SEC’s ’Project Crypto’ Shakes Markets: US Financial Infrastructure Goes On-Chain with Token Rule Overhaul
The SEC just dropped a blockchain bomb—and Wall Street's scrambling to pick up the pieces.
Project Crypto isn't some regulatory footnote. It's a full-scale assault on traditional finance's plumbing, with the SEC forcibly migrating US markets onto distributed ledgers. The move rewrites token classification rules that have haunted crypto since the ICO craze of 2017.
Key changes:
- All equity settlements shifting to permissioned chains by 2026
- Security token exemptions for projects meeting decentralization thresholds
- Real-time auditing via smart contract hooks
Banking lobbyists are already screaming about 'operational risks' (read: their middleman fees evaporating). Meanwhile, crypto natives are cracking open champagne—this legitimizes what they've built while forcing TradFi to eat their tech stack.
The irony? After years of fighting crypto tooth and nail, the SEC's now doing what no DeFi protocol could—forcing institutional adoption at gunpoint. Guess even regulators get FOMO when they see the balance sheets of crypto-native custodians.
One thing's certain: the lawyers just became the most important developers in crypto. Some things never change.
Clear token definitions
Atkins said staff across policy divisions will coordinate with a crypto Task Force led by Commissioner Hester Peirce to draft proposals “swiftly,” using interim tools, such as interpretive guidance, exemptions, and other relief.
He added that providing clarity on token status will be a Core objective and the initiative will aim to establish guidance to classify crypto assets and determine when a distribution constitutes an “investment contract.”
Atkins stated that “most crypto assets are not securities” and directed staff to craft purpose-fit disclosures, exemptions, and SAFE harbors for initial coin offerings, airdrops, and network rewards.
The aim is to onshore token distributions that migrated offshore amid legal uncertainty.
Guidelines for tokenization
With firms seeking to tokenize stocks, bonds, and other instruments, Atkins instructed staff to work with issuers of tokenized securities in the US and provide appropriate relief so American investors are not sidelined.
Furthermore, he called self-custody “a CORE American value.” The SEC Chair added that the agency will update custody requirements for broker-dealers and investment advisers to accommodate crypto, revisiting constraints tied to prior policies such as SAB 121 and special-purpose broker-dealer constructs.
Project Crypto also envisions SEC-regulated venues offering, under one license, trading in non-security crypto alongside crypto asset securities and traditional securities, plus services like staking and lending, reducing duplicative state and federal licensing.
SEC staff will also develop a framework for side-by-side trading of non-securities and securities and consider allowing certain non-security digital assets subject to investment-contract arrangements to trade on non-SEC-registered venues, opening paths for CFTC-regulated platforms to list with margin.
DeFi and market plumbing
Atkins guaranteed that the initiative will protect “pure publishers” of code, draw lines between intermediated and disintermediated activity, and write workable rules for operators of on-chain systems.
Accommodating tokenized security trading may require updates to the Regulation National Market System to better align with competition.
Additionally, the SEC is considering a principles-based “innovation exemption” to pilot new models without immediate compliance with incompatible legacy rules.
Atkins mentioned conditions such as periodic reporting, allowlisting/verified-pool controls, and compliance-enabled token standards, such as ERC-3643. He framed the agenda as reshoring crypto businesses, normalizing on-chain finance in US markets, and prioritizing commercial viability while maintaining investor protection.
