On February 18, 2026, Chairman Paul S. Atkins and Commissioner Hester M. Peirce of the Securities and Exchange Commission (“SEC”) delivered joint remarks at ETHDenver, outlining both the significant regulatory steps the SEC has taken over the past year and its agenda for the months ahead to provide additional regulatory clarity regarding digital assets.  The speech, entitled “Number Go Down and Other Schadenfreude,” takes its name from two themes addressed by the speakers:  the recent decline in cryptocurrency prices (an inversion of the crypto community’s hopeful “number go up” rallying cry) and, of course, the German term for taking pleasure in the misfortune of others.  Commissioner Peirce referred to this when commenting on critics reveling in the recent market downturn.  The speech suggests that market participants should instead focus on the durable regulatory frameworks being created that promote innovation.  The full text of the speech is available here.

A Year of Regulatory Progress

Commissioner Peirce catalogued key developments at the SEC since the change in administration:

  • Ending “regulation by enforcement” and rescinding Staff Accounting Bulletin No. 121, which had imposed controversial custody accounting requirements on financial institutions holding crypto assets;
  • Holding roundtables on topics such as the definition of a security, trading, custody, tokenization, DeFi, and privacy;
  • Issuing staff guidance on mining, staking, meme coins, and stablecoins;
  • Launching a joint initiative with the Commodity Futures Trading Commission (CFTC) called “Project Crypto,” designed to establish a lasting basis for coordination and cooperation in regulating areas of joint interest;
  • Approving exchange generic listing standards for crypto exchange-traded products; and
  • Publishing a taxonomy for tokenized securities and issuing no-action letters on tokenization and decentralized physical infrastructure networks (DePIN).

The Regulatory Agenda Ahead; The Innovation Exemption

Chairman Atkins outlined an extensive SEC agenda.  The SEC plans to issue a framework explaining how it analyzes crypto assets that may be investment contracts, including how such contracts are formed and how they may be terminated.  The Chairman also stated that the SEC is considering an “innovation exemption” to facilitate limited trading of certain tokenized securities on novel platforms with an eye toward developing a long-term regulatory framework.  In addition, the SEC intends to propose rulemaking to establish pathways for capital raising in connection with the sale of crypto assets.

Commissioner Peirce addressed expectations relating to the innovation exemption, signaling that it would represent an incremental, rather than a revolutionary, transformation of the regulatory landscape.  The exemption would facilitate integration of tokenized securities into the existing financial system without eliminating all regulatory requirements.

Chairman Atkins addressed his desire to enable traditional finance institutions and crypto-native firms to experiment with trading tokenized securities through automated market makers on public, permissionless blockchains.  In his view, market participants should be able to engage with decentralized applications on public, permissionless blockchains.  To the extent that individual investors are more comfortable allowing intermediaries to take custody and trade on their behalf, it should be investors, and not the SEC, that makes that decision.  He also expressed a desire to consider whether there should be a safe harbor for participants who facilitate such trading activity.

Under this approach, issuers seeking to tokenize their securities would work with a transfer agent or other tokenization agent to enable trading on automated market makers or other decentralized trading systems. The innovation exemption would provide relief from certain rules that may be inapplicable given how blockchain technology functions, while still maintaining appropriate investor protections through buyer and seller white-listing processes and trading volume limitations.  Importantly, the exemption would be temporary while the SEC develops rules.  Chairman Atkins noted that the SEC welcomes any feedback on this proposed approach.

Additional items on the agenda include no-action letters and exemptive orders addressing wallets and other user interfaces not subject to registration under the Securities Exchange Act of 1934, as amended; rulemaking on broker-dealer custody of non-security crypto assets, including payment stablecoins; and a transfer agent modernization rulemaking that would accommodate blockchain-based recordkeeping.

Embedded Compliance and Privacy Considerations

Chairman Atkins touched on his interest in the ability of decentralized trading technologies to embed compliance functions directly into smart contracts.  For example, founders could encode lockup commitments into smart contracts, ensuring automatic enforcement of resale restrictions.  Similarly, he signaled that communications between issuers and securityholders could be reimagined through use of blockchain technology.  The Chairman also pointed to privacy-preserving technologies, such as zero-knowledge proofs, which could help achieve Bank Secrecy Act objectives while reducing compliance costs and protecting individual privacy.  Commissioner Peirce expressed concern about the extent of financial surveillance embedded in the financial system, suggesting that blockchain technology presents an opportunity to protect Americans from bad actors while safeguarding financial privacy.

Key Takeaways for Market Participants

These remarks suggest that market participants should anticipate significant regulatory guidance in the near term.  Those interested in tokenizing securities or trading tokenized securities through decentralized mechanisms should monitor developments on the innovation exemption and consider engaging with the SEC.  More broadly, the speech signaled that the SEC remains open to dialogue with industry participants, including those building decentralized applications, traditional financial institutions exploring tokenization, and even critics of the technology.  The SEC’s stated willingness to issue no-action letters and exemptive orders to address specific factual circumstances suggests that proactive engagement may yield meaningful accommodations.

Author

Ali Perry
+1 212 506 2514
akperry@mayerbrown.com