In a significant shift toward regulatory clarity, SEC Chair Paul Atkins has stated that the majority of crypto tokens traded today are not, in and of themselves, securities. This foundational change in perspective is part of the SEC’s “Project Crypto“, a comprehensive initiative designed to modernize securities rules and establish the United States as a leader in the digital asset revolution.
A New Framework for Crypto Assets
Chair Atkins’ approach moves away from blanket assumptions and introduces a more nuanced method for classifying digital assets. He has explained that a token alone is generally not considered a security; the classification depends heavily on the surrounding context and how it is sold. This has led to a functional framework that groups crypto-assets into categories.
The key insight is that many tokens function as “digital commodities,” “digital collectibles,” or “digital tools” with practical utility. These assets, which derive their value from the programmatic operation of a decentralized system or are aimed at use and collection, typically fall outside the scope of securities regulation. However, two categories remain firmly within the SEC’s purview: tokens that represent traditional instruments like stocks or bonds (tokenized securities) and crypto-assets offered as part of an investment contract.
The determination of what constitutes an investment contract still relies on the Howey test, but the SEC’s 2025 guidance has refined its application. The focus is on the “reasonable expectation of profit” derived from the managerial efforts of a centralized team or promoter. The framework also introduces a three-pronged analysis, examining the initial sale context, the token’s ongoing use on a decentralized network, and the degree of control retained by the founding team. Crucially, Atkins has noted that the security status is not necessarily perpetual and can change if the promises or reliance on managerial efforts are fulfilled or end.
The Bigger Picture: Project Crypto and Regulatory Onshoring
This new classification framework is a cornerstone of the broader “Project Crypto” initiative. Announced by Chair Atkins, this Commission-wide effort aims to overhaul securities regulations to facilitate the movement of American financial markets on-chain and “reshore” the crypto businesses that previously fled the country due to regulatory uncertainty.
A key goal is to provide “clear and simple rules of the road for crypto asset distributions, custody, and trading”. This shift represents a move away from the “regulation-by-enforcement” strategy of previous administrations toward creating a more predictable and innovation-friendly environment. The initiative also involves collaboration with the President’s Working Group on Digital Asset Markets and aligns with the pro-innovation stance of the GENIUS Act for stablecoins.
Implications for the Crypto Ecosystem
The practical implications of this clarified stance are far-reaching for everyone in the crypto industry.
For token issuers, the path to compliance is now clearer. Projects can structure their tokens and marketing to emphasize genuine utility and decentralization, thereby reducing the risk of being classified as a security. This clarity may accelerate the launch of new projects and make it easier for existing tokens to list on U.S. platforms.
For exchanges and trading platforms, the reduced regulatory ambiguity lowers the risk of listing a wide array of tokens. U.S. platforms can now operate with greater confidence, knowing which assets are considered securities and require stricter oversight and which are not. This is expected to increase market participation and liquidity.
For investors, this environment fosters greater confidence. A regulated market with clearer rules reduces the prevalence of scams and fraudulent projects. Furthermore, the SEC has taken concrete steps to improve the institutional infrastructure, such as withdrawing the obstructive 2019 joint statement on custody, which paves the way for more broker-dealers to safely hold crypto assets for their clients.
In essence, the SEC’s new posture under Chair Atkins marks a pivotal turn from ambiguity to action. By acknowledging that most crypto tokens are not securities and building a structured framework around that principle, the agency is laying the groundwork for a more mature, secure, and competitive digital asset market in the United States.
