SEC Chair Paul Atkins Unveils Token Taxonomy Framework for Crypto Classification
The Securities and Exchange Commission takes a major step toward crypto regulatory clarity. SEC Chair Paul Atkins announced plans to establish a comprehensive token taxonomy framework. This initiative marks a significant shift from previous enforcement-heavy approaches to digital asset regulation.
Speaking at the Federal Reserve Bank of Philadelphia’s Fintech Conference on November 12, Atkins outlined the Commission’s plan to create a classification system rooted in the Howey Test. The framework addresses a question that has plagued the crypto industry for years: which digital assets qualify as securities?
Atkins emphasized that most crypto assets are not securities in themselves. The SEC token taxonomy will establish clear boundaries for regulatory jurisdiction. This approach recognizes that technological innovation requires thoughtful legal frameworks.
Four Categories Define the Token Taxonomy Framework
The proposed SEC token taxonomy introduces four distinct asset classifications. Digital commodities or network tokens form the first category, encompassing assets like ETH and SOL that derive value from decentralized network operations. These tokens do not qualify as securities under the framework.
Digital collectibles represent the second category, which may convey rights to works of art without expectations of profits. The SEC token taxonomy treats these as non-securities because purchasers seek ownership rather than investment returns.
Digital tools comprise the third category, performing practical functions without investment contract characteristics. The framework recognizes that these assets serve utility purposes rather than speculative investments.
Tokenized securities form the fourth category, remaining under SEC jurisdiction despite their blockchain-based form. These assets represent ownership of traditional securities and continue requiring regulatory oversight.
Network Maturation Allows Tokens to Exit Securities Status
The SEC token taxonomy introduces a dynamic approach to crypto classification. Atkins explained that tokens can begin as securities but lose that classification as networks mature and decentralize. This “sunset provision” acknowledges the evolving nature of blockchain projects.
“Networks mature. Code is shipped. Control disperses,” Atkins stated, noting that issuer roles diminish or disappear over time. When purchasers no longer rely on essential managerial efforts, the investment contract expires. The SEC token taxonomy accounts for this technological reality.
The framework enables tokens to transition to CFTC-regulated or state-supervised platforms once they demonstrate sufficient decentralization. This flexibility allows projects to graduate from securities status through verifiable milestones.
Project Crypto Complements Congressional Legislation
The SEC token taxonomy aligns with legislation currently under Congressional consideration. Atkins clarified that the agency aims to complement rather than replace legislative efforts. Commissioner Hester Peirce collaborates on this regulatory modernization initiative.
The framework follows months of industry engagement, including over 100 meetings with market participants and hundreds of public submissions. This consultative approach contrasts sharply with previous regulatory strategies. The SEC token taxonomy reflects stakeholder input across the crypto ecosystem.
Atkins cautioned that the new framework does not signal lax enforcement, stressing that fraud remains unacceptable. The SEC token taxonomy seeks a balance between innovation and investor protection.
Streamlined Registration for Compliant Token Offerings
The SEC token taxonomy includes provisions for tokens that remain securities. Atkins directed staff to prepare recommendations allowing investment contract tokens to trade on non-SEC-regulated platforms. These exemptions create tailored offering regimes for crypto assets subject to investment contracts.
Figure’s SEC-registered YLDS token on the Sui blockchain exemplifies the tokenized securities the framework aims to regulate. Clear registration pathways encourage compliance while reducing regulatory uncertainty. The SEC token taxonomy provides predictable rules for legitimate projects.
Secondary trading exemptions represent another key component. Post-contract assets can move to alternative trading venues regulated by the CFTC or state authorities. This flexibility expands market access while maintaining appropriate oversight.
Token Taxonomy Marks Regulatory Shift Under Trump Administration
The SEC token taxonomy reflects broader policy changes under the current administration. The Trump administration takes a starkly different approach from former Chair Gary Gensler’s enforcement-focused strategy. Project Crypto launched in July 2025 as the cornerstone of this regulatory transformation.
The framework addresses industry demands for regulatory clarity that persisted throughout the previous administration. Previous SEC enforcement effectively halted token sales for US retail investors since 2018. The SEC token taxonomy aims to reopen these markets under clear rules.
Coinbase recently launched the first token sales platform serving US retail investors since 2018. This development coincides with the regulatory push toward comprehensive classification standards. The SEC token taxonomy creates conditions for renewed market participation.
Conclusion
The SEC token taxonomy represents a turning point for crypto regulation in the United States. Chair Atkins’ framework distinguishes securities from network tokens, collectibles, and tools with unprecedented clarity. This approach balances innovation with investor protection through flexible classification standards.
The coming months will determine how effectively the SEC token taxonomy achieves its objectives. Industry participants gain long-awaited guidance on regulatory compliance and market access. The framework positions American crypto markets for growth under clear regulatory boundaries.
