SEC eyes rules for on-chain markets

Crypto regulation is starting to move down a layer. Not just “is this token a security?” and not just “should ETFs exist?” The SEC is now talking about the market plumbing itself — how trading, settlement, custody, and even software-run venues should work when finance moves on-chain. That changed on May 8, when SEC Chair Paul Atkins used a speech in Washington to say the agency is preparing formal rulemaking for blockchain-based markets and keeping a close eye on AI in finance. ### What actually changed? Atkins didn’t announce a finished rule. But he did something almost as important — he said the SEC should use notice-and-comment rulemaking, plus exemptions where needed, to explain how securities laws apply to on-chain systems. That is a real shift in posture. It means the agency is signaling written rules instead of relying mainly on lawsuits, staff guidance, or one-off interpretations. (sec.gov) ### What does “on-chain markets” mean here? Basically, markets where parts of the normal financial stack run on blockchains. Trading can happen through software. Settlement can happen directly on-chain. Assets can be represented as tokens instead of entries in a traditional database. Atkins framed these systems as neither fully old-school finance nor fully decentralized finance, but often a hybrid of both. That hybrid point matters because the current SEC rulebook was built around firms with clearly separated roles. (sec.gov) ### Which parts of the stack did he target? He named four. First, how on-chain trading systems can operate inside the regulatory perimeter. Second, whether broker and dealer definitions fit the people or firms involved. Third, what counts as a clearing agency when clearing and settlement happen on-chain. Fourth, how the SEC should think about “crypto vaults,” which is basically the custody piece. That is a much more specific agenda than vague talk about “crypto clarity.” (pymnts.com) ### Why is that a bigger deal than it sounds? Because these are the load-bearing rules. If you change custody, trading venue, and clearing treatment, you change whether tokenized stocks, bonds, funds, and other securities can exist at scale in the U.S. This is the difference between approving a product and redesigning the rails underneath the product. Think less “one more crypto filing” and more “can regulated capital markets actually run on new software?” That is the question the SEC is now openly taking on. (pymnts.com) ### Where does AI fit into this? Atkins gave the speech at the Special Competitive Studies Project’s AI+ Expo, and he bundled AI-driven finance with blockchain-based markets as two areas where old categories may not fit new systems. He did not unveil a separate AI rule package in the speech excerpt now public. But he clearly put AI-powered financial applications on the SEC’s watchlist alongside on-chain market structure. (pymnts.com) ### Is this just Atkins freelancing? No — it fits the direction of his chairmanship. Atkins was sworn in as SEC chair on April 21, 2025, and he has spent the last year pushing for a more explicit crypto framework. SEC events and speeches under his tenure have repeatedly focused on trading, custody, tokenization, and DeFi rather than the older enforcement-first approach. ### What’s the catch? (sec.gov) A speech is not a rule. The SEC still has to draft proposals, take comments, and survive the usual legal and political fights. Congress also remains in the picture — Atkins again nudged lawmakers toward the CLARITY Act, arguing that statutory changes would make the framework more durable than agency rulemaking alone. ### So what should you watch next? (sec.gov) Watch for proposed rules that define when an on-chain system is an exchange, broker, dealer, or clearing agency — and when it is not. That boundary will decide whether tokenized securities stay a niche experiment or become normal market infrastructure. The SEC is no longer just asking whether crypto fits the rules. It is asking whether the rules themselves need to be rewritten for software-based markets. (pymnts.com)