"We should not stifle innovation and investor choice by requiring underlying assets to trade only in one regulated environment." These remarks by SEC Chairman Paul Atkins at the Philadelphia Federal Reserve Bank’s Fintech Conference signal a major turning point in U.S. crypto asset regulation.
On November 12, Chairman Atkins formally outlined his crypto "token taxonomy" initiative, aiming to clearly distinguish which cryptocurrencies qualify as securities and which do not. This classification framework provides the urgently needed regulatory guidance for the market, offering clearer direction for investors and industry participants alike.
01 Four New Categories for Crypto Assets
SEC Chairman Paul Atkins’ proposed token taxonomy divides crypto assets into four distinct categories, with three explicitly excluded from the definition of securities.
According to the SEC’s press release, Atkins’ current views on various types of crypto assets can be summarized as follows:
Digital commodities or "network tokens" are not securities. The value of these assets is fundamentally tied to the programmatic operation of "fully functional" and "decentralized" crypto systems.
They do not derive value from the expectation of profit based on the essential managerial efforts of others.
Digital collectibles are also not considered securities. These assets are intended for collection and/or use, and may represent or confer rights to art, music, video, trading cards, or in-game items.
Atkins specifically notes that buyers of such assets do not expect to profit from the day-to-day management efforts of others.
Digital utilities are excluded from the securities definition as well. These crypto assets serve practical functions, such as memberships, tickets, vouchers, proofs of ownership, or identity badges.
The only category Atkins clearly identifies as securities is "tokenized securities." These crypto assets represent ownership of financial instruments defined as "securities," maintained on a crypto network.
02 Why Aren’t These Assets Securities?
The SEC Chairman’s criteria are rooted in the U.S. Supreme Court’s Howey Test, which centers on whether profits are expected from the efforts of others.
For digital commodities or network tokens, the SEC Chairman believes their value comes from the programmatic operation of a fully functional, decentralized crypto system, rather than reliance on others’ essential managerial efforts. This implies that network tokens like Ethereum (ETH) and Solana (SOL) may fall outside the scope of securities.
Buyers of digital collectibles do not expect to profit from others’ day-to-day management. NFTs and other digital collectibles are primarily for collection and use, not as investment vehicles.
Digital utilities are distinguished from securities by their practical functions. Assets such as memberships, tickets, vouchers, proofs of ownership, or identity badges are primarily for utility, not investment.
Atkins also clarified that tokens initially sold as securities may lose that classification as projects become decentralized and the issuer’s role diminishes.
"Once an investment contract can be understood as having run its course, tokens may continue to trade, but those trades are no longer ‘securities transactions’ simply because of their origin story," Atkins explained.
03 Market Impact of the Taxonomy
The SEC’s token taxonomy is expected to have a profound impact on the cryptocurrency market, marking an important step toward regulatory clarity.
This framework includes exemption provisions, allowing certain tokens to be traded on platforms overseen by the Commodity Futures Trading Commission (CFTC) or state regulators, rather than being limited to SEC-regulated markets.
Atkins emphasized that this approach will promote innovation while safeguarding investors: "We should not stifle innovation and investor choice by requiring underlying assets to trade only in one regulated environment, rather than another."
This initiative complements broader legislative efforts in Congress, including the Digital Asset Market Structure Bill, which aims to establish clear supervisory divisions between the SEC and CFTC.
The bill classifies major cryptocurrencies like Bitcoin as digital commodities, placing them under CFTC jurisdiction, and requires exchanges to separate trading, brokerage, and clearing functions.
04 Latest Market Developments
As the SEC releases this significant statement, let’s review the latest performance of major crypto assets as of November 13.
According to CoinMarketCap data, as of November 13 (UTC), Bitcoin (BTC) was priced at $101,994.67, down 1.25% over 24 hours. Ethereum (ETH) stood at $3,428.34, down 0.56% in 24 hours.
XRP (XRP) was at $2.40, up 0.05% in 24 hours. Dogecoin (DOGE) traded at $0.1711, up 0.86% in 24 hours.
Solana (SOL) was at $152.82, down 1.62% in 24 hours.
Under the SEC’s classification framework, these network tokens may be considered digital commodities rather than securities, which has significant implications for their regulatory trajectory.
Among other major tokens, Avalanche (AVAX) was at $17.09, down 0.06% in 24 hours. Shiba Inu (SHIB) was at $0.000059599, down 0.95% in 24 hours.
Aptos (APT) was at $3.03, down 2.72% in 24 hours.
05 Industry Response and Future Outlook
The crypto industry has welcomed this regulatory clarity, viewing it as a crucial step toward balancing innovation with investor protection.
The SEC stresses that the taxonomy is not a sign of relaxed enforcement. Atkins warns that fraud and market manipulation will continue to face severe penalties.
He reaffirmed the SEC’s commitment to "integrity and comprehensibility" in the crypto market.
This classification framework provides clearer guidance for token issuers and trading platforms, especially for exchanges like Gate, by clarifying which assets may be classified as securities—helping platforms operate in greater compliance.
With the U.S. government back to normal operations following the shutdown, the pace of crypto regulation is expected to accelerate.
The approval and listing process for XRP ETF products may be a prime example, as the DTCC website has already listed 11 XRP ETF products.
The finalization of the SEC’s token taxonomy could ultimately influence global standards, as other jurisdictions grapple with similar classification challenges.
Looking Ahead
The landscape of the crypto world is quietly shifting. With 11 XRP ETF products now listed on the DTCC website and Canary having filed an 8A application for an XRP ETF with the SEC, the convergence of traditional finance and crypto is accelerating.
The SEC’s token taxonomy is not the end, but a new beginning. It signals the end of the crypto asset "wild west" and the start of a new era marked by regulatory clarity and greater institutional participation.
For those seeking a balance between innovation and compliance in the crypto world, this is undoubtedly an encouraging development.
