tl;dr
The SEC is launching “Project Crypto” to modernize securities regulations for blockchain activities and advance US markets toward on-chain operations. The initiative, announced by Chair Paul Atkins, will clarify definitions of crypto tokens, distinguishing securities from non-securities, and provide...
The Securities and Exchange Commission (SEC) is set to launch an ambitious initiative called “Project Crypto” aimed at modernizing securities regulations to better accommodate blockchain-based activities and advance US markets toward on-chain operations. Announced by Chair Paul Atkins on July 31, the program will implement recommendations from the recent President’s Working Group (PWG) report and build upon the GENIUS Act’s federal framework for payment stablecoins. Atkins clarified that his remarks reflect his personal views.
A key focus of Project Crypto will be establishing clear definitions for crypto tokens. The SEC’s policy teams, coordinated by a Crypto Task Force led by Commissioner Hester Peirce, will rapidly develop proposals using tools like interpretive guidance and exemptions. The initiative aims to clarify which crypto assets qualify as securities by providing guidance for classifying tokens and identifying when distributions constitute investment contracts. Atkins emphasized that the majority of crypto assets are not securities and directed staff to design tailored disclosures, exemptions, and safe harbors for activities such as initial coin offerings, airdrops, and network rewards. This move hopes to onshore token distributions that have previously shifted offshore due to regulatory uncertainty.
With the rise of tokenization of traditional assets like stocks and bonds, the SEC will coordinate closely with issuers to offer appropriate regulatory relief so American investors maintain access. Atkins highlighted the importance of self-custody as a core American value and announced plans to update custody rules for broker-dealers and investment advisers to better fit the crypto ecosystem. Project Crypto also envisions a more streamlined licensing system where SEC-regulated venues could offer trading in non-security crypto assets, crypto asset securities, and traditional securities under a single license, including services such as staking and lending, reducing regulatory overlap at federal and state levels. Additionally, the SEC will explore frameworks for simultaneous trading of securities and non-securities in the same venue and potentially allow certain non-security digital assets tied to investment contracts to be traded on platforms regulated by the Commodity Futures Trading Commission (CFTC).
Addressing decentralized finance (DeFi) and infrastructure aspects, Atkins assured that Project Crypto will protect developers who solely publish code, distinctly separate intermediated from disintermediated activities, and create pragmatic rules for operators of blockchain systems. Enhancements to the Regulation National Market System may be necessary to support tokenized securities and improve market competition. Furthermore, the SEC is considering a principles-based “innovation exemption” designed to let new models be piloted without immediate adherence to potentially conflicting legacy regulations. This exemption could involve requirements such as periodic reporting, verified participant pools, and compliance-ready token standards like ERC-3643. Through this sweeping agenda, the SEC aims to reshore crypto businesses, integrate on-chain finance into US markets, and balance fostering commercial viability with protecting investors.