SEC Pivots to Crypto-Friendly Rules, Aims to Fuel U.S. Innovation Lead

The Securities and Exchange Commission (SEC) has embarked on a transformative journey under the leadership of Chairman Paul S. Atkins, who has articulated a clear stance that most crypto assets are not securities. This declaration, made on July 31, 2025, during a speech at the America First Policy Institute, marks a significant shift in the regulatory approach toward digital assets and aligns with broader efforts to modernize the U.S. financial framework. The initiative, dubbed “Project Crypto,” aims to establish a regulatory environment that fosters innovation while ensuring investor protection and market competition.

Atkins’ remarks came shortly after the release of the President’s Working Group on Digital Asset Markets report, which outlined strategies to enhance American leadership in digital financial technology. This report, described as the "blueprint to make America first in blockchain and crypto technology," forms the foundation for Project Crypto. The initiative reflects the SEC’s intent to streamline regulatory processes, move away from the previous administration’s enforcement-driven strategy, and promote a more transparent and predictable environment for digital asset innovation [1].

Central to Project Crypto is the development of clear guidelines to determine whether a crypto asset qualifies as a security, commodity, stablecoin, or another type of digital asset. The SEC is committed to providing "bright-line rules" and "purpose-fit disclosures, exemptions, and safe harbors" for security tokens, including initial coin offerings (ICOs), airdrops, and network rewards. These measures are expected to encourage innovation and reduce the regulatory uncertainty that has historically driven crypto businesses to other jurisdictions [1].

Another key component of the initiative is the SEC’s emphasis on custodial flexibility. Atkins underscored the importance of allowing Americans to self-custody their digital assets, calling it a "core American value." The SEC will modernize custody requirements for registered intermediaries and foster a competitive market for custodial service providers. This initiative aligns with the PWG Report’s recommendations and is intended to facilitate the development of a robust and diversified custodial infrastructure for crypto assets [1].

In addition, Project Crypto seeks to support the growth of "super-apps" — platforms that can offer a wide range of digital asset services under a single licensing structure. This approach aims to reduce regulatory fragmentation and promote a more integrated market for both securities and non-securities products. The SEC will coordinate with the Commodity Futures Trading Commission (CFTC) and other regulators to ensure a cohesive and efficient regulatory environment [1].

The initiative also emphasizes the importance of on-chain innovation, particularly in the context of decentralized finance (DeFi). The SEC plans to distinguish between pure software publishers and intermediaries and develop rational, workable rules for on-chain systems. The agency will explore amendments to existing rules, such as Regulation NMS, to accommodate on-chain trading of tokenized securities. Additionally, the SEC will consider relief to facilitate the tokenization of traditional assets such as equities and debt instruments [1].

Market participants are advised to closely monitor the SEC’s proposed rulemakings and engage in the public comment process. The agency is expected to outline detailed proposals in the near term and may use interpretive or exemptive relief in the interim. This creates an opportunity for stakeholders to shape the evolving regulatory landscape and position themselves for the anticipated growth in the digital asset sector. The initiatives are also likely to spur new opportunities for capital formation, product development, and market entry, although they will require careful consideration of compliance, risk management, and operational readiness [1].

Project Crypto represents a strategic pivot by the SEC toward a more supportive and innovation-friendly regulatory environment. By embracing on-chain markets, supporting DeFi, and providing clear rules, the agency aims to position the United States as a global leader in the digital finance revolution. Market participants are encouraged to prepare for a dynamic and competitive landscape and to seize the opportunities presented by this transformative initiative [1].

Source: [1] SEC Chairman Atkins Announces “Project Crypto” (https://www.aoshearman.com/en/insights/ao-shearman-on-fintech-and-digital-assets/sec-chairman-atkins-announces-project-crypto)