Thank you and good afternoon. I am delighted to address this distinguished group at today’s roundtable on tokenization. Thank you to the panelists for their participation.
The discussion today is timely as securities are increasingly moving from traditional databases to blockchain-based ledger systems. This movement is similar to the transition of audio recordings from analog vinyl records to digital formats decades ago. The ability to encode audio in a digital file format unlocked tremendous innovation within the music industry. Audio was freed from its boundaries as a static creation and became compatible across a wide range of devices and applications.
Just as the shift to digital audio revolutionized the music industry, the migration to on-chain securities has the potential to remodel aspects of the securities market by enabling new methods of issuing, trading, owning, and using securities. For example, on-chain securities can utilize smart contracts to distribute dividends to shareholders. Tokenization can also enhance capital formation by transforming relatively illiquid assets into liquid investment opportunities.
In order for the United States to be the ‘crypto capital of the planet,’ the Commission must consider whether regulatory changes are needed to accommodate on-chain securities and other crypto assets. Rules designed for off-chain securities may stifle the growth of blockchain technology.
A key priority will be to develop a rational regulatory framework for crypto asset markets that establishes clear rules while discouraging bad actors. Clear rules are necessary for investor protection against fraud.
It is a new day at the SEC. Policymaking will no longer result from ad hoc enforcement actions. Instead, the Commission will utilize its existing authorities to set fit-for-purpose standards for market participants. This undertaking requires coordination across multiple offices and divisions within the Commission.
Now, I mentioned three areas of focus for crypto asset policy – issuance, custody, and trading. Regarding issuance, I intend for the Commission to establish clear guidelines for distributions of crypto assets that are securities or subject to an investment contract. In the past few years, the SEC first pursued what I call the ‘head-in-the-sand’ approach, then pivoted to regulation through enforcement. I am committed to charting a new course.
Regarding custody, I support providing registrants with greater optionality in determining how to custody crypto assets. It is important to provide clarity on the types of custodians that qualify as a ‘qualified custodian.’
Regarding trading, I am in favor of allowing registrants to trade a broader variety of products on their platforms. While the Commission works to develop a comprehensive regulatory framework, securities market participants should not be compelled to go offshore to innovate with blockchain technology.
Thank you for your attention.
— new from SEC.gov