New Regulatory Approach for Digital Assets
SEC Chairman Paul Atkins has outlined the next phase of Project Crypto, which aims to provide clearer regulatory guidance for digital assets under federal securities laws. The framework builds on work led by Commissioner Hester Peirce and the Crypto Task Force, focusing on transparent and fair treatment of cryptocurrencies.
Atkins addressed the uncertainty that has surrounded crypto classification over the past decade, noting that much of the confusion stems from the evolving nature of digital assets. He made a significant clarification: just because a cryptocurrency was part of an investment contract under the Howey test doesn’t mean it remains a security permanently. “I believe that most crypto tokens trading today are not themselves securities,” he stated.
Token Classification System
The new framework introduces a proposed token taxonomy that categorizes cryptocurrencies based on their function and what purchasers expect from them. Under this approach, digital commodities—often called network tokens—won’t be classified as securities. Similarly, digital collectibles like NFTs are excluded from securities regulation because buyers don’t anticipate profits coming from the managerial efforts of others.
Digital tools that serve practical purposes, such as memberships, tickets, credentials, or identity verification, also fall outside SEC oversight. Only tokenized securities will continue to be regulated as traditional securities.
Howey Test Application
Atkins discussed how the Howey test applies to digital assets, explaining that investment contracts involve putting money into a common enterprise with expectations of profits from others’ efforts. He noted that once an issuer fulfills, fails to satisfy, or terminates their managerial promises, the tokens may continue trading without being considered securities.
This represents a significant shift in thinking. It acknowledges that many tokens start with investment contract characteristics but may evolve into something else entirely. The framework recognizes that digital assets can have multiple phases in their lifecycle.
Broader Regulatory Coordination
The initiative includes plans for exemptions and special offerings for digital assets tied to investment contracts. The SEC will coordinate with Congress, the CFTC, banking regulators, and other stakeholders to create a regulatory environment that supports innovation while maintaining investor protections.
Fraud remains subject to enforcement regardless of classification, and anti-fraud provisions will apply even to tokens no longer classified as securities. This ensures that investor protection remains a priority across all digital asset categories.
Project Crypto, first launched in July 2025, aims to provide clarity, fairness, and integrity for developers, investors, and intermediaries. This week has proven particularly significant for crypto regulation, with the Senate Agriculture Committee sharing a draft plan for digital asset commodities and the U.S. Treasury issuing guidance on staking rewards for retail investors.
The framework represents a more nuanced approach to digital asset regulation, acknowledging that not all tokens fit neatly into existing securities categories. It’s a step toward creating clearer rules that can adapt to the rapidly evolving crypto landscape while maintaining essential investor protections.
