SEC Chairman Atkins Outlines Crypto Rulemaking Agenda: Regulation Crypto Assets, Transfer Agents, Cu

Key Takeaways

• In a speech at the Solana Policy Institute Summit, SEC Chairman Paul Atkins described three connected initiatives under Project Crypto: the proposed Regulation Crypto Assets, proposed transfer agent modernization rules, and a forthcoming custody proposal for investment advisers and regulated funds.
• He also urged Congress to pass the CLARITY Act while saying the SEC will proceed with or without it.
• Compliance teams at advisers, funds, broker-dealers, and transfer agents should prepare for substantial changes to how crypto assets are issued, held, and transferred.

Deep Dive

In a speech at the Solana Policy Institute Summit, SEC Chairman Paul Atkins described three connected initiatives under Project Crypto: the proposed Regulation Crypto Assets, proposed transfer agent modernization rules, and a forthcoming custody proposal for investment advisers and regulated funds. He also urged Congress to pass the CLARITY Act while saying the SEC will proceed with or without it. Compliance teams at advisers, funds, broker-dealers, and transfer agents should prepare for substantial changes to how crypto assets are issued, held, and transferred.

Three workstreams were identified. First, Regulation Crypto Assets has been proposed but not adopted. It would give issuers a path to raise capital using digital assets. Atkins said a key open question in the public feedback is when a covered investment contract ceases to exist once the promised managerial efforts are complete. He tied that question to the CLARITY Act, which he said addresses a limitation in current law. Second, the SEC has proposed streamlining and modernizing transfer agent rules, which have gone largely untouched for about forty years, to reflect tokenized and onchain securities. Public comment is pending. Third, Atkins has directed staff to develop a custody proposal, which has not yet been issued. He said it would permit investment advisers, including those managing regulated funds, to self-custody crypto assets and to use state trust companies as custodians, "under certain circumstances and subject to appropriate conditions." The conditions are not yet defined.

No effective dates or compliance deadlines were given. The timing items are the vote on the CLARITY Act that Atkins said was set for the day after the speech, the open comment periods on the two proposals, and an unspecified date for the custody proposal. Because the custody conditions are unknown, any relaxation of the qualified custodian approach would probably come with controls that advisers must meet. These could include safeguarding, recordkeeping, and valuation controls, and they remain unconfirmed.

Recommended actions: (1) Monitor the CLARITY Act vote and the SEC's rulemaking dockets. (2) Consider submitting or contributing to comment letters on Regulation Crypto Assets and the transfer agent proposal, especially on the question of when an investment contract ends. (3) Advisers and fund sponsors should review their current custody arrangements under the Advisers Act and the Investment Company Act and assess how self-custody or state trust company custody would affect operational, cyber, and fiduciary risk. (4) Transfer agents and tokenization teams should gap-assess recordkeeping and technology systems against the proposed changes. (5) Do not change existing compliance programs on the basis of the speech alone. Current law and enforcement standards still apply until rules are adopted.

Risk implications: The regulatory direction favors crypto market participants, but uncertainty remains because the proposals are not final and legislative outcomes are unresolved. Rules adopted without legislation could also be revisited by a future administration or challenged in court. Expanded self-custody could increase operational and investor protection risk if controls are weak. Early preparation could provide a competitive advantage for firms planning crypto products or tokenized securities.

Source: Securities and Exchange Commission