SEC Launches Project Crypto to Modernize Crypto Regulation and Spur Innovation

The U.S. Securities and Exchange Commission (SEC) has announced a transformative regulatory initiative known as “Project Crypto,” aimed at modernizing securities laws to position the United States as a global leader in cryptocurrency and blockchain innovation. SEC Chair Paul Atkins emphasized that the U.S. is at a pivotal moment in financial history, akin to the early days of the New York Stock Exchange and the rise of electronic trading. The initiative is a strategic response to President Trump’s vision of making the U.S. the “crypto capital of the world” [1].

A key objective of Project Crypto is to clarify the classification of crypto assets, with Atkins asserting that most are not securities. This approach seeks to reduce legal uncertainty and address regulatory ambiguities that have, in his view, driven innovation overseas [1]. The initiative also incorporates recommendations from the recent President’s Working Group (PWG) Report on Digital Market Data [1].

The SEC plans to modernize custody rules to better align with digital assets, including promoting self-custody, where investors can store and manage their crypto assets in personal wallets. Atkins described this as a fundamental American right and indicated that the agency will adjust regulations to reflect this shift [1]. Additionally, the SEC will develop new tests to determine whether a crypto asset qualifies as a security, a crucial step in reducing regulatory confusion [1].

Project Crypto also aims to streamline the regulatory framework for “super apps,” which allow broker-dealers to offer a range of crypto-related products under a single license. By eliminating the need for multiple state and federal approvals, the SEC hopes to foster innovation and competition in the space [1].

A dedicated cross-agency effort led by SEC Commissioner Hester Peirce’s Crypto Task Force will explore exemptions and other regulatory tools to ensure outdated rules do not hinder technological progress [1]. This initiative aligns with the recently passed GENIUS Act, which supports technology-friendly financial reform [1].

While the crypto industry has broadly welcomed the initiative, analysts note that its success will depend on the SEC’s ability to balance regulation with innovation [3]. Challenges remain, particularly in defining the boundaries between traditional securities and emerging crypto structures [3].

According to several reports, Project Crypto represents a generational regulatory shift [4]. It reflects the SEC’s commitment to adapting to the digital economy while maintaining investor protection and market integrity [5]. The evolving regulatory landscape could have significant implications for decentralized finance (DeFi) and on-chain activities by creating a regulatory space that accommodates both intermediated and non-intermediated financial models [1].

According to analysts, the initiative marks a significant shift in the SEC’s stance, potentially signaling a more accommodating regulatory environment for blockchain-based financial systems [3].

Sources:

[1] Cointribune, “SEC Launches “Project Crypto” to Modernize U.S.” (https://www.cointribune.com/en/sec-project-crypto-self-custody-regulation/)

[2] Traders Magazine, “SEC Launches Project Crypto” (https://www.tradersmagazine.com/featured_articles/sec-launches-project-crypto/)

[3] ChainCatcher, “From SEC's Project Crypto, what does Trump want to hype?” (https://www.chaincatcher.com/en/article/2195018)

[4] Gizmodo, “The SEC Shifts Gears on Crypto” (https://gizmodo.com/the-sec-shifts-gears-on-crypto-2000638314)

[5] InsuranceNewsNet, “Reaction: SEC to Launch "Project Crypto"” (https://insurancenewsnet.com/oarticle/reaction-sec-to-launch-project-crypto)