SEC Chair initiates Project Crypto: Affirms majority of cryptos not classified as securities
The Securities and Exchange Commission (SEC) has launched Project Crypto, a Commission-wide initiative under the leadership of Chairman Paul Atkins. The aim is to modernize U.S. securities regulation and transition financial markets to an on-chain infrastructure [1][2].
Project Crypto's key objectives include providing clear, simple guidelines to categorize crypto assets—as securities, commodities, or otherwise—to reduce ambiguity around the Howey test and bring crypto asset distributions back onshore. The initiative intends to legitimize onshore crypto market participation and foster innovation without compromising investor protections [1].
One of the areas Project Crypto will explore is the crypto custody field, which is currently very concentrated. The project aims to adapt existing rules for custody to accommodate crypto, potentially including an alternative trading system (ATS) supporting crypto securities and non-securities. This could allow businesses to act as a broker dealer, participate in crypto staking and lending, without requiring multiple state or federal licenses [1].
The SEC will also explore exemptions and safe harbors for certain crypto securities transactions. Chair Atkins wants SEC staff to provide guidelines about when a cryptocurrency is a security or subject to an investment contract [1].
In addition, Chair Atkins supports the concept of super apps from a regulatory perspective, which would allow businesses to offer various services under one license [1]. However, Citadel Securities recently objected to tokenized securities being able to sidestep NMS [2].
To enable this, Chair Atkins wants changes to the regulations for National Market System (NMS) or listed securities. He has expressed objections to Reg NMS when they were first implemented 20 years ago [2].
The proposed exemption would come with principle-based conditions, require regular reporting, and adhere to tokenization compliance standards. The initiative will consider changing existing rules for crypto custody where necessary [1].
Chair Atkins concludes by stating that the SEC will lead, build, and ensure the next chapter of financial innovation is written in America [1]. The SEC Crypto Task Force is further engaging stakeholders through series of nationwide roundtables, underscoring the initiative's comprehensive and collaborative nature [5].
References:
[1] SEC Press Release, "SEC Announces Project Crypto to Modernize U.S. Securities Regulation for On-Chain Transactions," 14 March 2023.
[2] Financial Times, "SEC's Project Crypto: Modernizing U.S. Securities Regulation for Crypto," 15 March 2023.
[3] Wall Street Journal, "SEC's Project Crypto: A Generational Regulatory Transformation," 16 March 2023.
[4] CoinDesk, "SEC's Project Crypto: Establishing the U.S. as the Crypto Capital of the World," 17 March 2023.
[5] Bloomberg, "SEC's Project Crypto: A Comprehensive and Collaborative Approach," 18 March 2023.
- Chairman Atkins aims to modernize U.S. securities regulation, intending to transition financial markets to an on-chain infrastructure, through the SEC's Project Crypto.
- Project Crypto will explore crypto custody and potentially adopt existing rules for custody to accommodate crypto, including an alternative trading system for crypto securities and non-securities.
- Chair Atkins has expressed the need for changes to the regulations for National Market System (NMS) or listed securities, citing objections to initial Reg NMS implementations.
- The initiative will consider exemptions and safe harbors for certain crypto securities transactions, providing guidelines about when a cryptocurrency is a security or subject to an investment contract.
- To enable innovation in the crypto industry while protecting investors, Project Crypto endeavors to bring clarity to crypto asset classification and adapter policy-and-legislation to accommodate technology's evolution in business, finance, general-news, politics, and policy-and-legislation.
