SEC Chair Paul Atkins on Digital Asset Regulation
In remarks delivered at the Federal Reserve Bank of Philadelphia, SEC Chair Paul Atkins outlined how the agency plans to tackle digital asset fraud through its “Project Crypto” initiative and pending legislation. During his speech, he emphasized a need for modernization in the regulation of digital assets.
Token Taxonomy and Investment Contracts
Atkins mentioned the potential for developing a “token taxonomy” that would adapt the Howey test — the foundational criterion used by the SEC for defining securities — to acknowledge that investment contracts can have finite durations. He quoted Commissioner Hester Peirce, stating:
“While initial token launches may commence as investment contracts, they do not maintain this status perpetually.”
As a result, once the investment aspect is deemed completed, trading of the token may persist without being classified as securities transactions.
Regulatory Oversight and Exemptions
Furthermore, Atkins clarified that under his leadership, the SEC will regard digital commodities, collectibles, tools, and network tokens as not subject to its regulation, while tokenized securities would remain under the agency’s oversight. He indicated that, contingent upon pending measures in Congress, he anticipates exploring exemptions that would establish a specialized offering framework for crypto assets aligned with investment contracts.
Market Structure Bill and Enforcement
Atkins also addressed the ongoing discussion around a market structure bill currently under consideration in the Senate. He reiterated that it does not imply relaxed enforcement by the SEC:
“Fraud is fraud. While the SEC is responsible for safeguarding investors against securities fraud, other federal regulatory agencies are equipped to oversee and deter illegal activities in the market.”
Government Operations and Funding
As for the state of the government, despite a shutdown currently affecting operations, House lawmakers are preparing to vote on a funding bill that the Senate has already approved, which aims to sustain government functions through late January after more than 40 days of closure. Negotiations have been ongoing among senators regarding the market structure bill, with recent progress indicated by the release of a discussion draft by Republican leaders from the Senate Agriculture Committee.
