Project Crypto is the SEC’s initiative to clarify crypto rules, focusing on token classification, custody, trading and DeFi oversight. Under Chair Paul Atkins, the agency prioritizes clear rulemaking and zero tolerance for fraud to replace prior “regulation by enforcement” practices.
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SEC will publish clearer rules on token classification, custody, and trading.
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Project Crypto aims to modernize regulation and reduce compliance friction for market participants.
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Chair Paul Atkins emphasizes enforcement against fraud while enabling legal certainty for crypto firms.
Project Crypto SEC crypto regulation update: key rule changes on token classification, custody, and DeFi oversight — read implications and next steps for firms.
What is Project Crypto?
Project Crypto is the SEC’s rulemaking initiative to clarify how securities laws apply to cryptocurrency. The program targets token classification, updated custody standards, trading rules, and cross-agency coordination. It replaces ad hoc enforcement with formal rules designed to reduce uncertainty for market participants.
How will the SEC change crypto rules under Chair Paul Atkins?
Chair Paul Atkins has signaled a shift from the prior era of “regulation by enforcement” under Gary Gensler to transparent rulemaking. The SEC will prioritize written rules on token status, custody requirements for digital assets, trading oversight, and guidance for decentralized finance (DeFi).
The agency also plans cross-agency collaboration with banking and commodities regulators and will publish timelines for rule proposals. Atkins reiterated the SEC’s continued strict stance on fraud and market manipulation.
Why does token classification matter?
Token classification determines which legal regime applies. If a token is a security, issuers face registration, disclosure, and custody obligations. Clear definitions reduce legal risk for exchanges, custodians, and developers and can unlock broader institutional participation.
How should firms prepare for Project Crypto rule changes?
Firms should conduct immediate compliance reviews of token listings, custody practices, and trading controls. Implement transparent disclosure processes and update custody segregation and insurance policies. Maintain audit trails and strengthen anti-fraud controls.
Practical steps include:
- Inventory tokens and document economic features and rights.
- Assess custody models against proposed custody standards and segregate client assets.
- Enhance KYC/AML and trade surveillance to meet stricter enforcement expectations.
- Prepare comment submissions when the SEC publishes proposed rules.
What issues will Project Crypto prioritize?
Project Crypto is expected to focus on: token classification, custody rule updates, DeFi engagement, cross-agency coordination, and streamlining compliance for private market asset digitization. The SEC will also seek to modernize rule language to account for blockchain-native structures.
Frequently Asked Questions
When did the SEC launch Project Crypto and why?
The SEC launched Project Crypto in July to modernize rules and reduce regulatory uncertainty. The initiative responds to industry calls for clear standards on tokens, custody, and decentralized finance while maintaining investor protections.
How will Project Crypto affect exchanges and custodians?
Exchanges and custodians will face clearer requirements on token listings, custody segregation, and recordkeeping. Firms should update controls and disclosure practices to align with forthcoming rule text and enforcement priorities.
Key Takeaways
- Clarity over uncertainty: Project Crypto aims to replace ad hoc enforcement with written rules.
- Token classification matters: Status as a security triggers registration and custody obligations.
- Action items for firms: Inventory tokens, update custody protocols, enhance surveillance, and prepare to comment on proposed rules.
How-to: Steps for Compliance Readiness (HowTo schema included)
Follow these prioritized actions to align with Project Crypto expectations.
Conclusion
Project Crypto signals a material shift in SEC crypto policy by prioritizing formal rulemaking on token classification, custody, trading, and DeFi. Market participants should take immediate steps to inventory assets, strengthen custody and compliance controls, and prepare to engage during the rulemaking process to shape practical outcomes.
