SEC Chair Paul Atkins this week laid out a plan to create a limited 'innovation pathway' for on-chain trading systems, signaling the agency's most concrete step yet toward fitting crypto-native markets inside the U.S. securities rulebook. In a May 8 speech, Atkins said the SEC will use formal rulemaking to decide how these platforms fit within the legal definition of an exchange — a question that has hung over the industry for years.
The Atkins proposal
Atkins didn't offer a single fix. Instead, he sketched a menu of possible approaches: exemptive relief, conditional no-action letters, pilot programs, tailored registration, or even a lighter-touch registration model. The core problem, he said, is that on-chain protocols can automatically handle jobs that under current law belong to separate entities — exchanges, broker-dealers, clearing agencies, transfer agents. That blurring creates legal uncertainty no one can ignore.
The SEC's Division of Trading and Markets already issued conditional relief to self-custodial crypto interfaces back on April 13, an interim step while the bigger regulatory puzzle gets solved.
Learning from the 1990s
Atkins pointed to the SEC's own history as a template. Back in the 1990s, the agency faced a similar mismatch when electronic trading networks started popping up. It responded with Regulation ATS in 1998, letting alternative trading systems operate as broker-dealers under specific conditions — balancing innovation with investor protection. Atkins suggested that same regulatory pragmatism could work for on-chain finance.
Commissioner Hester Peirce floated a similar idea last December. She proposed tailoring Form ATS for crypto, revising disclosure requirements, and rethinking how ATS reporting should work on public blockchains. The agency's Crypto page recorded five market structure or tokenization actions between March 17 and May 4, suggesting the topic has been in active discussion internally.
Interim steps and earlier actions
Before Atkins' speech, the SEC had already been nudging the door open. A February FAQ clarified that trading pairs of securities and non-security crypto assets is permissible under current rules, that existing ATS forms can handle crypto disclosures, and that broker-dealer ATS operators can perform clearing and settlement functions. Those answers removed some obstacles but left the bigger architecture questions unresolved.
The innovation pathway Atkins described could eventually take one or more of the regulatory forms he listed — or something else entirely. Formal rulemaking will determine the shape.
For now, the crypto industry has a direction of travel. The next concrete step is the SEC publishing a proposed rule or request for comment. No timeline was given, but the agency's recent pace — five crypto-related actions in under two months — suggests it won't drag its feet.
