From Wall Street To Web3: BlackRock Presses SEC For Urgent Crypto Overhaul

Blackrock is urging the SEC to fast-track a major overhaul of crypto rules, pressing for clearer frameworks around staking, tokenization, and exchange-traded products (ETPs). In a May 9 meeting with the SEC’s Crypto Task Force, the asset management giant laid out its vision for more robust and adaptive regulation, one that could redefine how digital assets are governed across financial markets.Blackrock’s AgendaBlackrock’s recent meeting with the SEC’s Crypto Task Force outlined a targeted five-point agenda, aiming to influence how digital assets are regulated in the U.S. According to a memorandum from the SEC, the discussion centered on how to “address issues related to regulation of crypto assets.”Leading the conversation were Blackrock’s senior figures from regulatory affairs, legal, compliance, and digital asset divisions. They began with updates on three of their cornerstone products: the iShares Bitcoin Trust (IBIT), iShares Ethereum Trust (ETHA), and the Blackrock USD Institutional Digital Liquidity Fund (BUIDL). The firm then raised a critical issue, staking within ETPs, asking whether the SEC would entertain regulatory pathways to allow such features in future products.Blackrock also brought up the potential for tokenizing traditional securities, proposing that the SEC develop clearer rules to integrate tokenized assets into existing capital markets. Another major point focused on ETP approval standards. The firm asked for a transparent checklist that meets Section 6(b) of the Exchange Act and suggested a temporary framework while long-term rules are finalized. Finally, Blackrock recommended that the SEC set options trading limits for crypto ETPs based on asset liquidity.The Crypto Task Force, now operating under Commissioner Hester Peirce, reflects a growing openness to dialogue in Washington’s evolving stance on digital finance.Tokenizing $150B Treasury Fund with BNY MellonBlackRock has filed to tokenize its $150 billion Treasury Trust Fund with the SEC, signaling a major leap toward merging blockchain with traditional finance. The proposed plan involves issuing “DLT shares,” available exclusively through BNY Mellon. These shares would operate on a blockchain-based system that mirrors institutional ownership, offering a secure, transparent ledger.The fund requires a $3 million minimum for initial investment, but follow-up contributions have no such threshold. This effort aligns with CEO Larry Fink’s belief that tokenization can deliver “near-instant settlement, fractional ownership, and digital voting,” while still requiring robust identity verification to maintain trust and compliance.By partnering with BNY Mellon, BlackRock adds its weight to a growing list of financial institutions, like JPMorgan and State Street, testing blockchain rails for mainstream finance. The SEC, for its part, is considering a new amendment to crypto laws that could accelerate this trend by redefining how digital assets are issued, stored, and traded in the U.S.SEC’s Reaction: Pushing for a New Regulatory FrameworkIn a marked departure from the SEC’s historically cautious stance on digital assets, Chairman Paul Atkins unveiled a bold vision for crypto regulation during the agency’s cryptocurrency roundtable on May 12. Framing the new approach around three pillars: issuance, custody, and trading.Atkins committed to building a “clear and reasonable” framework that can keep pace with innovation while protecting investors.“I want the Commission to establish clear and reasonable guidelines for whether cryptocurrency assets are securities,” said Atkins, signaling a regulatory reset that industry stakeholders have long called for.IssuanceOn the topic of issuing digital assets, Atkins said the lack of regulatory clarity had discouraged companies from using existing compliance routes like registered offerings and Regulation A. He asked SEC staff to assess whether “additional guidance, registration exemptions, and safe harbors” could be developed to help crypto projects launch legally in the U.S.He maintained that the SEC “has the full authority” under existing securities laws to adapt to the needs of the crypto space. While some internal guidance has been issued in the past, Atkins believed further Commission-level action was needed to support a “sustainable regulatory environment” for digital innovation.CustodyOn custody, Atkins backed broader options for how registrants manage crypto assets, highlighting the SEC’s decision to remove Staff Accounting Bulletin No. 121—a move he said lifted a “significant barrier” for firms offering crypto custody services.Seamus Rocca, CEO of Xapo Bank, called this shift a “welcome step,” adding that “secure custody isn’t a technical nice-to-have, it’s the foundation of investor trust.” Rocca argued that crypto custody demands “purpose-built infrastructure,” rather than retrofitting old systems. He also warned that consumers should understand the “stark difference” between crypto exchanges and traditional banks.Atkins acknowledged that broker-dealers had never been prohibited from acting as custodians for crypto assets, but said new rules might still be necessary to clarify how “customer protection and net capital” requirements apply, especially in the case of self-custody or new custodial models.TradingAddressing trading, Atkins voiced support for expanding what registrants can offer to meet growing demand. He said the Commission should revisit rules for alternative trading systems and consider “conditional exemptions” to prevent innovators from moving abroad.He emphasized that U.S. markets shouldn’t lose ground due to outdated regulations, suggesting that a more flexible approach could both “support innovation” and preserve investor protections.While some remain wary of regulatory gaps, many in the industry see Atkins’ plan as the clearest sign yet that the SEC is ready to craft a modern, balanced crypto framework.A Fork in the RoadAt the SEC’s crypto roundtable, panelists agreed that today’s regulatory system, built for paper-based stock ownership, is poorly equipped to handle blockchain technology. Susan Gault-Brown of Allen Overy Shearman Sterling LLP remarked that digital assets “don’t fit squarely within the rules” designed for an older system. Others echoed this, noting that crypto enables peer-to-peer systems without the need for intermediaries. Larry Florio of 1kx pointed out that while this setup offers “unique abilities,” it also introduces “unique risks.” Georgetown professor Adam Levitin added that traditional custodians physically safeguard assets in vaults—“a really different set of skills” compared to securing crypto. The group advocated for a principles-based regulatory model that can evolve with technology. Kraken’s Mark Greenberg argued that rigid custody rules don’t make sense anymore, saying, “not my keys, not my crypto” may no longer apply. Overall, participants stressed that regulatory flexibility is essential to avoid outdated policies stifling innovation.The Road to Modern Crypto RegulationAs the SEC warms to industry input and institutions like Blackrock push for modernization, the path forward hinges on crafting agile, tech-neutral regulations. Balancing investor protection with innovation will define the future of crypto oversight and determine whether the U.S. can lead in the evolving digital asset economy.The post From Wall Street To Web3: BlackRock Presses SEC For Urgent Crypto Overhaul appeared first on Metaverse Post.