SEC Chairman Paul S. Atkins has detailed the commission’s forthcoming approach to digital asset regulation through the ‘Project Crypto’ initiative, proposing a comprehensive token classification system to clarify regulatory boundaries. In a November 12, 2025 address at the Federal Reserve Bank of Philadelphia, Atkins emphasized applying federal securities laws to crypto assets with fairness and common sense. The proposed framework categorizes digital assets into four distinct classes: digital commodities, digital collectibles, digital utilities, and tokenized securities. This classification aims to establish clear guidelines for when digital assets transition from securities to non-securities status, using the long-established Howey test as the foundation. Atkins acknowledged the work of Commissioner Hester Peirce’s Crypto Task Force in developing a coherent, transparent framework based on economic reality rather than rhetoric or fear. The chairman’s vision focuses on three key areas: establishing a clear token classification system, recognizing that investment contracts can terminate under the Howey test framework, and clarifying practical implications for innovators, intermediaries, and investors. The classification system distinguishes digital commodities or network tokens as non-securities when their value derives from functional, decentralized cryptographic systems rather than profit expectations from managerial efforts. Digital collectibles representing art, music, or cultural items also fall outside securities classification, as do digital utilities serving as membership credentials, tickets, or identity verification tools. Only tokenized securities—traditional securities recorded on blockchain—will continue to be regulated as securities. Atkins emphasized that most crypto tokens aren’t inherently securities, though they may be part of investment contracts during initial offerings. Critically, he noted that investment contracts can conclude when promises are fulfilled, failed, or naturally terminated, allowing tokens to trade independently without permanent securities classification. The SEC chairman expressed support for congressional efforts to establish comprehensive crypto market structure legislation while committing to develop tailored exemption frameworks for crypto assets subject to investment contracts. The approach aims to balance capital formation and innovation with investor protection, recognizing that overextending securities law jurisdiction could drive innovation overseas. Atkins concluded by affirming that the framework maintains strong anti-fraud enforcement while providing regulatory clarity that acknowledges the SEC’s jurisdictional boundaries and supports American leadership in financial innovation.
