Editor's Note: The relevant information is published on the website of the U.S. Securities and Exchange Commission (SEC) and is the transcript of Chairman Paul Atkins' speech at the Investor Advisory Committee. This article was compiled by the Asia-Pacific Institute for Future Finance.
Full Text:
The full text of the speech is as follows:
Ladies and gentlemen, good afternoon.
It is a pleasure to participate in the fourth and final Investor Advisory Committee meeting in 2025. Before sharing some reflections, I must clarify that the views I express today are solely my own and do not necessarily represent the position of the SEC or other commissioners. Of course, I also want to thank each and every one of you for your time, expertise, and enthusiastic commitment to the Committee this year.
Your work is crucial—our markets thrive when investors trust that our rules are fair, our processes predictable, and that regulators don't stifle innovation out of fear. I express and share the agency's gratitude for your dedication, with special thanks to Cristina Firvida, who will conclude her term as an Investor Advocate at the end of January. The SEC's work should always be responsive to the needs and interests of investors, and Cristina has provided critical support in achieving these goals. Cristina, best wishes for your future endeavors, and thank you for your contributions to our agency and investors as a whole. I also thank you for the valuable insights heard in this morning's panel discussion on corporate governance regulatory change. As chair, one of my priorities is ensuring that public companies become an attractive option for more businesses—and I look forward to participating in this important work over the coming months, guiding the SEC back to the cornerstones of our mission. Meanwhile, the next panel discussion will focus on how the Commission can modernize our rules to enable our markets to operate on the blockchain. Distributed ledger technology and the tokenization of financial assets, including securities, have the potential to transform our capital markets. Our financial markets have long been the envy of the world, and to ensure this status is maintained, U.S. businesses and investors must have the opportunity to leverage this technology to lead the future of global capital markets. Currently, our regulations take for granted that the issuance, trading, and management of securities through multiple layers of intermediaries will help mitigate risks such as information asymmetry and operational friction. However, when considering the rise of public blockchains and tokenization, we must acknowledge that these technologies have the potential to streamline not only transactions but also the entire relationship between issuers and investors. In other words, tokenization not only changes the way transactions are conducted, but it also enables direct connections for proxy voting, dividend payments, and shareholder communication, reducing the need for multiple intermediaries. As we modernize our regulations, we must comprehensively consider the scope of these changes, from how markets trade to the recording and servicing of securities ownership. I welcome the IAC's assistance in considering how to appropriately address these innovations. As with any technological transformation, market participants are experimenting with different tokenization models, and I'd love to hear the panel's thoughts on the impact of these approaches. Several models are worth discussing. First, some companies issue equity directly on a public distributed ledger, existing as programmable assets that, in some cases, can embed compliance, voting rights, and other governance functions. This approach allows investors to hold securities digitally, with fewer intermediaries and greater transparency. Second, third parties tokenize shares by creating on-chain security rights that represent ownership of off-chain shares. Third, we're seeing synthetic products—tokenized products designed to reflect the performance of public equity. The increasing availability and sales of these products overseas reflect global market demand for distributed ledger-driven infrastructure. Of course, the shift to on-chain capital markets requires more than just issuance. We must also consider other stages of the securities trading lifecycle. For example, tokenized shares could become mere talking points if holders cannot compete for trading in a liquid on-chain environment. But to achieve this, the Commission must carefully consider the intersection of our regulatory mandate and technological realities. Furthermore, issuers should be central to the discussion, helping to ensure these new systems function effectively and align with the overall goals of transparency and investor protection. Previous Commissions attempted to address on-chain markets by brute-forcing “transactions,” even including the most basic “communication protocols,” and then incorporating the new definitions into the full scope of the exchange regulatory framework. This approach lacked restrictive principles, expanded the SEC’s influence beyond Congress’s expectations, ultimately created uncertainty, and stifled innovation. We must not repeat the mistakes of the past. If we want to drive innovation, investment, and jobs in the United States, we must provide compliant pathways that allow market participants to leverage the unique capabilities of this new technology. That is why I asked staff to advise the committee on how to utilize our exemptions to allow on-chain innovation while continuing to develop long-term, lasting rules. Congress granted the SEC broad exemptions under the Securities Exchange Act of 1934, and we must use those powers responsibly. A well-thought-out exemption framework—limited, time-bound, transparent, and based on strong investor protections—can allow markets to develop on-chain models and provide investors with innovative new options. Furthermore, by incorporating feedback from market participants, we will be able to develop rules that differentiate true decentralized finance from the widespread centralized, on-chain finance of today. A lasting rulebook must recognize this difference, not force square pegs into round holes. If we try to regulate decentralized protocols like centralized brokers, we will stifle innovation—the very things that give them resilience and transparency. But if we allow centralized intermediaries to profit from regulatory arbitrage simply because they operate on-chain, we will erode the accountability and investor protection principles that have fueled global market dominance. Our task and responsibility is to develop rules that are functionally realistic. I look forward to working with colleagues at all levels of government in the coming years to achieve this. The SEC's role is not to resist the shift to on-chain capital markets, nor to force them into traditional definitions, nor to push innovators overseas. Instead, it aims to enable market participants to operate and innovate under clear safeguards, ensuring that U.S. markets remain among the most dynamic, transparent, and trustworthy in the world. If we stay on this path, we can ensure that the U.S. leads, rather than follows—the next chapter in capital market innovation. Finally, just as tokenization represents an evolution in markets, so too does the subject matter the Committee will consider. The emergence of artificial intelligence promises to revolutionize workflows and business models. However, with every emerging development, the SEC needs to consider not necessarily its novelty, but whether our existing disclosure framework is sufficient to provide investors with relevant material information. In this regard, I believe investors can rely on our current principles-based rules to understand how AI impacts companies. In fact, we should resist the temptation to impose prescriptive disclosure requirements on every “new thing” affecting businesses. Our principles-based rules are intentionally designed to allow companies to inform investors of any newly developed material impacts, including how AI affects their financial performance, how AI becomes a significant risk factor for investments, and how AI becomes an integral part of their business model. These rules stand the test of time because they rely on material, fundamental principles, not an ever-expanding list. As we discuss these topics together, I would like to once again thank you for your rigor and thoughtfulness in every Investor Advisory Committee meeting. Your collective expertise makes this committee an indispensable partner in protecting investors and strengthening our markets. Therefore, thank you all for your time and participation today. I look forward to the discussion to come.
Brian
Hui Xin
Joy
Aaron
YouQuan