The U.S. Securities and Exchange Commission is exploring whether a market structure framework rooted in 1990s-era regulation could serve as a crypto “innovation pathway,” potentially giving digital asset firms a clearer route to operating within federal oversight.
The concept centers on the SEC’s Regulation of Exchanges and Alternative Trading Systems, adopted in December 1998. That framework created a registration category for alternative trading systems, or ATSs, allowing new electronic trading venues to operate without registering as full national securities exchanges.
The ATS model was designed to accommodate technological shifts in how securities were traded. Rather than forcing every new venue into the existing exchange framework, the SEC created a lighter regulatory tier that preserved core investor protections while lowering barriers for emerging platforms.
How the 1990s ATS Model Applies to Crypto
SEC Commissioner Hester Peirce has been among the most vocal proponents of adapting existing regulatory structures for crypto. In remarks to the SEC’s Investor Advisory Committee, Peirce outlined why legacy frameworks could be repurposed rather than building entirely new crypto-specific rules.
The logic is straightforward: crypto trading platforms function similarly to the electronic trading venues that prompted the original ATS rules. Both involve matching buyers and sellers on technology-driven platforms outside of traditional exchange floors.
An innovation pathway modeled on this approach would let crypto firms register under a known regulatory structure. This could reduce the legal ambiguity that has kept many projects operating offshore or in regulatory gray zones, an issue that has shaped broader debates around how major crypto holders manage compliance risk.
What Remains Unresolved
The SEC has not adopted or proposed a final rule. The agency is evaluating the concept, and any formal pathway would require rulemaking, public comment periods, and likely interagency coordination with the CFTC.
A submission to the SEC’s Crypto Task Force from Solana-affiliated participants illustrates industry interest in shaping whatever framework emerges. Crypto exchanges, decentralized trading protocols, and custody providers would be the most directly affected by any ATS-style registration tier.
The key tension is scope. The 1998 ATS framework was built for securities. Applying it to crypto requires the SEC to first determine which digital assets qualify as securities, a classification question that remains central to market uncertainty and has driven enforcement actions across the industry.
Firms seeking clearer compliance routes would benefit from a defined pathway. But without resolution on token classification, an ATS-style framework could apply unevenly, covering some tokens while leaving others in regulatory limbo.
Concrete next steps to watch include any formal SEC rulemaking proposals, responses from the Crypto Task Force’s ongoing industry consultation process, and whether Congress advances competing legislative frameworks that could override or supplement the SEC’s approach.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.
