SEC Chairman Paul Atkins Launches Project Crypto, Launches New Token Framework

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At the Philadelphia Fed Fintech Conference, SEC Chairman Paul S. Atkins revealed the next phase of Project Crypto, a major step toward establishing a token taxonomy framework. This initiative aims to clearly categorize digital assets under U.S. securities laws, providing long-awaited regulatory clarity to the crypto market.

Fox Journalist Eleanor Terrett shared detailed insights from Atkins’s speech on X, highlighting the SEC’s intention to balance innovation and investor protection while fostering a transparent crypto environment.

Most Crypto Tokens Are Not Securities, Says SEC Chairman

Atkins began by stating that most crypto tokens currently traded are not securities. He clarified that simply existing on a blockchain doesn’t automatically make a token a security under U.S. law. The SEC continues to rely on the Howey Test to determine what qualifies as an “investment contract,” but Atkins emphasized that the agency is now applying it more flexibly to suit the realities of digital assets.

He explained that tokenization doesn’t change the nature of an asset — a stock remains a stock, and a bond remains a bond, even when converted into a digital token. Likewise, calling something a “token” or “NFT” doesn’t exempt it from regulation if it operates like an investment reliant on someone else’s efforts for profit.

New SEC Token Taxonomy Framework Explained

The new token taxonomy framework is built around two key principles:

1. Tokenized traditional assets retain their original legal status.
   For example, a tokenized bond is still a bond under securities law.
   
2. Labeling an asset as a token or NFT doesn’t exclude it from SEC oversight.
   If investors buy it with expectations of profit from another party’s work, it may still qualify as a security.

This approach represents a modernized interpretation of the Howey Test, ensuring the rules evolve with the digital asset ecosystem. Atkins reiterated that the SEC’s goal is to adapt securities laws to fit crypto realities, not force digital assets into outdated legal categories.

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How the SEC Framework Impacts Crypto Trading?

Atkins also addressed the evolution of crypto tokens over time. Some assets may initially qualify as securities, especially during token sales that promise future profits, but can later transition into non-securities as their underlying blockchain networks become decentralized and independent.

He drew a parallel to an old farming case, noting that once the original business arrangement ended, the land itself was no longer considered a security. Similarly, once a crypto project achieves full decentralization, its tokens could lose their security status.

SEC’s Approach: Encouraging Crypto Innovation While Protecting Investors

Atkins revealed that the SEC is exploring ways for non-security tokens to trade on platforms regulated by the CFTC or state-level financial agencies, not just SEC-approved exchanges. This shift could open new doors for innovation and market growth while maintaining investor safety.

He emphasized that the SEC intends to complement congressional efforts, not replace them. Concluding his address, Atkins said:

This signals a pivotal moment for the crypto industry, as regulators move toward a more balanced, transparent, and innovation-friendly framework for digital assets in the United States.

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