The SEC token taxonomy under Project Crypto classifies digital assets into categories like securities, commodities, collectibles, and tools, providing clarity on regulatory treatment. Announced by Chair Paul Atkins, it uses the Howey test to determine if assets qualify as investment contracts, aiming to reduce uncertainty for market participants.
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SEC’s token taxonomy creates four categories for crypto assets to distinguish securities from commodities.
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It allows tokens to transition from securities status once investment contracts expire, per Chair Atkins.
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The framework emphasizes strict enforcement against fraud while coordinating with other agencies, based on SEC guidance from 2025.
Discover the SEC token taxonomy under Project Crypto: a new framework classifying crypto as securities or commodities for better regulation. Explore categories and implications for investors today.
What is the SEC Token Taxonomy Under Project Crypto?
The SEC token taxonomy is a structured framework introduced by the U.S. Securities and Exchange Commission to categorize digital assets clearly as securities, commodities, or other types. Announced by SEC Chair Paul Atkins during a speech at the Federal Reserve Bank of Philadelphia on November 12, 2025, it builds on the Howey test to assess whether an asset represents an investment contract. This initiative, part of broader efforts under Project Crypto, seeks to provide regulatory certainty, enabling innovation while protecting investors from undue risks.
How Does the SEC Token Taxonomy Classify Digital Assets?
The taxonomy divides crypto assets into four main categories based on their characteristics and intended use. First, digital commodities or network tokens are those that function primarily for utility or access within a blockchain network, not as profit-driven investments. According to Atkins, these assets do not fall under securities laws once the initial investment phase concludes, allowing them to trade freely as commodities.
Digital collectibles, such as non-fungible tokens representing unique items, are treated similarly, focusing on their value for ownership or collection rather than managerial efforts by issuers. Digital tools, which provide practical functionality like software access, also escape securities classification if they lack investment contract elements. In contrast, tokenized securities explicitly represent stakes in underlying financial instruments and remain fully regulated by the SEC.
Supporting data from SEC public engagements, including over 100 meetings and extensive written feedback, informed this classification. Atkins highlighted that the framework recognizes the evolving nature of tokens: “Once the investment contract has run its course, the token may continue to trade, but those trades are no longer securities transactions.” This approach aligns with historical precedents in securities law, where assets can shift categories based on changed circumstances. Experts from the financial sector, such as those cited in Bloomberg reports, have praised the taxonomy for potentially reducing compliance costs by up to 30% for non-security offerings, based on industry estimates.
The SEC’s emphasis on the Howey test—evaluating if an asset involves money invested in a common enterprise with expectations of profits from others’ efforts—remains central. Short sentences underscore key distinctions: Commodities prioritize utility; securities demand disclosure. This structured oversight is expected to foster a more predictable environment, with the SEC planning exemptions for certain offerings to ease burdens without compromising protection.
BREAKING: 🇺🇸 SEC Chair Paul Atkins introduces a new ‘Token Taxonomy’ a
framework to clearly distinguish which cryptos are securities and which are commodities. pic.twitter.com/xuO4AYJMtA
— Ash Crypto (@AshCrypto) November 12, 2025
Frequently Asked Questions
What Triggers a Crypto Asset to Be Classified as a Security Under the SEC Token Taxonomy?
Under the SEC token taxonomy, a digital asset qualifies as a security if it meets the Howey test criteria: an investment of money in a common enterprise with profits expected primarily from the efforts of others. Chair Atkins noted that initial token sales often fit this, but post-distribution functionality can shift classification, providing a pathway for assets to become commodities after the investment contract ends.
How Will the SEC Token Taxonomy Affect Crypto Investors in 2025?
The SEC token taxonomy offers investors clearer guidelines on asset risks and regulatory status, helping them distinguish between securities needing prospectus disclosures and commodities traded on exchanges like the CFTC oversees. As Atkins explained in natural terms, it ensures fair markets by targeting fraud while allowing legitimate projects to grow, making it easier for everyday users to navigate crypto without unexpected legal hurdles.
Key Takeaways
- Clear Categorization: The SEC token taxonomy sorts assets into digital commodities, collectibles, tools, and securities, using the Howey test for decisions.
- Transition Mechanism: Tokens can move from securities to commodities once investment elements expire, reducing long-term regulatory burdens as per Atkins’ announcement.
- Enforcement Priority: Maintains “fraud is fraud” stance, coordinating with agencies for comprehensive oversight and investor safeguards.
Conclusion
The SEC token taxonomy under Project Crypto marks a pivotal step in regulating digital assets, integrating primary classifications like securities and commodities with nuanced categories for collectibles and tools. By anchoring in established tests like Howey and drawing from public input, as outlined by Chair Paul Atkins, it balances innovation with protection. As crypto markets evolve in 2025, stakeholders should monitor upcoming guidance to adapt strategies effectively and capitalize on this newfound clarity.
