SEC Chair Paul Atkins Pushes for ‘Token Taxonomy’ to Clarify Crypto Regulation Framework

New SEC leadership shifts tone toward structured crypto oversight rooted in the Howey Test

TL;DR

• SEC Chair Paul Atkins announced plans to build a “token taxonomy” to classify which cryptocurrencies qualify as securities.
• The framework will rely on the Howey Test but acknowledge evolving blockchain maturity.
• The initiative, part of “Project Crypto,” aligns with ongoing Congressional efforts on a market structure bill.

SEC Chair Paul Atkins has outlined a plan to create a “token taxonomy” aimed at formally distinguishing which digital assets should be considered securities. Speaking at the Federal Reserve Bank of Philadelphia’s Fintech Conference, Atkins detailed that this taxonomy will draw from the 1946 Howey Test, a longstanding legal standard for identifying investment contracts. The initiative marks a shift toward clearer, rule-based oversight as the agency seeks to modernize its approach to crypto regulation.

Atkins emphasized that cryptocurrencies can initially fall under securities law but may evolve beyond it as networks mature. “Networks mature. Code is shipped. Control disperses,” he said, adding that once token ecosystems reach a decentralized state and no longer rely on an issuer’s managerial efforts, the securities label should no longer apply. His remarks suggest a more dynamic regulatory view acknowledging that a project’s classification under securities law may change over time—a departure from the blanket approach under former SEC Chair Gary Gensler.

The new framework arrives after a year of significant recalibration within the SEC. Under the Biden administration, enforcement actions dominated the agenda, targeting major crypto firms and asserting that most tokens were securities. Since then, the agency has eased its stance, dropping several investigations and hosting crypto roundtables under Commissioner Hester Peirce’s guidance. Atkins’ tenure signals a continuation of that dialogue, with “Project Crypto” now leading efforts to refine the SEC’s digital asset rules.

Despite this shift, Atkins made it clear that the Commission’s evolving position does not equate to leniency. “It is not a promise of lax enforcement at the SEC,” he said. “Fraud is fraud.” He reiterated that tokenized securities—stocks or similar instruments issued on blockchain networks—will remain firmly under the SEC’s purview. Atkins also directed staff to explore pathways allowing tokens tied to investment contracts to trade on platforms regulated by other authorities, including the Commodity Futures Trading Commission (CFTC) or state-level regulators.

The SEC’s agenda also includes potential exemptions to develop a tailored offering regime for crypto assets linked to investment contracts. Atkins said these efforts would be designed to ensure compliance while supporting innovation in token markets. The ultimate goal, according to Atkins, is regulatory clarity that reflects technological progress without stifling market growth.

Lawmakers are simultaneously advancing their own crypto legislation. The House passed a comprehensive market structure bill earlier this year, while two competing Senate drafts are under consideration—the latest from the Senate Agriculture Committee introduced this week. Both versions seek to define federal jurisdiction and establish clearer boundaries between the SEC and the CFTC. Atkins stated that his agency’s “token taxonomy” initiative is intended to complement, not compete with, congressional efforts. “What I envision aligns with legislation currently being considered by Congress,” he said. “Commissioner Peirce and I have made it a priority to support Congressional efforts.”

The renewed focus on classification, exemptions, and interagency coordination could set the stage for a more coherent digital asset framework in the United States. Analysts expect the project’s development to influence not only crypto compliance standards but also investor sentiment reflected in the broader crypto price index and overall coin market cap, as clarity often drives institutional participation.

This article has been refined and enhanced by ChatGPT.