SEC Proposes Regulatory Sandbox to Foster Crypto Innovation

Uyeda, who took over the agency’s leadership amid an evolving digital finance landscape, emphasized that the current regulatory regime is outdated when it comes to blockchain-based business models. Many crypto exchanges and decentralized platforms operate under a burdensome web of state-by-state licensing rules, often requiring as many as 50 separate approvals to serve U.S. customers nationwide.

“This fragmented approach hinders innovation and raises compliance costs,” Uyeda said at the roundtable. “We should consider whether there may be a more efficient method of regulation, one that acknowledges the unique features of digital asset markets.”

The proposed sandbox would introduce time-limited, conditional exemptive relief for both registered and unregistered entities that trade in tokenized securities or non-security crypto assets. Under this framework, firms would be permitted to test their platforms and services while being subject to limited oversight. The conditions would be tailored to ensure adequate investor protection while allowing operational flexibility.

One of the core goals is to address the regulatory ambiguity around tokenized assets and the status of blockchain-based trading systems, which often merge custody, execution, and clearing into a single technological layer. Traditional regulations were not built with such integration in mind, leading to confusion over how existing securities laws apply.

Uyeda’s plan also seeks to avoid the pitfalls of reactive enforcement, which has long been a point of contention within the crypto industry. Instead of prosecuting firms after the fact, the sandbox would allow the SEC to engage with innovators early, gather data, and collaboratively build a path toward long-term compliance.

SEC Commissioner Hester Peirce, known for her pro-crypto stance, voiced strong support for the initiative. Peirce, who chairs the agency’s crypto-focused task force, said the sandbox could serve as a learning tool for both regulators and the private sector. “This kind of iterative, real-world experimentation is critical to forming a regulatory framework that works for everyone,” she noted.

The move comes at a time when other jurisdictions, such as the United Kingdom, Singapore, and the United Arab Emirates, have already implemented similar sandbox programs. Uyeda acknowledged that without meaningful reform, the U.S. risks falling behind in the global race to attract blockchain innovation.

The proposal also aligns with President Donald Trump’s broader policy shift toward pro-growth crypto regulation. In recent months, the Trump administration has taken steps to roll back rules seen as hostile to decentralized finance, and has emphasized the strategic importance of maintaining U.S. leadership in emerging technologies.

The SEC is now seeking public input on the sandbox concept, inviting comments from industry stakeholders, legal scholars, and the broader public. The feedback will play a key role in shaping the program’s final structure and determining which types of firms and tokens would qualify for the exemptions.

As Washington grapples with the rapidly evolving crypto landscape, Uyeda’s sandbox proposal represents a potential turning point. Whether it leads to lasting change or becomes another regulatory experiment will depend on the SEC’s willingness to embrace flexibility and innovation in equal measure.