U.S. Securities and Exchange Commission Discontinues ‘ATS’ Registration for Crypto Firms

The U.S. Securities and Exchange Commission (SEC) has indeed taken steps to move away from a proposed requirement that would have mandated cryptocurrency companies to register as “alternative trading systems” (ATS). This development reflects a significant shift in the SEC’s approach to regulating the crypto industry, influenced by a combination of political, industry, and leadership dynamics. In March 2025, Acting SEC Chairman Mark Uyeda announced that he had directed staff to abandon a 2022 proposal that aimed to expand the definition of ATS to include certain crypto firms.

This proposal, initiated under the previous Democratic leadership of the SEC, was part of a broader effort to impose stricter oversight on the crypto sector by subjecting it to the same regulatory framework as traditional securities exchanges. The plan faced significant pushback from the crypto industry, which argued that the heightened regulatory burden would stifle innovation and impose impractical compliance requirements, particularly given the decentralized and technology-driven nature of many crypto platforms.

In January 2025, the SEC launched a crypto task force aimed at overhauling its approach to digital assets, signaling a move toward a more industry-friendly regulatory framework. This shift has also been marked by the SEC pausing or dismissing several high-profile enforcement actions against major crypto firms, such as Binance and Coinbase, which had been accused of operating as unregistered exchanges. Uyeda criticized the original proposal as a “mistake,” arguing that it inappropriately linked the regulation of Treasury markets with what he described as a “heavy-handed attempt to tamp down the crypto market.”

By removing the ATS registration requirement, the SEC is reducing a key regulatory hurdle, potentially encouraging innovation and investment in the sector. Companies like Coinbase, Ripple, and others could benefit from clearer guidelines and a less adversarial regulatory environment, which might lead to increased institutional adoption and market expansion. The decision also aligns with broader political signals, including President Donald Trump’s 2024 campaign promises to establish a more crypto-friendly regulatory regime, such as creating a strategic Bitcoin reserve and promoting a national cryptocurrency stockpile.

However, this move does not mean the crypto industry is free from SEC oversight. Crypto firms must still navigate other securities laws, particularly if their tokens are deemed securities under the Howey Test, which would require registration and compliance with disclosure and reporting obligations. The SEC’s decision to abandon the ATS requirement is specific to the classification of crypto platforms as trading systems, not a blanket deregulation of the sector. Moreover, the crypto task force is tasked with developing new regulatory frameworks, which could introduce alternative registration channels or compliance measures in the future.

Critics of the original ATS proposal, including some within the crypto industry, argued that it was overly broad and could harm innovation, but proponents of stricter regulation contend that easing requirements could expose investors to increased risks, such as fraud, market manipulation, and Ponzi schemes, which have historically plagued the crypto space. The SEC’s previous enforcement actions, such as those against Binance and Coinbase, highlighted concerns about unregistered securities offerings and inadequate investor disclosures, issues that remain unresolved even with the abandonment of the ATS rule.

The SEC’s decision has sparked debate about its broader regulatory strategy. Some industry observers view this as a pragmatic step toward fostering a more collaborative relationship with the crypto sector, potentially legitimizing digital assets within mainstream financial markets. Others, however, see it as a politically motivated rollback of consumer protections, influenced by the incoming Trump administration’s deregulatory agenda and the crypto industry’s growing political clout, exemplified by significant lobbying efforts and campaign contributions from figures like Elon Musk.

It is also worth noting that this policy shift occurs in the context of other regulatory developments, such as the SEC’s approval of spot Bitcoin and Ether exchange-traded funds (ETFs) in 2024, which have already begun to integrate cryptocurrencies into traditional financial systems. These ETFs provide investors with regulated exposure to crypto assets, potentially reducing the need for direct trading on crypto platforms and thus mitigating some of the risks associated with unregulated exchanges. However, the abandonment of the ATS requirement could further encourage the growth of decentralized finance (DeFi) platforms and other crypto trading systems, which may continue to operate outside the SEC’s direct oversight, raising ongoing questions about market integrity and investor safety.

The SEC’s decision to end the proposed requirement for crypto companies to register as “trading systems” marks a significant pivot in its regulatory approach, driven by a combination of industry resistance, political pressures, and a desire to foster innovation. While this move reduces immediate regulatory burdens on crypto firms, it does not eliminate the need for compliance with other securities laws, and the long-term implications for investor protection and market stability remain uncertain.