US Leadership in the Digital Financial Revolution

Good afternoon, everyone. Thank you for Norm's enthusiastic introduction, and thank you for inviting me. I am very pleased to gather with you all, especially at this critical moment when the United States is demonstrating leadership in the crypto asset market. Before sharing some thoughts, I want to thank the America First Policy Institute for convening this timely discussion. Additionally, to put the compliance team at ease, I must declare that the views I express today are solely my personal opinions and do not necessarily represent the position of the SEC or other commissioners.

Today, I want to discuss what Commissioner Hester Peirce and I call the "Crypto Project", which will serve as the North Star in the SEC's historic effort to assist President Trump in building the United States as the "Global Crypto Capital". But before discussing our plans for crypto market dominance, I want to review some turning points in capital market development history, as they are quite similar to our current moment, and the future we shape should be worthy of the legacy we inherit.

From Buttonwood Tree to Blockchain: Evolution of Capital Markets

According to the PWG Report, one of my primary tasks is to quickly establish a regulatory framework for crypto asset issuance in the United States. Capital formation is one of the core missions of the SEC, but for a long time, the SEC has ignored the market's need for choice and suppressed crypto-based financing models. This has led the crypto market to gradually move away from asset issuance, depriving U.S. investors of the opportunity to participate in productive economic activities through this technology. The SEC's long-standing avoidant attitude towards crypto assets should become a matter of "shoot first, ask questions later" history.

Although the SEC's past position was to view most crypto assets as securities, in reality, most crypto assets are not securities. However, due to the ambiguous scope of the "Howey Test", some innovators have cautiously treated all crypto assets as securities. U.S. entrepreneurs are using blockchain technology to modernize various traditional systems and tools. For example, Bernie Moreno, the current federal senator from Ohio and a former entrepreneur, founded a company that puts car ownership certificates on the blockchain before running for office. He saw efficiency issues in property transfers and proposed a practical solution using blockchain technology.

These entrepreneurs need and should have a clear set of criteria to help them determine whether their business is subject to securities laws. I have instructed committee staff to develop clear guidelines to help market participants determine whether a crypto asset is a security or constitutes an investment contract. Our goal is to help them classify crypto assets such as digital collectibles, digital goods, or stablecoins according to these clear standards and assess the economic substance of their transactions. Through these classifications, market participants can determine whether the issuer has ongoing commitments or obligations, and thus whether the asset constitutes an investment contract.

Moreover, being classified as a security should not be a sin of development. We need a regulatory framework that adapts to crypto securities, allowing these products to thrive in the U.S. market. Many issuers will tend to use the product design flexibility provided by securities laws, and investors will benefit from security attributes such as dividends and voting rights. Project teams should not be forced to establish DAOs, create offshore foundations, or decentralize prematurely. I am excited about new commercial applications of crypto securities, such as participating in blockchain consensus mechanisms through tokenized stocks.

Therefore, for crypto asset transactions that indeed fall under securities law, I have requested staff to propose specific disclosure regulations, exemption clauses, and a "safe harbor" system, including for so-called "Initial Token Offerings (ICO)", "airdrops", and network reward programs. Our goal is to enable issuers to include U.S. users in their issuance plans to enjoy legal certainty and a friendly regulatory environment, rather than excluding them due to legal risks. I believe that by adhering to this direction, we may usher in an innovative Cambrian explosion.

Additionally, many companies wish to "tokenize" common stocks, bonds, partnership interests, or securities issued by other parties. Due to U.S. regulatory barriers, such innovations mostly occur overseas. Our policy department has also received numerous applications—from well-known Wall Street companies to Silicon Valley unicorns—seeking approval to distribute security tokens within the United States. I have requested the committee to work with these companies and provide regulatory exemptions where appropriate to ensure the U.S. is not left behind in crypto innovation.

Enhancing Freedom: Providing Diverse Custody and Trading Venue Choices

Second, to achieve the president's goals, the SEC must ensure that market participants have maximum freedom in choosing custody and trading platforms. As I have pointed out, the right to own and self-manage private property is a core U.S. value. I firmly believe that individuals have the right to use self-hosted wallets to hold their crypto assets and participate in on-chain activities such as staking. However, some investors will still choose to entrust their assets to SEC-registered intermediaries like brokers or investment advisors, which will be subject to additional regulatory requirements when providing custody services.

During my tenure, implementing the PWG Report's recommendation to "modernize SEC registration intermediary custody obligations" will be a priority. The previous government's "special purpose broker framework", SAB 121 document, and "Channel Cutting Action 2.0" have resulted in almost no compliant crypto asset custody service providers in the market today. Existing custody regulations do not consider the characteristics of crypto assets. I have instructed staff to study how to adapt the current system, including providing exemptions or modifying rules when necessary to promote the development of crypto asset custody services.

The PWG Report also recommends allowing market participants to conduct multi-line businesses under the most effective licensing structure. We cannot force them into an outdated "Procrustes' bed" regulatory system. I support allowing them to freely choose the most suitable regulatory path while safeguarding investor interests.

Promoting Super Apps: Achieving Horizontal Integration of Products and Services

Third, another important goal during my chairmanship is to allow market participants to innovate within the "Super-Apps" framework. Many people ask me, "What is a super app?" It's simple: securities intermediaries should be able to provide diverse products and services on one platform, under one license. A broker with an Alternative Trading System (ATS) should be able to simultaneously offer non-security crypto asset trading, security-based crypto asset trading, traditional securities services, and services like staking and lending, without applying for licenses in over fifty states or multiple federal licenses.

Current federal securities laws do not prohibit registered trading platforms from listing non-security assets. I have instructed committee staff to develop further guidance and plans to promote the landing of such "super apps". Perhaps we will eventually name it "Reg Super-App".

According to the PWG Report recommendations, the SEC should collaborate with other regulatory agencies to establish the most concise and efficient licensing system for registered intermediaries, avoiding multiple regulatory overlays. This model is widely adopted in banking, where banks generally do not need additional registration as brokers or clearing institutions. Regulators should provide regulation at the lowest necessary dose, protecting investors while encouraging corporate growth. We should not use overly paternalistic regulation to drive companies overseas or let regulatory burdens favor resource-rich large companies, thereby stifling the competitiveness of small and medium enterprises.

Based on specific PWG Report recommendations, I have instructed the committee to develop a framework that allows non-security and security-based crypto assets to be traded in parallel on the same SEC regulatory platform. Additionally, I have requested an assessment of how to use the committee's powers to allow certain crypto assets to be listed on non-SEC registered trading platforms. This will not only enable state-licensed platforms to offer more assets but also provide margin functionality for CFTC-regulated platforms, potentially releasing greater liquidity, although Congress has not yet granted additional powers.

Releasing U.S. Market Potential: Beautiful and Powerful On-Chain Software Systems

Fourth, I have instructed committee staff to update outdated regulatory rules to release the potential of on-chain software systems in the U.S. securities market. On-chain software comes in various forms—some systems are truly decentralized and do not rely on any intermediaries; others are maintained by specific operators. Regardless of the form, they should have a place in our financial markets.

Any market structure regulatory framework for crypto assets must provide a clear path for on-chain software developers who do not rely on centralized intermediaries. Decentralized Finance (DeFi) software systems—such as Automated Market Makers (AMM)—can achieve automated, non-intermediary financial market activities. U.S. federal securities laws have always assumed the existence of regulatable intermediaries in the market, but this does not mean we should forcibly introduce intermediaries just to conform to old regulatory logic. If the market can operate without intermediaries, we should respect that.

We will leave room for the development of these two modes - centralization and decentralization - in the U.S. market. We will protect developers who simply publish software code, reasonably draw the line between intermediary participation and non-intermediary activities, and establish clear and feasible regulatory rules for intermediary institutions that wish to operate on-chain software systems. DeFi and other on-chain software systems will become part of our securities market, rather than being stifled by redundant or excessive regulation.

To realize this vision, we need to modify existing rules. For example, to support on-chain trading of securities, we may need to revise the National Market System Regulation (Reg NMS). In fact, I had jointly written a dissenting opinion against Reg NMS with then-Commissioner Cynthia Glassman twenty years ago, and today, those concerns seem more relevant. Over the past twenty years, the excessive requirements imposed by Reg NMS have distorted market activities and hindered the natural evolution of the U.S. securities market. Congress had envisioned that the "forces of competition, not redundant regulation" would guide the development of the national market system. I will strive to push us back to this original intention and further promote innovation and competition in the market.

Promoting Innovation: Business Viability is Our North Star

Finally, innovation and entrepreneurial spirit are the engines of the American economy. President Trump once called America the "nation of builders". Under my leadership, the SEC will encourage this spirit, rather than suppressing it with complex procedures and one-size-fits-all rules. The current commission is actively considering some reform proposals from the industry to stimulate innovation; at the same time, we are exploring the introduction of an "innovation exemption mechanism" - allowing registered and unregistered institutions to quickly bring new business models and services to market, even if these models do not completely match existing rules.

In my vision, this innovation exemption mechanism will allow technological pioneers and business innovators to immediately participate in the market without having to comply with outdated or economically obstructive complicated regulations. Correspondingly, they will need to comply with some principle-based conditions to achieve the core policy objectives of federal securities laws. These conditions may include: commitment to periodic reporting to the SEC, introduction of whitelist or "certification pool" functions, and only allowing securities tokens that meet compliance function standards (such as ERC3643) to circulate. I encourage market participants and SEC staff to consider "business viability" as a core consideration when developing models.

Conclusion

While advancing these priority items, I look forward to collaborating with other government departments to jointly build the United States into a global crypto capital. This is not just a transformation of regulatory models, but a cross-generational opportunity.

From paper agreements under the sycamore tree to electronic ledgers on the blockchain, the wind of innovation continues to blow. Our mission is to let this wind continue to drive America's leadership forward. After all, ladies and gentlemen, we have never been satisfied with following others. We will not stand on the sidelines. We will lead the trend. We will build it ourselves. And we will ensure that the next chapter of financial innovation is written in the United States.

Thank you very much for listening today. Please pay attention to our upcoming announcements and proposals, and we welcome your valuable suggestions and comments as always.

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