U.S. Securities and Exchange Commission (SEC) Chair Paul Atkins says the regulator is preparing to roll out a new framework for how digital assets are classified — a move that could bring long-awaited clarity to the crypto industry.
Speaking at the Federal Reserve Bank of Philadelphia, Atkins said the SEC aims to establish a token taxonomy that clearly distinguishes between various types of crypto assets, grounded in the Howey test, the longstanding legal standard used to determine whether something is a security.
A New Token Taxonomy
Atkins explained that the Commission is exploring a classification system based on four categories:
- Digital Commodities or Network Tokens – These function as utility assets within decentralized networks and are not securities.
- Digital Collectibles – Items like NFTs that hold personal or cultural value, not investment value, are not securities.
- Digital Tools – Utility-focused tokens used to access or enable blockchain services, also not considered securities.
- Tokenized Securities – Tokens that represent ownership or rights in a traditional financial instrument, which are securities.
This framework, Atkins said, aims to provide a “coherent token taxonomy” that clarifies regulatory boundaries for innovators, investors, and financial institutions.
Grounded in the Howey Test
Atkins emphasized that any framework must remain anchored in the Howey investment contract analysis, which defines a security based on whether investors expect profits primarily from the efforts of others.
However, he acknowledged that not all tokens classified as securities at launch will remain that way forever:
“Once the investment contract can be understood to have run its course, the token may continue to trade, but those trades are no longer ‘securities transactions’ simply by virtue of the token’s origin story,” he explained.
Reflecting a Broader Regulatory Shift
Atkins’ remarks come as part of a broader initiative known as “Project Crypto”, launched earlier this year under the Trump administration to modernize financial regulations around digital assets.
The SEC’s goal, according to Atkins, is to differentiate between various types of crypto assets while maintaining strong investor protections and market integrity.
“In the coming months, I anticipate that the Commission will consider establishing a token taxonomy anchored in the longstanding Howey investment contract analysis, recognizing that there are limiting principles to our laws and regulations,” Atkins said.
Why It Matters
The proposed framework could help end years of regulatory uncertainty that have plagued the crypto industry, giving businesses and developers clearer guidelines for token issuance and trading.
By distinguishing between non-security digital assets and tokenized securities, the SEC aims to strike a balance between innovation and compliance, potentially opening the door for more institutional participation and responsible growth in the digital asset space.
In short, Atkins’ proposal signals that the U.S. may be moving toward a more structured and predictable crypto regulatory environment, one that acknowledges the diversity of digital assets — and the need for rules that evolve with the technology.
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