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SEC Chair Paul Atkins unveils crypto rulemaking plans

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Atkins' proposals align with Trump's crypto-friendly

stance

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'Project Crypto' to modernize securities rules for digital

assets

(Adds details of speech and context in paragraphs 10-20)

By Hannah Lang and Douglas Gillison

July 31 (Reuters) - The head of the U.S. securities

regulator unveiled sweeping plans to overhaul capital markets

regulations on Thursday to accommodate cryptocurrencies and

blockchain-based trading, in a major win for the digital asset

industry, which has long pushed for tailored rules.

Securities and Exchange Commission Chair Paul Atkins laid out

numerous pro-crypto plans in remarks delivered in Washington,

including that he has directed commission staff to craft

guidelines to determine when a crypto token is a security as

well as proposals for a wide range of disclosures and

exemptions.

Atkins also said he has asked SEC staff to work with firms

looking to offer tokenized securities -- blockchain-based shares

of stocks or funds that have become an increasing focus of many

major crypto players.

"This represents more than a regulatory shift - it is a

generational opportunity," Atkins said in a speech before the

America First Policy Institute, a think tank that was created to

support President Donald Trump's policy agenda.

If enacted, Atkins' proposals would represent a broad shift

for U.S. securities regulation, potentially enabling crypto to

become more enmeshed with traditional finance.

Details of his plans for crypto come just a day after a

cryptocurrency working group formed by Trump called on the SEC

to create new rules specific to digital assets and outlined the

administration's stances on market-defining crypto legislation.

In a landmark report, the White House encouraged the SEC and

the Commodity Futures Trading Commission to use their existing

authorities to "immediately enable the trading of digital assets

at the federal level."

On the campaign trail last year, Trump courted crypto cash by

pledging to be a "crypto president" and promote the adoption of

digital assets.

That is in stark contrast to former Democratic President Joe

Biden's regulators, who, in a bid to protect Americans from

fraud and money laundering, cracked down on the industry. The

Biden administration's SEC sued exchanges Coinbase,

Binance, and dozens more, alleging they were flouting U.S. laws.

Trump's SEC has since dropped those cases.

Influential crypto executives had accused the Biden

administration of being hostile to digital assets, and routinely

expressed frustration with the lawsuits Biden's SEC brought

against several crypto companies, many of which alleged that

most crypto tokens were unregistered securities.

'PROJECT CRYPTO'

Atkins, who worked with crypto firms in recent years before

heading the SEC, said the agency's crypto rulemaking will be

housed under a new initiative dubbed "Project Crypto," which he

said will seek to broadly modernize securities rules and

regulations.

Project Crypto will move to swiftly implement the White House's

recommendations laid out in Wednesday's report, Atkins said.

Those include establishing an "innovation" exemption from

securities laws to allow market participants to engage in new

business models, and providing guidance as to how digital assets

can be considered commodities.

Atkins said he has asked SEC staff to draft "clear and simple

rules of the road" for crypto distributions, custody and

trading, and that in the meantime, the regulator will consider

using interpretative and exemptive authorities to provide

regulatory flexibility for crypto issuers, exchanges and other

intermediaries before new rules are formally adopted.

Atkins also said that most cryptocurrencies are not securities,

a designation that requires registration with the SEC along with

certain disclosures. Crypto firms have tried to avoid that

designation, because current regulations require securities to

be traded separately from other assets, like commodities.

But that could soon change, Atkins said, adding that he has

directed SEC staff to develop a framework that allows for

certain crypto assets that are deemed to be securities to be

traded alongside tokens that are not securities.

The extensive agenda Atkins laid out for crypto on Thursday is a

major change in fortunes for the crypto industry, which spent

millions of dollars in last year's election to support Trump and

other Republican congressional candidates.

Atkins' plans for crypto answer nearly all of the crypto

industry's major wishlist items.

The crypto sector has for years argued that existing U.S.

regulations are inappropriate for cryptocurrencies and has

called for Congress and regulators to write new ones that

clarify when a crypto token is a security, commodity, or falls

into another category, such as stablecoins.

Trump's support for the crypto industry has sparked

conflict-of-interest concerns, which at times have threatened to

derail congressional crypto legislation that the industry has

said is critical to its future.

Trump's family has launched cryptocurrency meme coins, and

the president also holds a stake in World Liberty Financial, a

crypto platform. The White House has denied that any conflicts

of interest are present.