Paul Atkins, the new chair of the US Securities and Exchange Commission (SEC), has emphasized the need for a regulatory framework for digital assets.

Sworn in earlier this week, Atkins expressed optimism about crypto’s potential to lower costs and mitigate risks in financial markets.

He looks forward to collaborating with market participants and policymakers to establish a rational framework for crypto assets.

This marks a shift from the SEC’s previous approach under Chair Gary Gensler, which classified most cryptocurrencies as securities.

Since Gensler’s departure, the SEC has rolled back some policies, including halting enforcement actions against major industry players.

🔗 Source: The Block

🧠 Food for thought

1️⃣ Regulatory pendulum swings reflect long-running tensions in digital asset oversight

The latest SEC shift represents a predictable regulatory pattern seen across multiple administrations as agencies struggle to apply traditional frameworks to emerging technologies.

Since at least 2018, there has been significant debate around the SEC’s jurisdiction over crypto assets, with critics describing the commission’s approach as an “unlimited power grab” that could stifle innovation 1.

The Digital Chamber (established in 2014) has advocated against restrictive regulations on self-hosted wallets and contributed to landmark judicial decisions limiting SEC jurisdiction, highlighting the longstanding tension between innovation and regulation 2.

This pattern extends beyond crypto. Similar regulatory shifts occurred during the dot-com era and financial technology innovations, where periods of strict oversight frequently alternated with more permissive approaches as administrations changed.

Atkins’ criticism that “innovation has been stifled” directly echoes industry complaints dating back to 2019, suggesting this regulatory philosophy shift was anticipated by market participants long before the leadership change 3.

2️⃣ The Howey Test’s application to crypto reveals limitations of decades-old frameworks

The SEC’s reliance on the 1946 Howey Test as the primary framework for digital asset classification has created persistent regulatory challenges that multiple SEC chairs have struggled to resolve.

This 77-year-old legal framework, created for traditional securities, requires assets to meet four specific criteria: investment of money, common enterprise, expectation of profits, and efforts of others 4.