The SEC and Congress are coordinating efforts to modernize crypto regulation while protecting investors.
The U.S. Securities and Exchange Commission (SEC) has introduced a new framework under Project Crypto to classify digital assets. The announcement came from Chairman Paul Atkins during the Philadelphia Fed Fintech Conference.
The initiative focuses on defining a token taxonomy that determines how securities laws apply to cryptocurrencies. It marks one of the SEC’s most detailed attempts to bring regulatory clarity to the evolving crypto market.
During the conference, Atkins stated that most crypto tokens currently trading are not securities.
He clarified that an investment contract does not automatically persist just because a token trades onchain. The Commission’s approach, he explained, remains grounded in the Howey test but will be applied with flexibility.
Atkins highlighted two guiding principles for the framework. First, traditional financial assets such as stocks or bonds retain their legal status even if tokenized. Second, labeling something a token or NFT does not exempt it from securities laws if profits rely on managerial effort.
According to Eleanor Terrett, who reported from the conference, the SEC’s Crypto Task Force is finalizing a detailed taxonomy. Under the proposal, digital commodities, NFTs, and utility tokens will not be treated as securities.
However, tokenized stocks and bonds will remain within securities law jurisdiction.
Atkins used the Howey citrus grove analogy to explain the shift. Tokens, he said, may begin as part of an investment contract but cease to be securities once networks decentralize. Secondary trading of these assets could therefore occur outside SEC-regulated exchanges.
The Chairman also discussed how the SEC plans to address maturing blockchain ecosystems. As networks grow and issuers step back, tokens often lose reliance on centralized control. This, Atkins noted, changes their regulatory status under U.S. law.
He added that non-security tokens could trade on platforms regulated by the Commodity Futures Trading Commission (CFTC) or state agencies. This adjustment is meant to support innovation while maintaining investor safeguards.
Terrett reported that the SEC’s Crypto Task Force is working closely with Congress to align on legislative goals. Atkins reiterated that fraud enforcement will remain strict even as the agency modernizes its oversight model. He concluded that embracing flexibility is essential to ensuring American leadership in digital finance.
