The U.S. Securities and Exchange Commission (SEC) has revealed its next steps in the ongoing Project Crypto initiative. The commission intends to establish a token taxonomy framework to provide much-needed clarity on which crypto assets should be classified as securities.
In a recent speech delivered at the Federal Reserve Bank of Philadelphia, SEC Chair Paul Atkins announced that the SEC will consider implementing a token taxonomy. This framework would rely heavily on the Howey Test, a long-standing method for determining whether an asset qualifies as a security. Atkins emphasized that this effort is part of a broader goal to provide regulatory certainty in the cryptocurrency sector.
A New Approach for Categorizing Crypto Assets
Atkins noted that this move reflects the SEC’s commitment to addressing the limitations in current laws and clarifying the status of crypto assets. The SEC Chair explained that the vast majority of crypto assets do not meet the criteria of securities. In his remarks, he divided crypto assets into several categories, each with distinct characteristics.
According to Atkins, digital commodities or network tokens should not be classified as securities. These assets derive their value from the decentralized operation of blockchain systems, rather than the expectation of profit from others’ efforts. Additionally, the SEC Chair addressed digital collectibles, stating that these items should also not be classified as securities. These collectibles, which may involve works of art or other unique items, do not give buyers an expectation of profits.
Tokenized Securities Still Remain Securities
However, the SEC remains firm on tokenized securities. Atkins clarified that even when securities are tokenized, they will still be regarded as securities. This is because tokenized assets represent ownership in an underlying security, making them subject to existing regulations.
