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On November 12, SEC Chair Paul Atkins delivered remarks at the Federal Reserve Bank of Philadelphia describing the SEC's direction for digital asset oversight under "Project Crypto." The speech previewed a forthcoming "token taxonomy" grounded in the Supreme Court's Howey investment-contract analysis and emphasized that most tokens currently trading are, in his view, not securities under existing law.
In describing the next phase of Project Crypto, Chair Atkins highlighted the SEC's ongoing effort to distinguish among different types of digital assets using an approach tied to economic reality. He reiterated that while some tokens may initially be sold through an investment contract, that relationship can end once the issuer's essential managerial efforts cease. He also voiced support for congressional efforts to establish a federal market-structure statute and previewed potential staff recommendations for a tailored offering regime for crypto assets associated with investment contracts.
Chair Atkins identified several core elements of the SEC's evolving framework:
- Digital commodities are not securities. These "network tokens" derive value from a decentralized and functional system rather than from managerial efforts, and therefore fall outside the securities laws under the Chair's analysis.
- Digital collectibles fall outside securities regulation. Tokens tied to artwork, in-game items, and other collectible content are not purchased with an expectation of profits arising from the managerial efforts of others.
- Digital tools serve functional purposes. Membership credentials, tickets, identity markers, and other utility-focused tokens do not constitute securities.
- Tokenized securities remain securities. Where a token represents ownership of an instrument enumerated in the securities laws, it remains subject to SEC jurisdiction.
Putting It Into Practice: Chair Atkins' remarks offer a clearer view of how the SEC may approach digital-asset classification going forward. Regulated financial institutions and digital-asset platforms should monitor the forthcoming proposals expected to implement this framework, including potential exemptions designed to support capital formation involving crypto assets.
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