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Regulated Alternative Trading Systems (ATSs) in the USA will almost certainly be required to secure additional or clarified regulations to fully utilize stablecoins and cryptocurrencies, even with the new pro-crypto stance from the SEC under Chair Paul Atkins.
Here’s why and what those additional regulations are likely to entail:
The Nature of ATSs and Existing Regulations:
ATSs are private trading venues that are regulated by the SEC as broker-dealers and must comply with Regulation ATS. This framework aims to provide market participants with alternative trading venues that are subject to similar oversight as national securities exchanges, but with more flexibility.
When an ATS seeks to trade new types of assets or use new technologies, it needs to ensure it’s in compliance with existing securities laws and FINRA rules. The challenge with crypto has been its novel nature, leading to classification ambiguities and a lack of clear guidance.
Why Additional/Clarified Regulations are Needed for Crypto/Stablecoins on ATSs:
* Classification of Digital Assets:
* Securities vs. Commodities: The fundamental question remains: Is the crypto asset a security or a commodity? If it’s a security (e.g., many ICO tokens, certain stablecoins that might have investment contract characteristics), then the ATS is already within the SEC’s purview, but specific rules for “digital asset securities” are still evolving. If it’s deemed a commodity (like Bitcoin or Ethereum, per the current prevailing view), then the SEC’s direct jurisdiction over its trading on an ATS is less clear, and the CFTC might have primary oversight.
* Paul Atkins’ Approach: SEC Chair Paul Atkins has stated his intention to provide clearer “rules of the road” for the issuance, custody, and trading of crypto assets. He has also indicated that the SEC may “consider revising its rules to permit registered broker-dealers operating alternative trading systems (ATS) to handle trades in non-securities such as bitcoin and ether.” This directly implies the need for new or revised rules for ATSs to handle non-security crypto assets.
* Custody Requirements (Rule 15c3-3 & SIAI):
* Broker-dealers (including ATSs) are subject to the SEC’s customer protection rule (Rule 15c3-3), which dictates how they must safeguard customer funds and securities. This rule was designed for traditional securities and doesn’t easily map to the unique technological aspects of digital assets (e.g., private keys, self-custody).
* The SEC’s previous “Staff Accounting Bulletin 121” (SAB 121) had complicated banks’ ability to custody crypto, but its rescission in 2025 by Paul Atkins, and the new permissive guidance from the OCC, FDIC, and Federal Reserve, now makes it easier for banks to offer crypto custody.
* However, for ATSs directly custodying digital assets, the SEC may still issue specific guidance or amendments to Rule 15c3-3, or develop a more tailored framework for “special purpose broker-dealers” (SPBDs) to address the unique custody risks of digital assets, as hinted by Chair Atkins.
* Market Structure and Transparency (Reg NMS, ATS Rules):
* Regulation NMS (National Market System) governs how securities are traded on US exchanges and ATSs, aiming for fair and efficient markets. Applying all aspects of Reg NMS to fragmented crypto markets with different underlying technologies is complex.
* The SEC will need to clarify how existing ATS rules (e.g., fair access, disclosure of operations, order display rules) apply to crypto trading, especially considering the 24/7 nature of crypto markets and the role of decentralized exchanges.
* Anti-Money Laundering (AML) and Sanctions Compliance (FinCEN):
* ATSs, as broker-dealers, are already subject to stringent AML/KYC obligations under FinCEN and FINRA. When dealing with crypto, they need robust systems to monitor transactions on the blockchain, identify suspicious activities, and comply with sanctions lists, which presents unique challenges. This isn’t a new regulation for ATSs but requires specific application of existing rules to crypto.
* Cybersecurity and Operational Resilience:
* Given the high-profile hacks and vulnerabilities in the crypto space, ATSs dealing with digital assets will face intensified scrutiny regarding their cybersecurity frameworks, data protection, and operational resilience to withstand attacks or system failures. FINRA’s “2025 Annual Regulatory Oversight Report” highlights cybersecurity as a key area.
* Disclosure and Investor Protection:
* ATSs will need clear guidelines on disclosures to investors regarding the risks of trading crypto assets, especially for novel or complex tokens. FINRA also emphasizes “Customer Outreach” to ensure investors understand the differences between traditional and crypto accounts.
Paul Atkins’ Vision for ATSs:
SEC Chair Paul Atkins specifically mentioned in May 2025 that he has “asked the staff to help us devise ways to modernize the ATS regulatory regime to better accommodate crypto assets.” He is also in favor of “allowing registrants to trade a broader variety of products on their platforms,” including potentially non-securities. This strongly suggests that new guidance, no-action letters, or formal rule proposals are in the pipeline to update the ATS framework for the digital asset era.
In essence, while ATSs are already regulated entities, the unique characteristics of stablecoins and cryptocurrencies necessitate either clarifications to existing rules or new, tailored regulations to ensure they can be safely and compliantly integrated into these trading venues. The current SEC leadership is actively working towards providing this clarity.

Video courtesy of Interactive Brokershome

Video courtesy of Interactive Brokers