SEC Chair Atkins Unveils ‘Project Crypto’: Most Tokens May Not Be Securities Under New Taxonomy

Atkins stressed that classification may change as networks mature. “Networks mature. Code is shipped. Control disperses. The issuer’s role diminishes or disappears,” he said. At that point, tokens may trade without being securities.

‘Innovation Exemption’ for On-Chain Markets

Beyond classification, Atkins signaled the SEC will weigh a package of exemptions for tokenized securities trading on-chain. The so-called Innovation Exemption would create a “tailored offering regime” for digital assets that are part of an investment contract.

The move marks a “final nail” in the Gensler era, according to analysts, reversing the presumption that most tokens are securities. Atkins criticized past SEC approaches for creating “unnecessary obstacles to U.S. innovation”.

Form Does Not Change Substance

Atkins laid out two guiding principles for Project Crypto:

• Form does not change substance. A stock remains a stock, whether on paper or blockchain.
• Economic reality over labels. Calling something a “token” or “NFT” does not exempt it from securities laws.He emphasized that “tokenization doesn’t change the nature of an asset”. A tokenized bond is still a bond under securities law.

Next Steps: White House Review and Legislation

The SEC sent the proposed interpretation to the White House for review on March 24. As of this week, government records show the proposal as “pending review”.

The taxonomy aligns with market structure legislation currently being drafted in Congress. Atkins echoed President Donald Trump’s call for lawmakers to adopt crypto legislation before year-end.

Commissioner Hester Peirce’s foundational work heavily influenced the framework. The SEC’s Division of Corporation Finance issued related guidance on March 17 outlining the same four categories.

Why It Matters for Markets

A formal token taxonomy would give issuers, exchanges, and custodians a predictable way to classify assets before enforcement. Projects across DeFi, NFTs, and AI-linked tokens could benefit if deemed non-securities. For deeper breakdowns of DeFi protocols that could be impacted, see this Monstro DeFi guide.

The announcement delivers on “key demands of the ascendant crypto sector” that sought clarity on SEC jurisdiction. For tokenized securities, the Innovation Exemption could unlock on-chain trading under a bespoke regime.