SEC Drops Bombshell: New Crypto Token Taxonomy Unveiled in Project Crypto

The SEC just rewrote the rulebook—again. Their newly revealed token classification framework under 'Project Crypto' could make or break the next bull run.

Here's what's changing:

• Security tokens now face stricter scrutiny—no more 'utility' loopholes

• DeFi governance tokens may dodge the worst of it—for now

• Stablecoins? Still the wild west (but with better surveillance)

Wall Street analysts are already gaming the system—because nothing says 'financial innovation' like finding regulatory arbitrage before the ink dries.

A framework for defining digital assets

The proposed taxonomy, developed by the SEC’s Crypto Task Force, divides assets into four main categories. Network tokens or digital commodities, digital collectibles such as NFTs and in-game items, and digital tools like tickets or memberships WOULD not be considered securities. 

Tokenized stocks or bonds, however, would remain securities regardless of their format. The idea is to distinguish functional, decentralized tokens from those representing ownership or profit claims.

Atkins also addressed the “gray zone” that has long frustrated developers and investors, when tokens tied to an initial investment contract continue to trade after a network decentralizes.

I was honored to give the keynote at the @PhiladelphiaFed’s Ninth Annual Fintech Conference this morning. My remarks outlined the next steps in the @SECgov’s Project Crypto and what to expect in the coming months. pic.twitter.com/WI79ANJrfD

Creating room for innovation

The SEC plans to give such tokens alternative trading paths through CFTC- or state-regulated platforms, rather than restricting them to SEC-approved exchanges. Atkins said the goal is to balance investor protection with innovation, allowing tokens that no longer function as securities to trade legally without forcing them offshore.

The SEC reaffirmed its focus on fraud prevention and transparency, not overreach. The agency emphasized that its role is to protect investors from deception, not to treat every digital innovation as a stock offering. Fraud will still face enforcement, but genuine innovation should have space to grow.

Coordination with Congress and market impact

The SEC’s taxonomy aligns with pending congressional legislation aimed at establishing a broader market structure for digital assets. Atkins confirmed that the agency is working closely with lawmakers and the Commodity Futures Trading Commission to synchronize oversight of both securities and non-securities tokens. 

Project Crypto marks a turning point in U.S. crypto regulation. First unveiled on September 10, it aims to define when investment contracts end, letting mature blockchains operate without constant legal threat.

The plan draws a firm line between functional tokens and financial instruments, replacing courtroom chaos with clear rules. It’s not deregulation, it’s definition.

Also read: 21Shares Submits S-1 Filing to SEC for Hyperliquid ETF