Mature networks may trade outside SEC jurisdiction, under CFTC or state oversight.
The U.S. Securities and Exchange Commission (SEC) is moving closer to a working definition for digital assets. Speaking at the Philadelphia Fed’s Fintech Conference, Chair Paul S. Atkins unveiled the next phase of Project Crypto, an initiative to draw clear boundaries between tokens that fall under securities law and those that don’t. Atkins said most crypto tokens trading today are not securities, and the SEC’s approach must reflect that reality.
He emphasized that an investment contract doesn’t last forever simply because an asset continues to trade on a blockchain. Citing the Howey test, Atkins proposed a more flexible approach for blockchain, saying, “A stock is still a stock, a bond is still a bond — but economic reality trumps labels.”
The proposed taxonomy, developed by the SEC’s Crypto Task Force, divides assets into four main categories. Network tokens or digital commodities, digital collectibles such as NFTs and in-game items, and digital tools like tickets or memberships would not be considered securities.
Tokenized stocks or bonds, however, would remain securities regardless of their format. The idea is to distinguish functional, decentralized tokens from those representing ownership or profit claims.
Atkins also addressed the “gray zone” that has long frustrated developers and investors, when tokens tied to an initial investment contract continue to trade after a network decentralizes.
The SEC plans to give such tokens alternative trading paths through CFTC- or state-regulated platforms, rather than restricting them to SEC-approved exchanges. Atkins said the goal is to balance investor protection with innovation, allowing tokens that no longer function as securities to trade legally without forcing them offshore.
The SEC reaffirmed its focus on fraud prevention and transparency, not overreach. The agency emphasized that its role is to protect investors from deception, not to treat every digital innovation as a stock offering. Fraud will still face enforcement, but genuine innovation should have space to grow.
The SEC’s taxonomy aligns with pending congressional legislation aimed at establishing a broader market structure for digital assets. Atkins confirmed that the agency is working closely with lawmakers and the Commodity Futures Trading Commission to synchronize oversight of both securities and non-securities tokens.
Project Crypto marks a turning point in U.S. crypto regulation. First unveiled on September 10, it aims to define when investment contracts end, letting mature blockchains operate without constant legal threat.
The plan draws a firm line between functional tokens and financial instruments, replacing courtroom chaos with clear rules. It’s not deregulation, it’s definition.
