Author: Zhang Feng

At the fourth Investor Advisory Committee meeting in 2025, SEC Chairman Paul Atkins delivered a highly anticipated speech. This address was not only a summary of his year but also a systematic exposition of the future development path of the U.S. capital markets.

In the face of multiple technological waves such as blockchain technology, asset tokenization, and artificial intelligence, Atkins clarified the SEC's regulatory mission and principles, emphasizing the need to "ensure that public companies become an attractive option for more businesses," while also paving a compliant path for the on-chain transformation of financial markets, and avoiding "overly prescriptive" regulatory approaches to emerging technologies. We focus on nine core points from his speech to reveal the SEC's regulatory thinking and strategic direction in this new era.

1. The SEC Chairman's Primary Task: Reshaping the Attractiveness of Public Companies

Atkins emphasized at the beginning of his speech that one of his core tasks is to "ensure that public companies become an attractive option for more businesses." This statement reflects the SEC's deep concern about the current structure of the U.S. capital markets and its global competitiveness. As the main body of the capital market, the vitality and health of public companies directly affect resource allocation efficiency, investor confidence, and national financial competitiveness.

In recent years, with the diversification and convenience of financing channels in the private market, more and more companies are choosing to delay or abandon going public, leading to a shrinking number of public companies. To address this, the SEC needs to reignite companies' willingness to go public by optimizing the regulatory framework, reducing compliance burdens, and enhancing market transparency and predictability, thereby consolidating the global leadership position of the U.S. public markets.

2. Rule Modernization: Promoting the Evolution of Capital Markets to "On-Chain Operations"

In the face of the rapid development of distributed ledger technology (DLT) and asset tokenization, Atkins clearly stated that the SEC must promote rule modernization to enable the market to achieve "on-chain operations." The traditional securities issuance, trading, and settlement systems rely on multiple intermediaries, which, while reducing information asymmetry and operational risks to some extent, also lead to inefficiencies, high costs, and insufficient transparency.

Public blockchain technology is expected to fundamentally reconstruct this system, achieving full on-chain processes for securities issuance, holding, trading, and servicing. The SEC's task is not to hinder this process but to amend outdated rules to provide compliant development space, ensuring that the U.S. takes the lead in the global on-chain capital market construction.

3. Public Blockchain and Tokenization: Restructuring the Relationship Between Issuers and Investors

Atkins pointed out that public blockchain and tokenization can not only simplify transaction processes but also "simplify the entire relationship between issuers and investors." Under the traditional securities holding system, shareholder identity verification, voting rights exercise, and dividend distribution must be completed through multiple intermediaries such as custodians and brokers, making the process complex and error-prone.

Tokenized securities can achieve automated governance functions through smart contracts, such as proxy voting, real-time dividends, and shareholder communications, significantly enhancing efficiency and transparency. This technology-driven direct relationship restructuring is a core change that the SEC must fully consider when formulating new regulations.

4. Three Main Models of Tokenization

Atkins systematically outlined three tokenization models currently emerging in the market, reflecting the SEC's high attention to industry practices:

• Direct On-Chain Issuance Model: Companies directly issue equity tokens on a public distributed ledger, with these tokens serving as programmable assets that can embed compliance conditions, voting rights, and other governance functions, allowing investors to hold directly and minimizing intermediary involvement.
• On-Chain Rights Mapping Model: Third-party institutions map the ownership of traditional stocks to on-chain equity certificates, allowing investors to indirectly enjoy the economic and governance rights of the underlying assets by holding on-chain tokens. This model retains some aspects of the traditional legal structure while introducing on-chain liquidity.
• Synthetic Product Model: Issuing synthetic tokenized products that reflect the stock price performance of listed companies, these products are often issued in overseas markets, reflecting the strong demand from global investors for on-chain financial infrastructure.

The SEC needs to design differentiated regulatory schemes for different models, encouraging innovation while preventing risks.

5. Mistakes of Previous SEC: Overexpansion and Suppression of Innovation

Atkins criticized the previous committee's mistakes in regulating the on-chain market, specifically the attempt to expand the legal definitions of "trading" and "exchanges" to include on-chain protocols and even basic communication protocols within the traditional exchange regulatory framework. This approach "lacked restrictive principles," not only exceeding Congressional legislative authority but also creating regulatory uncertainty that stifled technological innovation and market development.

Atkins emphasized that the SEC should not forcibly fit new business models into old frameworks through "brute force," but should construct a regulatory logic that matches the essence and functional realities of the technology.

6. Proper Use of Exemptions: Providing Transitional Space for Innovation

Under the Securities Exchange Act of 1934, the SEC is granted broad exemption powers. Atkins proposed that these powers should be "responsibly used" by establishing a "limited, time-bound, transparent, and strongly investor protection-based" exemption framework to provide a safe testing ground for on-chain financial innovation.

This "regulatory sandbox" thinking allows the market to explore new models in a controlled environment while giving the SEC time to accumulate regulatory experience and formulate long-term rules. Exemptions are not about laissez-faire but about promoting orderly market evolution through phased and conditional tolerance.

7. Regulating Decentralized Protocols: Avoiding "Square Peg in a Round Hole"

Atkins clearly opposed regulating decentralized protocols through centralized intermediaries. He believes that true decentralized protocols operate based on code rules and community governance, characterized by transparency, resistance to censorship, and strong resilience. Imposing traditional broker-dealer regulatory requirements would not only fail to achieve effective supervision but would also stifle their innovative vitality.

However, this does not mean that on-chain finance can become a "lawless land." The SEC must distinguish between "true decentralized finance" and "centralized entities merely dressed in on-chain clothing," preventing the latter from exploiting regulatory arbitrage to harm investor rights. Regulation should be based on "functional realities" rather than the superficiality of organizational forms.

8. Basic Principles of On-Chain Capital Market Regulation

Atkins outlined three basic principles for on-chain capital market regulation:

Technological Neutrality and Functional Regulation: Rules should be based on the substance of economic activities rather than the labels of technologies.

Inclusive Innovation and Controllable Risks: While encouraging technological applications, it is essential to ensure that transparency, accountability, and investor protection are not weakened by technological changes.

Global Coordination and Local Responsibility: The U.S. should actively lead international regulatory dialogue to prevent fragmentation and arbitrage while upholding high standards in its domestic market.

These principles collectively point to one goal: to maintain the U.S. as "the most vibrant, transparent, and trustworthy market in the world" in the on-chain era.

9. AI Information Disclosure for Public Companies: Adhering to Principle-Based Regulation, Opposing Checklist Regulation

When discussing the impact of artificial intelligence on businesses, Atkins displayed a clear "principle-based regulation" stance. He opposed the introduction of specific disclosure checklists for each new technology, advocating reliance on the existing materiality-based information disclosure framework. Companies should independently assess whether AI has a significant impact on their business models, financial conditions, and risks, and provide valuable information to investors accordingly. This flexible regulatory approach avoids the instability caused by frequent rule revisions and grants companies sufficient disclosure flexibility, reflecting the SEC's trust in the market's self-regulatory capacity.

Conclusion: Returning to Mission, Leading the Future

Atkins' entire speech conveyed a clear message: the SEC is trying to find a new balance between protecting investors, maintaining market integrity, and encouraging technological innovation. Its core idea is "returning to mission"—not by expanding power to respond to changes, but by optimizing rules, clarifying boundaries, and effectively using tools to better serve market development and public interests.

In today's dual wave of blockchain and artificial intelligence, this "mission-driven, principle-first, inclusive innovation" regulatory philosophy may be the key to maintaining the long-term competitiveness of the U.S. capital markets. The SEC's role is not to be a boulder blocking the flow of technology but to guide its compliant flow as a riverbed—preventing floods while nurturing the ecosystem.

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