SEC To Formalize “Innovation Exemption” By End Of Year

The United States Securities and Exchange Commission (SEC) will formalize an “innovation exemption” for companies, potentially as soon as the end of the year. 

The exemption will enable companies to leverage digital assets and other innovative technologies in the US. 

SEC Accelerating Plans For “Innovation Exemption” 

The United States Securities and Exchange Commission (SEC) is accelerating plans to formalize an “innovation exemption” framework to streamline compliance for crypto projects and foster technological advancements. The initiative was announced by SEC Chair Paul Atkins, who stated that it could roll out as soon as the end of the year. However, Atkins acknowledged that the current government shutdown had hindered the SEC’s ability to make progress on rulemaking. However, the SEC Chair stated that the exemption was a priority until the end of the year or the first quarter of 2026. Atkins made the comments at a Futures and Derivatives Law Report event hosted by law firm Katten Muchin Rosenman LLP. 

Atkins opened with a familiar refrain, stating that the agency had become a pro-innovation body and was looking to encourage developers and entrepreneurs to build in the US. Atkins said during a panel with former SEC Commissioner Troy Paredes, 

“As you know, we’ve had four years, at least, of repression of that industry, and with the result of pushing things abroad, rather than having innovation being done.”

According to Atkins, the agency will initiate the rulemaking by the end of 2025 or during the first quarter of 2026, depending on the ongoing US government shutdown. 

“We’ll see where that goes, but I have confidence [we’ll] be able to do it.”

Moving Beyond Regulation-By-Enforcement 

Formal rulemaking in crypto will enable the SEC to move beyond the regulation-by-enforcement approach employed by the previous administration and the use of informal guidance and staff notes. Atkiks stated that he pushed for the exemption last month, and it was something he hoped to have squared away. 

“That’s one of the top priorities to try to get that because 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.”

Market Structure Bill 

The SEC Chair also praised Congress’s efforts towards passing laws that addressed cryptocurrencies. Atkins highlighted the GENIUS Act, although he noted that the SEC did not have a major role to play in the creation and passage of the bill. 

“Market structure is an issue there on the bill, and so we’ll see where that goes. I’m optimistic.”

However, a previous panel was less optimistic about a market structure bill making it out of Congress before 2025. Summer Mersinger, CEO of the Blockchain Association, gave the bill a 51% or 52% chance of passing this year. Meanwhile, Greg Xethalis, partner and general counsel at venture firm Multicoin, believes lawmakers must be appreciated for their work. However, CoinFund’s Chris Perkins stated that he does not believe a bill will happen anytime soon. 

The GENIUS Act 

The GENIUS Act has been hailed as the first major crypto-focused bill to become law in the US. The act has started to show preliminary results, with regulators publishing proposed rules for the stablecoin sector earlier this year. According to Xethalis, much of what will happen from a developer’s point of view is plumbing. He also highlighted Visa’s integration of USDC into their payment growth tooling as an example of people indirectly using crypto. 

“Now that we have the rules at Treasury being written for the GENIUS Act, we’re going to see a Cambrian explosion of people actually starting to utilize this stuff on a day-to-day basis.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice