Latest speech by the US SEC Chairman: Saying goodbye to a chaotic decade, crypto regulation is entering an era of clarity.

Original author: Paul S. Atkins, Chairman of the U.S. Securities and Exchange Commission

Original translation by Luffy, Foresight News

Good morning, ladies and gentlemen! Thank you for your enthusiastic introductions and for inviting me here today, where we will continue to explore how the United States can lead the next era of financial innovation.

Recently, when discussing America's leadership in the digital finance revolution, I described "Project Crypto" as a regulatory framework we've built to match the dynamism of American innovators (note: the U.S. Securities and Exchange Commission launched the Project Crypto initiative on August 1st of this year, aiming to update securities rules and regulations to enable the on-chain transformation of U.S. financial markets). Today, I want to outline the next steps in this process. At its core is adhering to fundamental principles of fairness and common sense in applying federal securities laws to crypto assets and related transactions.

In the coming months, I expect the SEC (Securities and Exchange Commission) to consider establishing a token classification system based on the long-standing Howey Investment Contracts securities analysis, while acknowledging the limitations of our laws and regulations.

What I am about to elaborate on is largely based on the pioneering work of the Cryptocurrency Task Force led by Commissioner Hester Peirce. Commissioner Peirce has developed a framework for coherent and transparent securities law regulation of crypto assets based on economic substance rather than slogans or panic. I reiterate that I share her vision. I value her leadership, hard work, and unwavering commitment to advancing these issues over the years. I have worked with her for a long time and am delighted that she agreed to take on this task.

My presentation will revolve around three themes: first, the importance of a clear token classification system; second, the applicable logic of the Howey test, acknowledging the fact that investment contracts may terminate; and third, what this means in practice for innovators, intermediaries, and investors.

Before we begin, I would like to reiterate: While SEC staff are diligently drafting rule amendments, I fully support Congress's efforts to codify a comprehensive cryptocurrency market structure framework into law. My vision aligns with the bill currently under consideration in Congress and is intended to complement, not replace, Congress's critical work. Commissioner Peirce and I have prioritized supporting Congress's actions and will continue to do so.

It has been a pleasure working with Acting Chairman Pham, and I wish Mike Selig, President Trump's nominee for Chairman of the Commodity Futures Trading Commission (CFTC), a smooth and swift confirmation process. My experience working with Mike over the past few months has convinced me that we are both committed to helping Congress quickly advance the bipartisan market structure bill and get it to President Trump's signature. Nothing is more effective in preventing regulatory abuse than sound legislation enacted by Congress.

To reassure my compliance team, I hereby make a standard disclaimer: my statements represent my personal views as Chair and do not necessarily reflect the overall position of other Commissioners or the SEC.

A decade filled with uncertainty

If you're tired of hearing the question, "Are crypto assets securities?", I completely understand. This question is confusing because "crypto asset" isn't a term defined under federal securities law. It's a technical description that only describes how records are stored and value is transferred, but it barely mentions the legal rights associated with the specific instrument or the economic substance of the particular transaction—which are crucial for determining whether an asset is a security.

I believe that most cryptocurrencies traded today are not securities in themselves. Of course, it's not a radical viewpoint that a particular token might be sold as part of an investment contract in a securities offering, but rather a direct application of securities law. The statutory definition of securities lists common instruments such as stocks, notes, and bonds, and adds a broader category: "investment contracts." The latter describes a relationship between parties, rather than a permanent label attached to an item. Unfortunately, the statutory law does not define this either.

Investment contracts can be fulfilled or terminated. An investment contract cannot be considered valid indefinitely simply because the underlying asset is still being traded on the blockchain.

However, in recent years, too many people have argued that if a token was ever the subject of an investment contract, it will always be a security. This flawed view goes further, presuming that every subsequent transaction of that token (regardless of where or when) is a security transaction. I find it difficult to reconcile this view with legal provisions, Supreme Court precedents, or common sense.

Meanwhile, developers, exchanges, custodians, and investors have been groping in the dark, facing obstacles instead of SEC guidance. The tokens they see serve various purposes: some act as payment instruments, governance tools, collectibles, or access keys; others are hybrid designs that defy easy categorization. Yet, for a long time, regulatory stances have treated all these tokens as securities.

This view is neither sustainable nor practical. It incurs enormous costs with minimal returns; it is unfair to market participants and investors, inconsistent with the law, and has triggered a wave of offshore migration among entrepreneurs. The reality is: if the U.S. insists that every innovation on every chain navigate the minefield of securities law, these innovations will migrate to jurisdictions more willing to differentiate between different types of assets and more willing to establish rules in advance.

Instead, we will do what regulators should do: draw clear lines and explain them in clear language.

Project Crypto's core principles

Before elaborating on my views on the application of securities laws to cryptocurrencies and trading, I would like to first explain the two fundamental principles that guide my thinking.

First, whether a stock is represented by paper certificates, a depository trust and clearing company (DTCC) account, or a token on a public blockchain, it is still essentially a stock; a bond does not cease to be a bond simply because its payment flow is tracked through smart contracts. Securities are always securities, regardless of their form. This is easy to understand.

Second, economic substance trumps labeling. If an asset essentially represents a claim to a company's profits and its issuance comes with a promise of reliance on the core management efforts of others, then even if it is called a "token" or "non-fungible token (NFT)," it is not exempt from current securities laws. Conversely, just because a token was once part of a financing transaction does not mean it will magically transform into shares of the operating company.

These principles are not new. The Supreme Court has repeatedly emphasized that in determining the applicability of securities laws, the focus should be on the substance of the transaction, not its form. The new change lies in the scale and speed of the evolution of asset types in these new markets. This pace requires us to be flexible in responding to the urgent needs of market participants for guidance.

A coherent token classification system

Against this backdrop, I would like to outline my current views on various crypto assets (please note that this list is not exhaustive). This framework is based on months of roundtable discussions, over a hundred meetings with market participants, and hundreds of written comments from the public.

• First, regarding the bill currently under consideration in Congress, I believe that "digital goods" or "crypto tokens" are not securities . The value of these crypto assets is inherently related to and generated from the procedural operation of a "fully functional" and "decentralized" crypto system, rather than from anticipated profits derived from the critical management work of others.
• Secondly, I believe that "digital collectibles" are not securities . These crypto assets are intended for collection and use, and may represent or grant the holder rights to digital expressions or references to works of art, music, videos, trading cards, in-game items, or online memes, people, events, and trends. Buyers of digital collectibles do not expect to profit from the day-to-day management of others.
• Third, I believe that "digital instruments" are not securities . These crypto assets have practical functions, such as memberships, tickets, credentials, proof of ownership, or badges of identity. Purchasers of digital instruments do not expect to profit from the day-to-day management work of others.
• Fourth, "tokenized securities" are, and will remain, securities . These crypto assets represent ownership of financial instruments listed in the definition of "securities," which are maintained on crypto networks.

Howey Tests, Commitments, and Termination

While most crypto assets are not securities in themselves, they may be part of or bound by investment contracts. These crypto assets typically come with specific statements or commitments, requiring issuers to fulfill their management responsibilities to meet the Howey Test requirements.

The core of the Howey test is: investing money in a common cause and reasonably expecting to profit from the core management efforts of others. The buyer's profit expectation depends on whether the issuer makes statements or commitments regarding undertaking these core management efforts.

In my view, these statements or commitments must clearly and unambiguously describe the core management efforts that the issuer will undertake.

The next question is: How are non-security crypto assets separated from investment contracts? The answer is simple yet profound: the issuer either fulfills its statements or commitments, fails to do so, or the contract is terminated for other reasons.

To give you a better understanding, I'd like to talk about a place in the rolling hills of Florida. I've known it very well since I was a child; it was once home to William J. Howey's citrus empire. In the early 20th century, Howey purchased over 60,000 acres of uncultivated land and planted orange and grapefruit groves next to his mansion. His company sold the orchard plots to individual investors and was responsible for planting, harvesting, and selling the fruit for them.

The Supreme Court reviewed Howey's arrangement and established a test standard for defining investment contracts that has influenced generations. But today, Howey's land has been dramatically transformed. His mansion, built in Lake County, Florida in 1925, still stands a century later, used for weddings and other events, while the citrus groves that once surrounded it are mostly gone, replaced by resorts, championship golf courses, and residential areas—ideal retirement communities. It's hard to imagine anyone standing on those fairways and dead ends today considering them securities. Yet, over the years, we've seen the same test rigidly applied to digital assets, which have undergone similarly profound transformations but still bear the labels of their issuance, as if nothing has changed.

The land surrounding Howey's mansion was never a security in itself; it became the subject of an investment contract through a specific arrangement, and when that arrangement terminated, it ceased to be bound by the investment contract. Of course, despite the radical changes to the properties on the land, the land itself remained unchanged.

Peirce's observation is spot on: while an investment contract may be involved in the initial token offering of a project, these promises are not permanent. Networks mature, code is deployed, control decentralizes, and the issuer's role diminishes or even disappears. At some point, buyers no longer rely on the issuer's core management efforts, and most token transactions are no longer based on the reasonable expectation that "a certain team is still in control." In short, a token is not a security forever simply because it was once part of an investment contract , just as a golf course is not a security simply because it was once part of an citrus grove investment plan.

Tokens may continue to trade when an investment contract can be deemed to have been fulfilled or terminated according to its terms, but these trades do not become securities transactions simply because of the token's origin story.

As many of you know, I strongly support super apps in the financial sector—applications that allow custody and trading of multiple asset classes under a single regulatory license. I have asked SEC staff to prepare recommendations for SEC consideration regarding allowing tokens associated with investment contracts to trade on platforms not regulated by the SEC, including intermediaries registered with the Commodity Futures Trading Commission (CFTC) or subject to state regulatory systems. While fundraising activities should still be regulated by the SEC, we should not hinder innovation and investor choice by requiring underlying assets to be traded only under a single regulatory environment.

Importantly, this does not mean that fraudulent activities have suddenly become acceptable, or that the SEC's focus has diminished. Anti-fraud provisions still apply to false statements and omissions related to the sale of investment contracts, even if the underlying asset itself is not a security. Of course, the Commodity Futures Trading Commission (CFTC) also has anti-fraud and anti-manipulation powers to take action against misconduct in the trading of these assets, provided that these tokens are commodities traded in state markets.

This means that our rules and enforcement will be consistent with the economic substance that "investment contracts may terminate and networks can operate independently."

Cryptocurrency regulatory action

In the coming months, as envisioned in the bills currently being considered by Congress, I expect the SEC will also consider a range of exemptions to create a tailored issuance regime for crypto assets that are part of or bound by investment contracts.

I have asked staff to prepare recommendations for the SEC to consider. These recommendations aim to promote financing, embrace innovation, and ensure investor protection.

By streamlining this process, innovators in the blockchain space can focus their efforts on development and user engagement, rather than navigating a maze of regulatory uncertainty. Furthermore, this approach will foster a more inclusive and dynamic ecosystem, allowing smaller, more resource-constrained projects to experiment freely and thrive.

Of course, we will continue to work closely with the Commodity Futures Trading Commission (CFTC), banking regulators, and corresponding departments in Congress to ensure that non-security crypto assets have an appropriate regulatory framework. Our goal is not to expand the SEC's jurisdiction, but to ensure that financing activities thrive while protecting investors.

We will continue to listen to all sides. The Cryptocurrency Task Force and relevant departments have held numerous roundtables and reviewed a large number of written comments, but we still need more feedback. We need feedback from investors, developers concerned about code delivery, and traditional financial institutions eager to participate in on-chain markets but unwilling to violate the rules established for the paper era.

Finally, as I mentioned earlier, we will continue to support Congress's efforts to codify a sound market structure framework into law. While the SEC can offer reasonable opinions under current law, it is still possible for the SEC to change course in the future. This is why tailored legislation is so important, and why I am happy to support President Trump's goal of passing a cryptocurrency market structure bill by the end of the year.

Integrity, comprehensibility and rule of law

Now, I want to make it clear what this framework does not include. It is not a promise by the SEC to relax enforcement; fraud is fraud. While the SEC protects investors from securities fraud, the federal government has many other regulatory agencies capable of regulating and preventing illegal activities. That said, if you raise funds by promising to build a network and then abscond with the money, we will find you and take the most severe action in accordance with the law.

This framework is a commitment to integrity and transparency. For entrepreneurs looking to start a business in the U.S. and willing to abide by clear rules, we should not offer shrugs, threats, or subpoenas; for investors trying to differentiate between buying tokenized stock and buying game collectibles, we should not offer a complex network of enforcement actions.

Most importantly, this framework reflects a humble understanding of the boundaries of the SEC's own authority. Congress enacts securities laws to address specific problems—that is, situations where people entrust funds to others based on their good faith and competence. These laws are not intended to be a panacea for regulating all new forms of value.

Contracts, Freedom, and Responsibility

Let me conclude with a historical recollection from Commissioner Peirce's speech this May. She evoked the spirit of an American patriot who risked great personal danger, even facing death, to defend the principle that free people should not be subject to arbitrary laws.

Fortunately, our work doesn't require such sacrifices, but the principles remain the same. In a free society, the rules governing economic life should be knowable, reasonable, and appropriately constrained. We deviate from this core principle when we extend securities laws beyond their proper scope, when we presume every innovation to be criminal. We practice this principle when we acknowledge the boundaries of our authority, when we recognize that investment contracts can terminate and networks can operate independently based on their own value.

The SEC's reasonable approach to cryptocurrency regulation will not determine the fate of the market or any particular project; that will be determined by the market. However, it will help ensure that the United States remains a place where people can experiment, learn, fail, and succeed under firm and fair rules.

This is the significance of Project Crypto, and it is the goal the SEC should pursue. As Chairman, I pledge to you today: we will not let fear of the future trap us in the past; we will not forget that behind every debate about tokens are real people—entrepreneurs striving to build solutions, workers investing in the future, and Americans striving to share in the fruits of this nation's prosperity. The role of the SEC is to serve these three groups.

Thank you everyone, and I look forward to continuing our dialogue with you in the coming months.