SEC Plans Innovation Exemption for Crypto Projects

The United States Securities and Exchange Commission is undergoing a fundamental transformation in its approach to digital assets, with Chair Paul Atkins announcing accelerated plans for an ‘innovation exemption’ framework. Speaking at a Futures and Derivatives Law Report event hosted by law firm Katten Muchin Rosenman LLP, Atkins positioned the SEC as transitioning from what he described as ‘four years of repression’ of the crypto industry to becoming a ‘pro-innovation body.’ This strategic pivot aims to reverse the trend of American innovators moving their operations abroad by creating regulatory pathways that encourage development within the United States.

Atkins, appearing alongside former SEC Commissioner Troy Paredes, emphasized that the exemption represents a deliberate move beyond the ‘regulation-by-enforcement’ approach that characterized previous administrations. ‘I want to be welcoming to innovators and have them feel like they can do something here in the United States, so that they don’t have to flee to some foreign jurisdiction,’ Atkins stated, highlighting the exemption as one of his top priorities. The formal rulemaking process will replace reliance on informal guidance and staff notes, providing clearer compliance parameters for companies leveraging digital assets and blockchain technologies.

While the innovation exemption has emerged as a regulatory priority, its implementation faces practical hurdles. Atkins confirmed that the SEC aims to initiate rulemaking by the end of 2025 or during the first quarter of 2026, though he acknowledged that the ongoing U.S. government shutdown has hindered the agency’s ability to make progress. ‘We’ll see where that goes, but I have confidence [we’ll] be able to do it,’ Atkins remarked, expressing optimism despite the operational challenges.

The timing reflects the SEC’s commitment to establishing a structured framework that enables companies to leverage innovative technologies without facing regulatory uncertainty. Atkins noted that he had been pushing for the exemption since last month and hoped to ‘have it squared away’ promptly. The explicit timeline provides market participants with crucial visibility into the regulatory landscape, allowing crypto projects and traditional financial institutions to plan their U.S. market strategies with greater confidence.

The SEC’s innovation exemption initiative coincides with broader legislative developments, particularly the GENIUS Act, which Atkins praised as Congress’s significant contribution to crypto regulation. Although the SEC Chair noted that his agency didn’t play a major role in the bill’s creation and passage, he expressed optimism about its potential impact. ‘Market structure is an issue there on the bill, and so we’ll see where that goes. I’m optimistic,’ Atkins commented, highlighting the complementary nature of legislative and regulatory efforts.

The GENIUS Act, hailed as the first major crypto-focused bill to become U.S. law, has already yielded tangible results with regulators publishing proposed rules for the stablecoin sector earlier this year. Greg Xethalis, partner and general counsel at venture firm Multicoin, described the regulatory developments as ‘plumbing’ that will enable broader adoption. He pointed to Visa’s integration of USDC into their payment growth tooling as an early example of how people are indirectly using crypto, predicting that ‘we’re going to see a Cambrian explosion of people actually starting to utilize this stuff on a day-to-day basis’ now that Treasury is writing rules for the GENIUS Act.

However, industry experts remain divided on the legislative outlook. Summer Mersinger, CEO of the Blockchain Association, gave a market structure bill only a 51% or 52% chance of passing this year, while CoinFund’s Chris Perkins expressed skepticism that comprehensive legislation would happen anytime soon. Despite these mixed perspectives, the convergence of regulatory initiative and legislative action suggests a maturing ecosystem for digital assets in the United States.