SEC Launches Project Crypto to Modernize Crypto Regulations and Integrate Tokens Into Markets

The US Securities and Exchange Commission (SEC) has announced a wide-ranging initiative called “Project Crypto” aimed at modernizing securities regulations to align with blockchain technology and promote the integration of digital assets into traditional financial markets [1]. Announced by SEC Chair Paul Atkins in a July 31 speech at the America First Policy Institute, the initiative seeks to execute recommendations from the President’s Working Group (PWG) report and build on the framework provided by the recently passed GENIUS Act for payment stablecoins [1].

A key objective of the initiative is to clarify the status of crypto assets and establish guidance to determine when a distribution constitutes an “investment contract.” Atkins emphasized that “most crypto assets are not securities” and directed staff to develop tailored exemptions, disclosures, and safe harbors for initial coin offerings, airdrops, and network rewards [1]. The initiative also aims to bring token distributions that have moved offshore back into the US market amid existing legal uncertainties [1].

Project Crypto includes efforts to accommodate the tokenization of traditional financial instruments such as stocks and bonds. Atkins instructed SEC staff to collaborate with issuers of tokenized securities to ensure American investors remain active participants in the evolving market [1]. The initiative also seeks to streamline the regulatory landscape by allowing SEC-regulated venues to offer trading in both non-security crypto and traditional securities under a single license, reducing duplication in state and federal licensing [1].

Atkins emphasized the importance of “self-custody” as a core American value and indicated that the SEC will revisit custody rules for broker-dealers and investment advisers to better align with the realities of crypto asset management [1]. The commission is also exploring a principles-based “innovation exemption” to allow new models to operate without immediate compliance with outdated regulations, provided they meet conditions such as periodic reporting and token standard compliance [1].

The initiative aims to foster innovation while maintaining investor protection by drawing clear lines between traditional and decentralized finance (DeFi) activities and establishing workable rules for on-chain systems. Atkins framed the project as a broader agenda to bring crypto businesses back to the US and normalize on-chain finance within the country’s financial markets [1].

The development reflects the SEC’s ongoing efforts to address the rapid evolution of the crypto industry and its integration into the broader financial ecosystem. By providing regulatory clarity and adapting existing frameworks, the agency seeks to encourage innovation while ensuring that investor protections remain intact [1].

Source:

[1] SEC Unveils ‘Project Crypto’ to Move US Markets On-Chain and Rewrite Token Rules (https://cryptoslate.com/sec-unveils-project-crypto-to-move-us-markets-on-chain-and-rewrite-token-rules/)