The U.S. Securities and Exchange Commission is preparing to overhaul how it treats digital assets, with Chair Paul Atkins outlining a more adaptive framework that could redefine when tokens are considered securities and when they are not.
- SEC Chair Paul Atkins outlined the agency’s “Project Crypto” initiative to reform digital asset oversight.
- The SEC plans to create a token taxonomy recognizing that some tokens may evolve beyond securities status.
- Atkins supports limited exemptions for crypto assets tied to investment contracts.
During a policy speech at the Federal Reserve Bank of Philadelphia, Atkins said the SEC’s upcoming “Project Crypto” initiative aims to modernize the agency’s rulebook for the digital era. Central to the plan is a forthcoming “token taxonomy,” which would formally categorize digital assets based on their function, utility, and stage of development.
According to Atkins, the effort will be guided by the Howey test — the long-standing standard for determining what constitutes an investment contract — but with a new understanding that such classifications can evolve over time.
He pointed to Commissioner Hester Peirce’s earlier observations that a token may begin its life as part of an investment agreement yet later transition into a freely tradable asset with no securities characteristics. Once that transition occurs, Atkins said, trades involving such tokens would fall outside of SEC jurisdiction.
Drawing Clearer Lines Between Token Types
Atkins argued that the SEC should focus only on digital assets that are explicitly structured as securities, while others — such as network tokens, collectibles, and digital commodities — belong under different or no federal jurisdiction. He also hinted at developing a specialized regulatory path for tokens associated with investment contracts, creating an exemption-based regime tailored for crypto startups.
He emphasized that the agency’s goal is to bring clarity, not complacency: “Regulatory precision doesn’t mean leniency,” he said, warning that fraudulent conduct would remain aggressively prosecuted under existing laws.
A New Balance Between Oversight and Innovation
Atkins’ remarks come as the SEC faces growing pressure from Congress to coordinate with other agencies — particularly the Commodity Futures Trading Commission (CFTC) — on defining where one regulator’s authority ends and another’s begins.
Under legislation currently making its way through Congress, the SEC could soon be tasked with creating limited exemptions for certain token offerings, while the CFTC would oversee digital commodities. Atkins said he supports such coordination, calling it “essential for responsible innovation.”
Crypto Policy Continues Despite Washington Gridlock
The broader regulatory debate continues even amid a government shutdown that has stretched past 40 days. The Senate Agriculture Committee, which oversees the CFTC, released a discussion draft of its version of the market structure bill earlier this week. Meanwhile, the House of Representatives is expected to vote on a short-term spending package to restore government funding through January.
Despite the impasse, negotiations over digital asset policy have not slowed, suggesting that bipartisan momentum around crypto legislation remains intact.
The Road Ahead for “Project Crypto”
Atkins’ initiative represents one of the most significant efforts yet to define how digital assets will be classified in the U.S. Rather than treating every token as a security by default, the SEC appears to be moving toward a system that recognizes how blockchain projects mature — and how their tokens evolve from funding tools to functional assets.
For the SEC, “Project Crypto” is not just about redefining oversight, but about restoring trust — both in regulators’ ability to adapt and in the legitimacy of blockchain innovation within the U.S. financial system.
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Source: https://coindoo.com/sec-moves-toward-flexible-token-rules-as-project-crypto-takes-shape/