SEC's Regulatory Shift Embracing Innovation and Clearer Digital Asset Guidelines

SEC's Regulatory Shift Embracing Innovation and Clearer Digital Asset Guidelines

The U.S. Securities and Exchange Commission (SEC) is making a substantial shift in its regulatory stance towards innovative financial markets, including digital assets. At the SEC Speaks conference, Chairman Gary Gensler affirmed that the SEC will not shy away from innovation and will work towards establishing a clear, supportive regulatory environment for the digital asset space.

Chairman Gensler emphasized that “markets and technologies are inherently evolving. The SEC must not stifle this evolution but actively support and back it.” He further acknowledged the SEC’s past approach, stating that it had initially taken an “ostrich approach” to digital assets—ignoring them—and later adopted a “shoot first and ask questions later” policy when regulating the sector. This approach, according to Gensler, had eroded market confidence.

To address these concerns, Gensler directed various SEC departments to prepare drafts for new rules surrounding digital assets. One key proposal includes allowing SEC-registered institutions to store and trade both traditional securities and digital assets in a unified platform. This would lower investor costs and enable faster transactions in non-security digital assets under a federal regulatory framework.

Additionally, the SEC is planning to integrate its FinHub (Financial Innovation Hub) with other divisions to foster the adoption of emerging technologies like blockchain, AI, and machine learning throughout the agency. Chairman Gensler emphasized, "Innovation should be embedded in the SEC’s organizational culture."

The SEC is also revisiting its Consolidated Audit Trail (CAT), a massive data collection and monitoring system. Gensler criticized CAT for its high operational costs, which exceed $250 million annually, and called for a re-evaluation of its reporting requirements and scope.

Finally, Chairman Gensler reiterated that the SEC’s role is not to hinder innovation but to facilitate the market’s evolution. He stated, “The SEC is no longer an agency that suppresses innovation, but one that actively encourages it.”