Securities and Exchange Commission (SEC) Chairman Paul Atkins suggested that the agency may soon rewrite the rules governing how brokers custody digital assets.

At a digital asset roundtable held at the SEC in Washington, Atkins pointed out that the current framework for broker-dealers to hold digital assets isn’t working well and uses the low number of firms with the special-purpose designation to support that.

He argued that this situation reveals weaknesses in how things are structured, many of which come from decisions taken by the previous administration.

“The framework that exists now doesn’t meet today’s needs,” Atkins said. “Clearly, to encourage bigger institutional involvement in the crypto markets, we must look at changing everything from the ground up, rather than simply adjusting parts.”

SEC to Review Outdated Digital Asset Regulations

Atkins pointed out that even though broker-dealers are allowed to hold crypto asset securities or digital tokens, the unclear rules and missing protections have left firms confused and reluctant to act. He said that investor protection rules do not fully match the reality of the digital asset market.

The Chairman said he has asked SEC staff to start examining how the custody regime could be updated. If the review shows the current rules are not working, they could be removed and updated ones put in place, making things clearer and more flexible for banks.

He also pointed out that much of the SEC’s crypto rules set after 2017 are only ‘highly provisional’ in nature. He said that regulations must be built to last and should match the quick ongoing development in the crypto industry.

Many in the industry feel this change could be a major step forward in how the SEC manages interactions with crypto, especially for firms which want to manage their digital assets directly. Even though no timeline has been released, the message from the SEC is obvious: the SEC is getting set to oversee a new wave of regulation in the digital arena.

Atkins finished by saying, “We can’t keep regulating with rules made for older markets. New finance technologies demand that we think ahead.”