SEC's approach to tokens seeks to foster innovation in the crypto space while ensuring safeguards for investors

The U.S. Securities and Exchange Commission (SEC) has introduced a new adaptable framework under its Project Crypto initiative to help define how crypto assets are regulated, aiming to provide clearer guidelines and support innovation while still protecting investors. On November 12, Chair Paul Atkins presented the "Token Classification Framework," which is based on the 1946 Howey Test—a legal benchmark used to decide if an asset is an investment contract and therefore a security, according to a report by

. The framework clarifies that not every cryptocurrency will be classified as a security, even if it initially fits the Howey Test, as highlighted in a .

Atkins pointed out that the framework recognizes how blockchain projects can change over time, explaining that tokens might no longer be considered securities as their networks become more decentralized and original issuers relinquish control, as outlined in a

. "Networks evolve. Code is deployed. Authority spreads out," he remarked, indicating a more nuanced regulatory perspective compared to the stricter enforcement approach of former Chair Gary Gensler, as reported by . The SEC also intends to create exemptions for specific tokens, making it easier to raise capital while still upholding anti-fraud rules, as reported.

This initiative is in line with broader legislative measures, such as the upcoming CLARITY Act, which aims to clearly define the roles of the SEC and the Commodity Futures Trading Commission (CFTC) regarding digital assets, as reported. Under this new system, leading cryptocurrencies like and would likely be regulated by the CFTC as digital commodities, while "ancillary assets" with mixed features would stay under SEC oversight, according to . This strategy aims to resolve longstanding regulatory uncertainty, allowing tokenized securities and stablecoins to function within established market structures, as mentioned by .

Industry experts, including the Wall Street firm Bernstein, have commended the U.S. regulatory direction as a driver for global leadership in crypto. The GENIUS Act, which helped stablecoins grow to over $260 billion in U.S. dollar-backed supply, along with the CLARITY Act, are viewed as key steps for institutional adoption, as

noted. In addition, Franklin Templeton has expanded its Benji Platform to the Canton Network, a private blockchain for institutional clients, enabling instant trading of tokenized funds with greater privacy, as reported by .

The SEC's plans also intersect with industry developments, such as

, KraneShares, and Bitfinex's alliance to build infrastructure for tokenized securities. These partnerships aim to bridge traditional finance and blockchain, targeting institutional investors in jurisdictions like El Salvador, as reported.

Atkins emphasized that the framework does not mean a reduction in enforcement, reaffirming that "fraud is fraud" and promising to address wrongdoing in digital asset markets. The SEC's Project Crypto approach seeks to balance innovation with regulation, positioning the U.S. as a potential frontrunner in global crypto oversight.