SEC Chairman's OECD Speech: Ushering in an Era of Crypto and AI Financial Innovation

Source: Keynote Remarks by Paul S. Atkins, Chairman of the U.S. SEC, at the OECD Roundtable on Global Financial Markets; Compiled by Golden Finance. Ladies and gentlemen, good afternoon. First, I would like to thank Secretary General Cormann for his warm introduction. I also thank Carmine for inviting me to this roundtable and for organizing such a timely discussion on how we can work together to encourage competition in global capital markets and promote economic growth in our respective jurisdictions. I know that everyone here today is committed to achieving these goals, as your presence at this meeting demonstrates. I'm deeply honored to be with you, especially as we at the U.S. Securities and Exchange Commission (SEC) return to our core mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. Now, before I go further, I'm sure you understand that the views expressed here are my own and do not necessarily reflect those of the SEC or my fellow Commissioners. But for me, returning to France is also a homecoming. In the late 1980s, as a young lawyer in the Paris office of a New York law firm, I learned not only the complexities of international finance but also the enduring value of cross-cultural collaboration. My various stints at the SEC over the decades since have reinforced my understanding that the principles we cherish in the United States, including the power of free enterprise and the vitality of capital markets, can find common ground abroad. It is in this spirit that I welcome today's discussion on promoting economic growth and opportunity at home. Special Arrangements for Foreign Issuers The topic of U.S.-EU cooperation has fascinated me for years. I vividly remember the period leading up to the "Big Bang" of 1992, the sea change that gave rise to the European Single Market and the subsequent wave of significant opportunities. For those of us who were there, it was exhilarating to watch Europe's internal market take shape, driven by commerce and competition. Today, as Europe considers the direction of initiatives like the Savings and Investment Union, these themes are once again front and center. At the same time, even as the continent grows ever more interconnected, engaging with regions beyond the new European market remains crucial. And, of course, countries like the United States must continue to engage constructively with the world in ways that advance their own prosperity. At the SEC, these priorities inform our work: attracting foreign companies to U.S. markets and providing Americans with opportunities to invest in these companies, while ensuring a level playing field between U.S. and foreign companies and protecting our investors. Of course, the size and depth of U.S. capital markets have always been attractive to non-U.S. companies. They can enjoy a variety of potential benefits, including higher valuations, greater liquidity, access to U.S. capital, and enhanced visibility and reputation in the financial markets. Since the SEC's founding, our rules have consistently provided special accommodations for foreign companies accessing U.S. capital markets. These accommodations recognize the differences between U.S. and foreign companies in business and market practices, accounting standards, and corporate governance requirements. Nevertheless, the SEC remains focused on the need for U.S. investors to fully understand information about foreign issuers and to understand the extent to which such information is provided in accordance with the laws of their home jurisdictions. In 1983, the SEC established the foundation for the current standard under which foreign companies should receive these special treatments. Since then, the SEC has reevaluated and updated this standard as needed to address changes in global markets and protect American investors. One of my first actions as Chairman was to request Commission approval for a conceptual statement to solicit public comment on whether this standard should be updated to reflect developments in financial markets and corporate legal structures. The statement seeks public comment on whether foreign companies listed in the United States should be subject to additional requirements (such as minimum foreign trading volume or listing on a major foreign exchange) to provide them with benefits not available to U.S. companies. To be clear, the SEC welcomes foreign companies seeking access to U.S. capital markets. The issuance of this statement does not imply the SEC's intention to prevent such companies from listing on U.S. exchanges. Rather, our goal is to better understand the impact of significant changes in the number of foreign companies listed in the United States over the past two decades on U.S. investors and the U.S. markets. Notable changes include the composition of foreign companies reporting to the SEC and the increasing number of companies incorporated in jurisdictions, such as the Cayman Islands, that differ from the company's headquarters, operations, and governance frameworks that affect shareholder interests. In light of these changes, is the SEC's original intention to provide special accommodations to all foreign companies without conditions still justified, or should our rules be updated? Retrospectively reviewing our rules to assess whether they continue to achieve their intended policy objectives is a hallmark of an effective regulatory agenda. While the official comment period closed last Monday, the SEC will of course consider comments received after the deadline to evaluate whether to propose rule changes. I look forward to reviewing public feedback on this issue. While we take a fresh look at the types of foreign issuers that receive special treatment, we should not lose sight of the foundations of any effective regulatory system: high-quality accounting standards and financial materiality. Regarding accounting standards, U.S. companies must prepare their financial statements in accordance with U.S. Generally Accepted Accounting Principles (US GAAP). In 2007, while serving as an SEC commissioner, I voted in favor of a rule change that would allow foreign companies to prepare their financial statements in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), without reconciling them to US GAAP. In removing the coordination requirement, the SEC noted that "the sustainability, governance, and continued independence of the IASB as a standard-setting body are important considerations, as they relate to the IASB's ability to continue to develop high-quality, globally recognized standards." The SEC specifically noted the International Accounting Standards Committee Foundation (the predecessor of the IFRS Foundation)'s ability to secure "stable funding" for the IASB. In 2021, the IFRS Foundation announced the establishment of the International Sustainability Standards Board (ISSB), whose trustees are now responsible for raising funds for both the IASB and the ISSB. The IFRS Foundation's recent expansion of its remit does not detract from its long-standing core responsibility of providing funding for the IASB. In turn, the IASB must promote high-quality accounting standards that are focused on promoting reliable financial reporting and should not be used as a backdoor to achieve political or social agendas. Reliable financial reporting is essential to supporting capital allocation decisions. We all have a strong interest in the IASB being adequately funded and functioning properly. I encourage the IFRS Foundation to achieve its goal of "stable funding" and prioritize the IASB and its focus on financial accounting standards over specious and speculative issues. If the IASB does not receive adequate and stable funding, one of the preconditions for the SEC's 2007 removal of the requirement for foreign companies to prepare reconciliations of accounting differences may no longer hold, and we may need to review that decision retrospectively. Financial Materiality: Of course, in addition to high-quality accounting standards, regulation based on financial materiality is another pillar of achieving efficient capital flows. A focus on financial materiality means that disclosure requirements, corporate governance standards, and other regulatory measures are guided by the interests of investors, who, after all, provide the capital that supports the products, services, and jobs that companies create. In contrast, a regulatory regime based on dual materiality considers other non-financial factors. In the European Union, two recently enacted laws—the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD)—have advanced the dual materiality regulatory approach. These laws also affect U.S. companies operating in the EU. I am deeply concerned about the mandatory nature of these laws and the burden they impose on U.S. companies, as these costs may be passed on to American investors and customers. While I am encouraged by the EU's recent commitment to ensure that these laws do not unduly restrict transatlantic trade and appreciate the efforts to simplify and streamline these laws, further work is needed to refocus the regulatory regime on the principle of financial materiality, rather than dual materiality. Indeed, as Europe seeks to foster the development of its capital markets by attracting more companies and investment, it should focus on reducing unnecessary reporting burdens on issuers rather than pursuing objectives unrelated to the economic success of companies and the well-being of their shareholders. Project Crypto: As we call on our partners to foster investor confidence and vibrant markets in their jurisdictions, the same priorities drive us to unlock the potential of digital assets in the United States. As I mentioned earlier today, in the late 1980s, I worked in the Place de la Concorde, about four kilometers from where we are meeting now. Back then, I could hardly have imagined returning to this place in my current capacity to discuss new technologies, including those once outright denied or resisted, but now revolutionizing global finance. Now, as we stand just steps from Avenue Victor Hugo, his words seem most apt: "The people can resist the invasion of armies, but not the invasion of ideas." Armies can be resisted, but ideas, once ripe, cannot be stopped. Ladies and gentlemen, today we must acknowledge: the era of cryptocurrency has arrived.

For too long, the SEC has abused its investigative, subpoena, and enforcement powers to suppress the cryptocurrency industry. This approach is not only ineffective but also harmful; it has driven jobs, innovation, and capital overseas. American entrepreneurs have borne the brunt of this pressure, forced to invest heavily in legal defenses rather than in business development.

This is a new day at the SEC. Policy will no longer be shaped by ad hoc enforcement actions. We will provide clear, predictable rules to ensure innovators can thrive in America. President Trump has tasked me and my colleagues across the Administration with making the United States the cryptocurrency capital of the world, and the President’s Task Force on Digital Asset Markets has developed an ambitious blueprint to guide us in these efforts. As Congress drafts sweeping legislation, the Task Force has directed U.S. regulators to move swiftly to update our outdated rulebook. We are fulfilling this mission through Project Crypto, a comprehensive initiative to update securities rules and regulations so that our markets can operate on-chain. Our focus is clear: we must ensure the security of crypto assets. Most crypto tokens are not securities, and we will clearly draw the line. We must ensure entrepreneurs can raise capital on-chain without facing endless legal uncertainty. We must also allow "super app" trading platforms to innovate and increase choice for market participants. Platforms should be able to offer trading, lending, and staking services under a single regulatory framework. Investors, advisors, and broker-dealers should also be able to choose among a variety of custody solutions. Meanwhile, in line with the recent working group report, the SEC will work with other agencies to enable platforms to offer trading of crypto assets (whether securities or not) as well as staking and lending services under a single regulatory framework. I believe regulators should provide the minimum level of effective oversight necessary to protect investors, but not excessively. We should not burden entrepreneurial entrepreneurs with duplicative rules that only the largest incumbents can bear. By unleashing competition in trading venues and products, we can help ensure that American companies compete fairly globally. President Trump has called the United States a "nation of builders." During my tenure as Chairman, the SEC will encourage these builders, not stifle them with red tape. Our goal is simple: to usher in a golden age of financial innovation here in the United States. Whether through tokenized stock ledgers or entirely new asset classes, we aspire to achieve breakthroughs in U.S. markets, under U.S. regulation, for the benefit of American investors. International Collaboration Opportunities: Of course, these priorities can achieve their greatest potential when we strategically collaborate with international partners who share our commitment to innovation and regulatory clarity. Markets thrive when capital flows freely to its most productive uses. Public blockchains are inherently global, offering a unique opportunity to modernize the foundations of payments and capital markets. By collaborating, the United States and Europe can strengthen our domestic economies while solidifying our transatlantic partnership. To our credit, Europe is already leading the way. As the "Markets in Digital Assets" report notes, the EU's Markets in Crypto-Assets (MiCA) regulation embodies a comprehensive digital asset regime. Some European policymakers have already called for a "MiCA 2" to address issues such as decentralized finance (DeFi), non-fungible tokens (NFTs), and digital asset lending. I commend our European allies for their foresight in these initial attempts at regulatory clarity and believe the United States must learn from these efforts. That said, I am determined to ensure that the United States leads in fostering an economic environment that supports financial innovation. As we catch up, I look forward to working with our international counterparts to foster even more innovative markets. As Alexandre de Tocqueville put it, by working together, we can "enlarge the realm" of freedom and prosperity.

Artificial Intelligence and Finance: A New Era of Market Innovation

For our part, America's leadership in finance depends on planning for the future, not fearing it.

Just as blockchain is reshaping how we trade and settle assets, artificial intelligence (AI) is opening the door to agency finance—a system in which autonomous AI agents can execute trades, allocate capital, and manage risk at speeds unmatched by humans, with securities law compliance embedded in their code.

The benefits could be enormous: faster markets, lower costs, and broader access to strategies once the preserve of Wall Street's largest firms.

By combining AI with blockchain, we can empower individuals, increase competition, and unlock new prosperity. Governments' responsibility here is to ensure appropriate regulatory frameworks are in place while removing regulatory barriers that hinder innovation. Artificial intelligence is already a part of our capital markets, and its role will only grow. We must resist the temptation to overreact out of fear. On-chain capital markets and agency finance are on the horizon, and the world is watching. The choice we face is simple and profound: Either the United States moves forward with confidence and determination, or others will. I choose leadership, freedom, and growth—for our markets, our economy, and for the next generation. I look forward to collaborating with international colleagues who are willing to join us in the pursuit of more prosperous, freer societies.

Finally, with your collaboration, we can shape future regulation that serves its original purpose of protecting investors while providing ample room for innovators and entrepreneurs to thrive. As I've said before, this is a new day at the SEC, and we are realigning our principles with emerging possibilities. I believe that international cooperation on the regulatory issues I've discussed will benefit us both in the United States and globally in the long run. I look forward to working with you all, determined to meet the opportunities that lie ahead.