SEC Chair Confirms Plan to Formalize ‘Innovation Exemption’ Before Year-End

The U.S. Securities and Exchange Commission (SEC) is preparing to introduce a long-awaited “innovation exemption.”

With this exemption, companies would be able to experiment with digital assets and emerging technologies under a clearer regulatory framework.

SEC Chair Paul Atkins said the exemption remains one of his top priorities despite the ongoing government shutdown, which has slowed rulemaking progress.

Speaking at a Futures and Derivatives Law Report event in New York, Atkins said the agency aims to finalize the rule by late 2025 or early 2026. He described the initiative as an effort to “bring innovation home” after years of regulatory uncertainty that pushed many crypto firms overseas.

“We want developers to feel confident building in the United States,” Atkins said.

Shift Away from Regulation by Enforcement

The planned exemption would mark a major policy shift for the SEC. In previous years, the agency relied heavily on enforcement actions and informal staff guidance to shape crypto policy. By contrast, formal rulemaking, Atkins said, would offer clearer standards for startups and established firms alike.

“We’ve had years of stagnation in this industry,” he noted. “Now it’s time to set transparent, supportive rules that promote innovation.”

However, Atkins acknowledged that the government shutdown has “hamstrung” the SEC’s ability to move forward with new rules. Only essential functions are continuing, leaving most policy development on hold. Even so, he expressed confidence that the innovation framework would remain on track once operations resume.

Congress Pushes Crypto Legislation

Notably, the SEC’s efforts come alongside parallel moves in Congress to advance crypto legislation. Atkins praised lawmakers for progress on the GENIUS Act, the first U.S. law to establish a national framework for stablecoins.

Furthermore, he voiced optimism about a potential market structure bill that could clarify trading and custody rules for digital assets. However, industry experts offered mixed views, some estimating only a 50% chance the bill would pass before 2026.

Stablecoins Spur Real-World Adoption

In the meantime, the GENIUS Act has already spurred new activity in the stablecoin market. The U.S. Treasury Department is drafting implementation rules, which analysts say could unleash a new wave of crypto innovation.

Consequently, developers expect a broader use of stablecoins in payments, fund transfers, and financial contracts. For instance, companies like Visa, which recently integrated USDC into its payment systems, are early examples of this trend.