Breaking: SEC Launches “Project Crypto” To Enable Tokenization of U.S. Markets

In a massive development, the SEC has launched the “Project Crypto” initiative to provide further clarity for the crypto industry and promote Real-World Asset (RWA) tokenization. The Commission’s Chair, Paul Atkins, also clarified that most crypto assets are not securities and revealed plans to allow the trading of both crypto asset securities and crypto asset commodities.

SEC Chair Paul Atkins Unveils Project Crypto

In a press release, the SEC Chair announced this initiative to modernize securities rules and regulations to enable America’s financial markets to move on-chain. He added that he has directed the Commission’s policy divisions to work with the Crypto Task Force, led by Commissioner Hester Peirce, to ensure that they achieve the objectives of this initiative.

Through the Project Crypto initiative, the SEC aims to swiftly develop proposals to implement the White House’s Digital Asset Working Group’s recommendations. Atkins further declared that this initiative will ensure that the U.S. remains the best place in the world to start a business, develop cutting-edge technologies, and participate in capital markets.

The SEC Chair also affirmed that they will lure crypto businesses that earlier left the U.S., especially those that were victims of the previous administration’s regulation-by-enforcement “crusade” and the Operation Chokepoint 2.0.

This Project Crypto initiative also aligns with the draft crypto market structure bill that the Senate Banking Committee recently released. The bill provides that the Commission issues clear regulations that border on issues such as registration, custody, trading,  and curbing illicit finance.

Furthermore, the SEC Chair revealed that he has directed the Commission staff to draft clear and simple rules of the road for crypto asset distributions, custody, and trading for public notice and comment. He added that they will ensure that archaic rules and regulations do not hinder innovation and entrepreneurship in the country.

On Crypto Asset Commodities And Securities

As part of the Project Crypto announcement, the SEC Chair confirmed that most crypto assets are not securities. He noted how confusion over the application of the “Howey test” had led to the classification of all crypto assets as such.

However, that is about to change as he has directed the SEC staff to work on developing clear guidelines to help market participants determine whether a crypto asset is a security or subject to an investment contract.

Atkins noted that this would also help market participants slot crypto assets into categories such as digital collectibles, digital commodities, or stablecoins.” It is worth noting that the Commission already described meme coins as being similar to collectibles.

Meanwhile, still in line with the Project Crypto initiative, the SEC plans to work towards a regulatory framework for crypto asset securities that allows these products to flourish within the U.S. markets. As such, for crypto asset securities, Atkins has directed the SEC staff to propose “purpose-fit disclosures, exemptions, and safe harbors, including for so-called “initial coin offerings,” “airdrops,” and network rewards.”

The SEC also plans to enable market participants to innovate with “Super-Apps.” The aim is to allow securities intermediaries to offer a broad range of services and products on one platform and with a single license. That way, broker-dealers will be able to offer trading in non-security assets alongside crypto asset securities.

This addresses a crucial point that the Senate Banking Committee raised in their request for information for the crypto market structure bill on whether trading platforms should offer crypto asset securities and crypto asset commodities side-by-side.