The Securities and Exchange Commission (SEC) is taking a bold step towards modernizing securities rules for blockchain-based activities with the launch of a new initiative called “Project Crypto.” This initiative aims to shift US markets towards blockchain technology and on-chain transactions.
SEC Chair Paul Atkins announced the launch of Project Crypto in a speech on July 31 at the America First Policy Institute. He highlighted that the initiative will implement recommendations from the President’s Working Group report and build on the federal framework for payment stablecoins provided by the new GENIUS Act.
One of the key objectives of Project Crypto is to provide clear definitions for tokens. Atkins mentioned that the SEC will work with a Crypto Task Force led by Commissioner Hester Peirce to quickly draft proposals that will clarify the status of crypto assets and determine when a distribution constitutes an “investment contract.” The goal is to establish guidance for initial coin offerings, airdrops, and network rewards to bring token distributions back onshore.
In addition to token definitions, Project Crypto will also provide guidelines for tokenization of stocks, bonds, and other instruments. Atkins emphasized the importance of self-custody as a core American value and mentioned that the SEC will update custody requirements for broker-dealers and investment advisers to accommodate crypto assets.
The initiative also envisions SEC-regulated venues offering trading in non-security crypto assets alongside traditional securities, as well as services like staking and lending. SEC staff will develop a framework for side-by-side trading of non-securities and securities, opening up opportunities for CFTC-regulated platforms to list with margin.
Furthermore, Project Crypto will address decentralized finance (DeFi) and market plumbing issues, drawing lines between intermediated and disintermediated activities, and creating workable rules for operators of on-chain systems. The SEC is also considering an “innovation exemption” to pilot new models without immediate compliance with legacy rules.
Overall, Project Crypto aims to reshore crypto businesses, normalize on-chain finance in US markets, and prioritize commercial viability while maintaining investor protection. The initiative represents a significant step towards embracing blockchain technology and integrating it into the traditional securities market.