The U.S. Securities and Exchange Commission has long been the world’s most influential financial regulator, helping to ensure our capital markets are the deepest, fairest, and most accessible in the world. But its continued relevance will depend on whether it can do more than merely respond to innovation — it must proactively foster it.
For nearly a century, the SEC has adapted to evolving markets, new technologies and greater retail participation. In its best moments, the agency has embraced innovation in service of transparency, investor protection, and capital formation. But in recent years, it has strayed from that legacy — nowhere more visibly than in its approach to crypto and blockchain.
The good news is, with a change in leadership and a more open posture emerging, the SEC has a chance to course-correct. But the bigger question is: how do we make that change permanent? How do we build innovation into the SEC’s DNA so that the next promising financial technology isn’t strangled in its crib?
I spent nearly six years at the SEC, first as a Senior Counsel in the Division of Enforcement and then as Chief Counsel in the Office of Legislative and Intergovernmental Affairs. I’ve since held senior legal and policy roles in crypto firms across the ecosystem. From both perspectives, one thing is clear: the SEC can fulfill its mission more effectively — and maintain its global leadership — only if it becomes a proactive partner in financial innovation.
The SEC at Its Best
The SEC has a proud history of embracing change to the benefit of investors and markets alike. In the 1990s, it digitized corporate filings through EDGAR, replacing paper documents with searchable databases. It later approved Regulation ATS, enabling the rise of alternative trading systems that increased competition and liquidity. ETFs, which were once novel, are now mainstream products that offer low-cost, diversified exposure to a wide range of assets. More recently, fractional-share trading has empowered millions of retail investors to own a slice of companies they once could only admire from afar.
One especially relevant example as the SEC thinks about how to regulate crypto is the agency’s treatment of asset-backed securities. In the 1980s and 1990s, the SEC recognized that these complex financial products didn’t fit neatly into existing disclosure regimes. After years of study and no-action letters, it developed a tailored disclosure framework in 2004 — refined further in 2014 — that balanced innovation with investor protection. And it didn’t need to bring hundreds of enforcement actions to do it.
When the SEC Fell Behind
There are also times the SEC failed to adapt, to the detriment of both investors and markets. It was slow to respond to the rise of high-frequency trading, contributing to the 2010 Flash Crash. It took years to implement the crowdfunding rules authorized by the JOBS Act. It lagged on digital reporting standards, delaying broader access to market data.
And, for much of the last few years, its stance on crypto veered from caution to outright hostility. Instead of issuing clear rules for digital assets, the agency pursued a scattershot enforcement campaign — often against firms that were seeking to comply in good faith. Many of these actions didn’t even involve fraud or investor loss. Meanwhile, American crypto companies fled overseas, and a global industry flourished without us.
Even the SEC’s grudging approval of spot bitcoin ETFs in 2024 came only after it was forced by a federal court. And while the agency at one point talked about creating a crypto disclosure framework akin to what it did for ABS, it never followed through.
Innovation Isn’t the Enemy
Crypto may be new, but the SEC has faced this challenge before. It knows how to modernize its rules to meet new realities. What’s different now is the opportunity to leverage innovation — not just regulate it.
Take blockchain technology. It could enable near-instant trade settlement, reducing risk and freeing up capital. It could improve market transparency through immutable records and real-time transaction data. It could lower operational costs by reducing intermediaries. And tokenization could expand access to private markets and hard-to-reach asset classes, benefiting both issuers and investors.
Ironically, the SEC hasn’t seriously explored how blockchain could improve its own market oversight. That’s a missed opportunity. But it’s not too late.
A Blueprint for the Future
So what would it look like to build innovation into the SEC’s core mission?
- Revise the SEC’s Mandate: Congress should amend the Securities Exchange Act of 1934 to explicitly include the promotion of innovation and modernization, alongside investor protection, market integrity, and capital formation.
- Rethink Metrics of Success: The SEC shouldn’t measure success solely by the number of enforcement actions or penalties collected. It should also look to capital formation, investor confidence, and the safe adoption of new technologies.
- Create an Innovation Office: A dedicated, empowered team should engage with entrepreneurs, technologists, and academics to guide responsible innovation — just as similar offices in the U.K. and Singapore have done.
- Adopt Risk-Based Regulation: Not every new product or platform needs full regulatory treatment on day one. Pilot programs, safe harbors, and regulatory sandboxes can help innovators test ideas while maintaining appropriate guardrails.
- Invest in Education and Training: SEC staff need better fluency in emerging technologies. Cross-disciplinary expertise should be rewarded and cultivated.
These are not radical ideas — they are proven tools drawn from the SEC’s own playbook.
In a global race to define the future of finance, the SEC has a choice: lead or fall behind. Its greatest strength has always been its credibility and ability to adapt.
The next generation of investors and entrepreneurs won’t wait around for 20th-century rules to catch up to 21st-century innovation. Nor should they have to. If the SEC wants to remain the gold standard, it must adapt once again — not just to the present, but to what comes next.
