jakiro
Author: Zhang Feng
Amid the wave of digital assets sweeping the global financial system, the U.S. Securities and Exchange Commission (SEC) has long been regarded as the most controversial and influential regulatory force in the crypto world.Uncertainty about its stance, strict interpretation of the definition of “security,” and frequent enforcement actions have left innovators and investors wading through a fog of confusion.
However, a fundamental shift is taking place.In his speech titled “Project Crypto” on November 12, 2025, SEC Chairman Paul S. Atkins not only clearly responded to the market’s desire for regulatory certainty, but also proposed a new regulatory paradigm based on “economic substance” rather than “technical labels.”At the core of this transformation,It is to no longer regard every technological innovation as suspicious, but to admit that the life cycle of investment contracts may end, thus clearing the final institutional obstacle for the compliance path of tokens.
1. Clarifying supervision in response to uncertainty: ending the “ten-year fog”
In the past decade, the most frequently asked question in the crypto market has been: “Is this token a security?” However, what is reflected behind this question is the systemic confusion caused by vague regulations.Atkins admitted in his speech that “crypto-asset” is not a legal term in securities laws, but a technical description.The key to the problem is not the technical form, but the “legal rights” and “economic substance” behind it.
For a long time, market participants have fallen into a rigid cognitive misunderstanding: once a token is recognized as part of an “investment contract,” it is forever labeled as a “security,” and every subsequent transaction must comply with securities regulations.This view of “once a security, always a security” not only lacks legal basis, but is also seriously divorced from the actual development of digital assets.Atkins made it clear that this view was “unsustainable, unworkable, costly and of little benefit” and would lead directly to an outflow of innovation to jurisdictions with clearer regulations.
To this end, the SEC will reshape the regulatory framework with “clear boundaries” and “easy-to-understand language” to respond to the market’s fundamental need for certainty.This statement marks the SEC’s shift from “law enforcement-led” to “rules-led” and from “ex-post accountability” to “ex-ante guidance.”
2. Pay attention to substance over token form: Economic reality is higher than technical labels
In the process of constructing the new regulatory framework, Atkins emphasized two core principles:First, the essence of securities does not change due to its carrier form; second, economic reality is above all labels.
This means that regardless of whether the asset exists in the form of a paper certificate, a database record, or a blockchain token, as long as it essentially represents a claim on a business’s profits and relies on the management efforts of others, it falls within the jurisdiction of securities laws.On the contrary, even if a token was issued as part of an investment contract, once the contract is performed or terminated, its subsequent transactions should no longer be regarded as securities transactions.
This position returns to the “substance over form” principle established by the U.S. Supreme Court in the Howey case, abandoning the excessive obsession with technical appearances and instead focusing on the true role of assets in economic activities.
3. Token classification for different needs: building a unified token map
To implement the above principles, Atkins proposed a preliminary token classification system, dividing crypto assets into four categories:
Digital Goods/Network Tokens: The value of native tokens in decentralized networks such as Bitcoin comes from the programmed operation of the system itself, rather than relying on the management efforts of others, and is not a security.
digital collectibles: Assets that represent art, music, game items, etc., such as NFT, have value in use or collection, rather than investment profits, and are not securities.
digital tools: Tokens with actual functions, such as membership certificates, tickets, identity badges, etc., are not securities.
Tokenized securities: Tokens representing traditional financial instruments such as stocks and bonds are still securities regardless of their existence.
This classification not only responds to the market’s urgent need for “which tokens are not securities”, but also provides clear guidance for subsequent supervision and compliance paths.
4. Segmenting the process based on the performance of the investment contract: recognizing that the contract can be terminated
On the application of the Howey test, Atkins made a landmark point:Investment contracts can be performed, expired, or terminated.It is not a permanent legal label.
He used the historical changes of Howey Citrus Grove as a metaphor: the land that was the subject of the investment contract has now become a golf course and residential area and no longer has security properties.Similarly, a token may rely on the “key management efforts” of the development team in the early stages of the project, but as the network matures, code is released, and control is dispersed, the issuer’s role gradually weakens or even disappears.At this point, the life cycle of the investment contract has ended, and the transaction of tokens no longer constitutes a securities transaction.
This concept of “terminable contracts” breaks the long-standing rigid understanding of the “origin theory” of tokens and provides a compliant outlet for many mature public chain tokens and functional tokens.
5. Oppose fraud based on responsibility commitments: law enforcement should not be relaxed based on classification
Although the SEC has shown an open attitude towards classification and exemptions, Atkins also clearly emphasized:The bottom line against fraud does not change by asset class.Whether it is securities or commodities, misrepresentation, market manipulation, absconding with money, etc. will be severely punished.
He specifically pointed out that even if a token is not a security, as long as it involves false promises during the sale process, the SEC can still pursue liability based on anti-fraud provisions.At the same time, the CFTC also has anti-fraud and anti-manipulation authority over commodity crypto assets.
This shows that regulatory flexibility does not mean connivance.The boundaries of compliance can be broadened, but the bottom line of the law cannot be challenged.
6. Simplify processes for innovation and value: leave room for experimentation and growth
At the end of his speech, Atkins called on the SEC to introduce a package of exemptions to create a “tailor-made issuance mechanism” for crypto assets.This mechanism aims to simplify the compliance process and lower the threshold for innovation, so that project parties can focus on product development and user interaction rather than struggling with regulatory uncertainty.
He emphasized that the goal of regulation should not be to “shackle the future” but to “serve the people” – including entrepreneurs who build solutions, workers who invest in the future, and ordinary Americans who share in the country’s prosperity.
This speech by the SEC Chairman is not only a systematic response to the dilemma of encryption regulation in the past decade, but also a solemn commitment to the future leadership of financial innovation in the United States.It marks the shift of regulatory agencies from “defensive enforcement” to “constructive guidance” and from “technological fear” to “economic rationality.”
“We will never let fear of the future constrain us and keep us trapped in the past.” This sentence may be the best footnote for the new era of encryption supervision in the United States.When regulators begin to admit that investment contracts can be terminated, when tokens are no longer permanently questioned based on their “origin”, and when innovators no longer have to worry about vague rules – what we see is not only the dismantling of a regulatory barrier, but also the beginning of a new era: code can grow for innovation, protocols can operate based on community needs, and the law will eventually protect it instead of setting up obstacles.
