Bernstein: SEC's Project Crypto Could Transform Wall Street

In a significant endorsement of regulatory reform, Bernstein analysts praised the Securities and Exchange Commission (SEC) and its new initiative, 'Project Crypto,' led by Paul Atkins. They described it as the most transformative crypto vision by an SEC chair ever, potentially revitalizing U.S. innovation and establishing the country as a global leader in blockchain finance. Atkins announced Project Crypto during a landmark speech titled 'American Leadership in the Digital Finance Revolution,' emphasizing the need to modernize U.S. securities regulation. This initiative continues the previous administration's mission to position America as the crypto capital. Drawing comparisons with historical milestones, such as the 1792 stockbrokers' agreement and the modern clearing system, Atkins asserted that U.S. financial regulations must evolve alongside the rapid changes in technology. The analysts noted a recent regulatory shift reflected by the SEC dropping its case against Coinbase, indicating a movement from outdated analog rules to a more flexible digital approach. Project Crypto aims to bring crypto innovation back to the U.S. by relaxing regulations that previously stifled entrepreneurship. Unlike former Chair Gary Gensler's approach, Atkins believes most crypto assets are not securities, which has hampered capital formation. The new guidelines will categorize crypto assets into digital commodities, stablecoins, and digital collectibles, promoting the creation of tokenized securities. Additionally, brokers will be enabled to offer both crypto and traditional finance products under a single license. This regulatory evolution could lead to a unified platform that integrates trading, staking, lending, and stablecoins effortlessly. Finally, the SEC plans to revise antiquated rules to accommodate decentralized finance systems, which could revolutionize the capital markets by enabling 24/7 trading, prompt settlement and cross-asset collateralization. In closing, Atkins stressed the United States' commitment to leading in financial innovation, asserting that the nation will not merely follow but guide the growth of innovation.