SEC Chairman Says Tokenization Could Transform the US Financial System ‘Within Years’

The U.S. financial system could move to blockchain much sooner than many expected, according to SEC Chairman Paul Atkins.

In an interview with Fox Business, Atkins said the U.S. market structure is undergoing rapid changes as blockchain and electronic trading continue to mature. He noted that these advances are changing the way participants view payments, risk and transparency.

With this in mind, Atkins suggested that the transition to blockchain could happen within a few years rather than a decade. He emphasized that tokenization is emerging as a central feature of this change, with digital representations of assets poised to enter mainstream finance.

Tokenization is expected to reduce market friction

Atkins explained that the growing interest in tokenization systems stems from their potential to streamline key market functions. For example, blockchain-based payments can increase transparency and reduce the risk of delays between transactions, payments and final settlement, he said.

As he explained, these benefits could support both institutional and retail participants. By tightening payment windows and providing a clearer audit trail, on-chain systems can contribute to a more efficient and predictable market environment.

Regulators clarify what is important as security

To address supervisory concerns, Atkins reaffirmed that tokenized traditional securities are subject to the same securities laws as traditional securities. This continuity ensures clear investor protection as the industry evolves, he said.

At the same time, it emphasized that not all digital assets are subject to the same legal obligations. Collectibles, merchandise, and functional tools do not meet the criteria to be considered securities.

They therefore fall outside the scope of the long-standing Howie test governing regulated financial products.

New regulation “Innovation Exemption” coming into force soon

Atkins said the SEC will introduce a new “innovation exemption” next month to support responsible development. This measure will allow companies to test initial token models under controlled conditions.

He added that the framework is designed to bridge the gap between experimentation and regulation. By allowing limited, short-term trials, the SEC hopes to encourage practical innovation while maintaining investor protections.

SEC tries to shed anti-innovation reputation

The planned exemptions reflect broader internal changes. Atkins acknowledged that the SEC is often slow to adapt to technological changes. Sometimes they unintentionally impede progress.

But he said the agency is now aiming to play a more supportive role in maintaining the United States’ competitiveness in global digital asset development. He noted that the country has moved away from its previous restrictive position and is now working on bringing cryptocurrency activities into the country under US rules.

Privacy-friendly tokenization added to SEC agenda

This evolving attitude extends to blockchain tools that protect privacy. Last week, the SEC added privacy-focused tokenization to its upcoming roundtable, which will also include a contribution from Zcash founder Zooko Wilcox.

This session, led by Commissioner Hester Peirce, will explore how zero-knowledge proofs and other privacy mechanisms can facilitate compliance for tokenized securities. These tools are increasingly considered essential for wider institutional implementation.