholder input through the notice and commitment process to mitigate unintended consequences of potential exemptions?”
SEC Chair Paul Atkins: “Yes, notice and comment is important, but the innovation exemption that I’ve been talking about cabins, time limited, transparent and really anchored in strong investor protection. We would police that carefully, and it’s like a sand box, but not picking winners and losers.”
Rep. Nydia Velázquez (D-NY)
Rep. Nydia Velázquez (D-NY): “Since becoming Chair, the commission has pulled back from a remarkable 61% of the cases against the crypto industry. Do all these cases have the same legal or evidentiary deficiencies?”
SEC Chair Paul Atkins: “Well, thank you. Most of those were withdrawn or changed before I arrived in last April, but I can say that you know, what we’re trying to do is realign to what the statute hopefully will be the market structure statute, and the outlines that I’ve given in a couple of speeches regarding, you know, how we view the taxonomy and the structure on crypto.”
Rep. Andy Barr (R-KY)
Rep. Andy Barr (R-KY): “Chairman Atkins, thanks for the great work you’re doing at the commission. For two consecutive congresses, the House has passed and sent to the Senate digital asset market structure legislation, most recently known as the CLARITY Act, receiving overwhelming bipartisan support in this chamber last July. That level of bipartisan agreement reflects a growing interest in providing long-term certainty for market participants. From your perspective, Mr. Chairman, how does durable digital asset market structure legislation like the CLARITY Act impact the United States ability to continue to lead in financial market innovation and protect investors?”
SEC Chair Paul Atkins: “Well, as you know, the President has set out the challenge to that the US should be the crypto capital of the world, and I feel strongly that we can and should do that and achieve it. To do that, we have to have a framework that makes sense, that is fit for purpose. Unfortunately, traditional rules that the SEC has, you know, are not really fit for purpose here, and has created a lot of uncertainty in the marketplace. Thus the CLARITY Act, and thus the rule, the true importance of the SEC to work very much hand in glove with the CFTC, in order that there be no gaps in the oversight, but that also innovators have surety as to what they’re doing, and they’re not going to get, you know, in a gotcha sort of situation like has happened in the past with some of the enforcement actions that the SEC has brought in that area. So, we want to make sure that, you know, people know the rules of the road and can abide by it, and that those will foster innovation here in the United States.”
Barr: “I know there’s a few outstanding issues and points of disagreement in the Senate. We certainly encourage a resolution of those points of disagreement to achieve what you said is so important kind of a statutory framework for market structure so that indeed, the United States can be the crypto capital of the world.”
Rep. Young Kim (R-CA)
Rep. Young Kim (R-CA): “Under Gary Gensler’s runaway rogue regulation, the Commission drifted away from its mandate of protecting investors and facilitating capital formation, using regulation as enforcement, he single handedly set back the crypto industry in this country by over a decade, and since taking office, President Trump and you have taken important steps to reverse that trend. Thank you for your work in Congress. We have worked hard to assist those efforts with the passage of The GENIUS Act, and now we must continue that work by getting the CLARITY Act across the finish line. One way that the SEC has achieved that is through the Crypto Task Force and its focus on unlocking tokenization to promote innovation and efficiencies in our capital markets. Can you provide a brief update on the efforts to unlock tokenization and the benefits tokenization promises to bring to the US capital markets?”
SEC Chair Paul Atkins: “Tokenization, I think, is very important innovation that’s coming about, and tokenized securities that can be traded on chain, I think has a future benefit just for the transparency that distributed ledger technology brings to the issue, and then the prospect for a t zero sort of payment versus delivery type of regime on change so that can help de risk the financial services industry by a lot. We want to encourage that, and then have rules around this that protect investors, protect issuers and the other stakeholders in this whole effort.
Kim: “I know that one avenue we’re exploring to unleash tokenization is the potential innovation exemption. So how is the commission approaching this innovation exemption, and is there a timeline to issue that exemption?”
Atkins: “Well, we’re planning to do that here this year, and so we’re hoping that you all will in Congress will adopt the CLARITY Act, or whatever, however you do it, and then that arrives on the president’s desk. But in the meantime, we’re working a pace, and this innovation exemption, I think, will be a good watershed.”
Kim: “Sure, and one aspect of Crypto Task Force has been collecting industry feedback around topics such as tokenization. So how does the commission plan to utilize the feedback that you collect on that issue from the Crypto Task Force?”
Atkins: “Yes, we’ve done a number of round tables, and we’ve received a lot of commentary coming in from all sorts of stakeholders in and around the digital asset industry. We are distilling that and using that to help refine what we will come out with. With respect to this innovation exemption.”
Rep. Josh Gottheimer (D-NJ)
Rep. Josh Gottheimer (D-NJ): “There’s been much discussion about the SEC forthcoming digital asset innovation exemption. You’ve said that this exemption will, quote, allow registrants and non-registrants to quickly go to market with new business models and services that do not neatly fit within our existing rules and regulations. Just yesterday, the founder of the SafeMoon token was sentenced to eight years in prison for conspiracy to commit securities fraud, and new services like Pump Dot Fun make it very easy to launch tokens backed by absolutely nothing. I believe we need clear guardrails and rules of the road for digital asset innovation to flourish in the United States. We also have to have strong consumer protections. Can you discuss the timing and scope of the innovation exemption, and how you’re building consumer protections into it?”
SEC Chair Paul Atkins: “Yes, well, so fraud is fraud, whether it happens, you know, the crypto world or in paper certificates, and so we take that very seriously. And like you say, that really is a detriment to investor confidence if we’re not active in that area. So with respect to the innovation exemption, you know it will be when we come out, the goal is to make it a cabins limited time, type of exemption, but to allow innovators to operate in that that within those limits.”
Gottheimer: “And there’s supervision, but you’re concerned, like I am, about these tokens backed by nothing like these, these Pump Dot Fun type things, right? I assume that’s not what the SEC wants, absolutely. Okay. I think it’s very important we keep an eye on that. Obviously want innovation, but we also don’t want scam artists out there and hucksters pushing stuff online. And I think we have to be very careful about that. The SEC has rightly been spending a lot of time and attention on digital assets, but there are many other opportunities for updating and modernization. Electronic record keeping, rules E, delivery, cross trading, Form PF, reporting for private funds, co-investment by open and mutual funds and many other areas are ripe, in my opinion, for modernization. Are these initiatives in your SEC still getting appropriate attention? How do you and your staff prioritize them, and how are you thinking about them?”
Atkins: “Well, we have a lot on our plate, obviously, but you know, we’re, I’m really very pleasantly surprised coming back to the SEC how gung ho the staff is and all the divisions to dive into these. I think we’ve restored confidence in the morale of the agency, and people are leaning into it.”
Gottheimer: “Yeah and I think the modernization piece is key, right? There’s a lot of opportunity to do it. I appreciate that you’ve previously recognized that tokenized securities are and will continue to be securities. Would you agree that market making activity of tokenized securities should be treated in similar manner to traditional financial market making activity?”
Atkins: “Yeah. Well, those are those big issues of, you know, how to adjust the rules to deal with the new reality, but we definitely are looking in that, to that in our Trading and Markets area. And we’ve been having round tables, you know, in this regard, and working, obviously with the CFTC on it as well.”
Gottheimer: “Thank you. Digital asset market actors consistently tell us that regulatory fragmentation between the SEC and CFTC creates uncertainty, discourages responsible innovation and drives activity offshore. I appreciate the steps you’ve been taking in the CFTC to harmonize definitions and disclosure standards and supervisory expectations to reduce regulatory fragmentation. Can you discuss some of the challenges that market actors face, navigating across conflicting regulatory frameworks?”
Atkins: “Yeah, well, I like to use an analogy of SEC CFTC, two fortresses with no man’s land in between. So traditionally, that field or that no man’s land is littered with the bodies of would be products that could never really make it through that gauntlet. So we are, you know, out to change that and to work in harmony.”
Rep. Ritchie Torres (D-NY)
Rep. Ritchie Torres (D-NY): “You know, I’ve long been a believer in emerging technologies like crypto and blockchain. But as you know, every industry has actors good and bad. Crypto is no exception. Have you taken any enforcement action against any bad actor in the crypto industry?”
SEC Chair Paul Atkins: “Yes. I mean, we have brought cases for fraud, outright fraud, and we’re in litigation with some of those right now involving digital assets, involving digital assets, one actually up in your city or up in New York.”
Miscellaneous
Sen. Dick Durbin (D-IL) posted “Americans’ opinions about cryptocurrency are crystal clear. In a recent survey, 61% said they oppose using taxpayer dollars to bail out the crypto industry—including 57% of Trump supporters. Will the White House and Congressional Republicans protect the taxpayers or their rich crypto donors?”
Rep. Rashida Tlaib (D-MI) posted “During the 2024 election, nearly half of corporate spending came from the crypto industry. Now the SEC is dismissing cases against major crypto-related Trump supporters like Coinbase, Kraken, Binance, and Justin Sun. The corruption is just staggering.”
Sen. Dave McCormick (R-PA) posted “Digital assets are a fast-growing space. In this new world, we need to ensure competition and opportunity, while also establishing clear rules that give consumers and investors confidence. Smart crypto regulation will help protect the public and encourage responsible growth.”
Rep. Bryan Steil (R-WI) posted “BREAKING CRYPTO NEWS SECPaulSAtkins confirms that the SEC is preparing Token Taxonomy guidance in line with CLARITY to secure US Leadership in Digital Assets.”
What I’m Reading This Week
J5 Warns of Use of Crypto Platforms for Tax Evasion, Other Crimes, Kelsey Brooks, Tax Notes.
Taxing Digital Assets, Jasper L. Cummings, Jr., Tax Notes.
J5 Discusses Cryptocurrency Payment Processor Expansion, Tax Notes.
About Zero One Strategies
Zero One Strategies is a specialized government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.
The practice focuses on key areas such as artificial intelligence, digital assets, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.
Contact us at Stacey@ZeroOneStrategies.com
