Key Takeaways
- The SEC is developing a new token taxonomy to clarify which crypto assets are securities based on established legal analysis.
- The proposed guidelines distinguish between digital commodities, collectibles, tools, and tokenized securities to better regulate crypto markets.
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SEC Chairman Paul Atkins said Wednesday that the agency would consider creating a token taxonomy based on the Howey investment contract framework in the coming months.
According to Atkins, the taxonomy will outline four crypto asset categories informed by extensive public input.
Digital commodities or network tokens tied to decentralized systems, digital collectibles like art or in-game items, and digital tools such as memberships or tickets will not be treated as securities. In contrast, tokenized securities representing financial ownership will remain under securities regulation.
Atkins also noted that investment contracts can eventually expire once the efforts or promises that define them have been fulfilled. In other words, tokens initially sold as securities may later lose that status once a project becomes decentralized or the issuer’s role ends.
“Most crypto tokens trading today are not themselves securities,” Atkins said in remarks. “Of course, it is possible that a particular token might have been sold as part of an investment contract in a securities offering.”
“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,” Atkins stated.
The upcoming guidelines will seek to balance regulation with support for innovation, ensuring clarity for developers and investors.
The chairman said the Commission will continue working with counterparts at the CFTC, banking regulators, and Congress to ensure non-security crypto assets have an appropriate regulatory regime.
