SEC Provides Clarity on Crypto Classification
SEC Chairman Paul Atkins has outlined the next phase of Project Crypto, which aims to bring much-needed clarity to how digital assets will be regulated under federal securities laws. The initiative builds on work led by Commissioner Hester Peirce and the Crypto Task Force, focusing on transparent and fair treatment of cryptocurrencies.
In a recent address, Atkins discussed the uncertainty that has surrounded crypto classification over the past decade. He explained that most of this confusion stems from the changing nature of digital assets themselves. According to his remarks, a cryptocurrency being part of an investment contract under the Howey test doesn’t necessarily make it permanently a security because such agreements can end.
“I believe that most crypto tokens trading today are not themselves securities,” Atkins stated, marking a significant shift in regulatory thinking.
New Taxonomy Framework
The new framework introduces a proposed token taxonomy that categorizes cryptocurrencies by function and purchaser expectations. Under this approach, digital commodities—often called network tokens—are not classified as securities. Similarly, digital collectibles like NFTs are excluded from securities classification because buyers don’t anticipate profits 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. However, tokenized securities continue to be regulated as securities regardless of their digital format.
Atkins further discussed the application of the Howey test, which identifies investment contracts as involving money put into a common enterprise with expectation of profits from others’ efforts. He noted that once the issuer fulfills, fails to satisfy, or terminates their managerial promises, the tokens may continue trading without being considered securities.
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 Commodity Futures Trading Commission, banking regulators, and other stakeholders to create a regulatory environment that supports innovation while maintaining investor protections.
Importantly, fraud remains subject to enforcement regardless of classification changes. Anti-fraud provisions will continue to apply to tokens even if they’re no longer classified as securities.
Project Crypto, first launched in July 2025, aims to provide clarity, fairness, and integrity for developers, investors, and intermediaries. Headed by Atkins and Peirce, the initiative was specifically designed to differentiate between securities and other digital assets.
This week appears to be particularly significant for crypto regulation. On November 10, the Senate Agriculture Committee shared a draft plan to regulate digital asset commodities. The same day, the U.S. Treasury and IRS issued guidance allowing staking on crypto ETPs and passing staking rewards to retail investors.
These developments suggest we might be entering a new phase of regulatory maturity for digital assets. The framework seems to acknowledge that not all digital tokens serve the same purpose or carry the same risks. It’s a more nuanced approach than we’ve seen previously, which could help both innovators and investors navigate this space more confidently.
Of course, the devil will be in the implementation details. How these classifications are applied in practice, and how they interact with existing regulations, will determine whether this framework truly provides the clarity the market needs.
