On November 12, SEC Chair Paul Atkins delivered remarks at the Federal Reserve Bank of Philadelphia, outlining the agency's direction for digital asset oversight under Project Crypto. He previewed a forthcoming token taxonomy based on the Supreme Court's Howey test, stating that most currently trading tokens are not securities. Atkins emphasized distinguishing digital assets by economic reality and supported congressional efforts for a federal market-structure statute.
SEC Chair Paul Atkins spoke on November 12 at the Federal Reserve Bank of Philadelphia, detailing the SEC's evolving approach to digital assets through Project Crypto. His remarks previewed a "token taxonomy" rooted in the Supreme Court's Howey investment-contract analysis, which determines whether an asset qualifies as a security based on expectations of profits from others' managerial efforts.
Atkins noted that while some tokens may initially be sold via investment contracts, this status ends once the issuer's essential managerial efforts cease. He affirmed that most tokens trading today do not qualify as securities under existing law. The chair highlighted the SEC's effort to classify digital assets by economic reality, identifying several core elements in the framework:
- Digital commodities, or "network tokens," derive value from decentralized, functional systems rather than managerial efforts and thus are not securities.
- Digital collectibles, such as tokens for artwork or in-game items, fall outside securities regulation as they lack profit expectations from others' efforts.
- Digital tools, including membership credentials, tickets, and identity markers, serve functional purposes and do not constitute securities.
- Tokenized securities, representing ownership of traditional securities, remain subject to SEC jurisdiction.
Atkins expressed support for congressional action to create a federal market-structure statute for crypto assets. He also previewed potential staff recommendations for a tailored offering regime for crypto assets linked to investment contracts. These developments aim to provide clarity for regulated institutions and digital-asset platforms, potentially including exemptions to foster capital formation in the sector.