Author: Zhang Feng

In 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. Its uncertainty in stance, strict interpretation of the definition of "securities," and frequent enforcement actions have made it difficult for innovators and investors to navigate through the fog.

However, a fundamental shift is occurring. On November 12, 2025, SEC Chairman Paul S. Atkins, in his speech titled "Project Crypto," not only clearly responded to the market's demand for regulatory certainty but also proposed a new regulatory paradigm based on "economic substance" rather than "technical labels." The core of this shift is to no longer view every technological innovation as suspicious, but to acknowledge that the lifecycle of an investment contract may terminate, thereby clearing the final institutional barriers for the compliance path of tokens.

I. Clear Regulation Against Uncertainty: Ending the "Decade of Fog"

For the past decade, the most frequently asked question in the crypto market has been: "Is this token a security?" However, this question reflects the systemic confusion brought about by regulatory ambiguity. Atkins admitted in his speech that "crypto assets" are not a statutory term in securities law but a technical description. The key issue lies not in the technical form but in the "legal rights" and "economic substance" it embodies.

For a long time, market participants have fallen into a rigid cognitive misconception: once a token is identified 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 also seriously deviates from the real development of digital assets. Atkins pointed out that this perspective is "unsustainable, impractical, costly, and yields minimal benefits," and directly leads to innovation flowing to jurisdictions with clearer regulations.

To this end, the SEC will reshape the regulatory framework with "clear boundaries" and "understandable language" to respond to the fundamental demand for certainty in the market. This statement marks the SEC's shift from "enforcement-led" to "rules-led," from "post-event accountability" to "pre-event guidance."

II. Emphasizing Substance Over Token Form: Economic Reality Above Technical Labels

In constructing the new regulatory framework, Atkins emphasized two core principles: First, the essence of a security does not change based on its carrier form; second, economic reality supersedes all labels.

This means that regardless of whether an asset exists in the form of a paper certificate, database record, or blockchain token, as long as its essence represents a claim to corporate profits and relies on the management efforts of others, it falls under the jurisdiction of securities law. Conversely, even if a token was issued as part of an investment contract, once the contract is fulfilled or terminated, 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, discarding excessive fixation on technical appearances and focusing instead on the real role of assets in economic activities.

III. Classifying Tokens Based on 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 Commodities/Network Tokens: Such as Bitcoin and other native tokens in decentralized networks, whose value derives from the programmatic operation of the system itself rather than relying on the management efforts of others, and thus do not fall under securities.

Digital Collectibles: Such as NFTs representing art, music, gaming items, etc., whose value lies in use or collection rather than investment profit, and thus do not fall under securities.

Digital Tools: Such as membership credentials, tickets, identity badges, etc., which have practical functions and do not fall under securities.

Tokenized Securities: Tokens representing traditional financial instruments like stocks and bonds, regardless of their form, still fall under securities.

This classification not only addresses the market's urgent need to know "which tokens are not securities" but also provides clear guidance for subsequent regulation and compliance paths.

IV. Segmenting Processes Based on Investment Contract Performance: Acknowledging Contract Termination

In the application of the Howey test, Atkins proposed a milestone viewpoint: Investment contracts can be performed, can expire, and can terminate. They are not a permanent legal label.

He used the historical changes of the Howey orange grove as a metaphor: the land that was once the subject of an investment contract has now become a golf course and residential area, no longer possessing the attributes of a security. Similarly, a token may rely on the "key management efforts" of the development team in the early stages of a project, but as the network matures, code is released, and control is decentralized, the role of the issuer gradually diminishes or even disappears. At this point, the lifecycle of the investment contract has ended, and the trading of the token no longer constitutes a securities transaction.

This concept of "contract termination" breaks the long-standing rigid understanding of the "origins" of tokens, providing a compliance exit for many mature public chain tokens and functional tokens.

V. Opposing Fraud Based on Commitment to Responsibility: Enforcement Does Not Relax Due to Classification

Although the SEC has shown an open attitude towards classification and exemptions, Atkins also emphasized: The anti-fraud baseline will not change based on asset categories. Whether securities or commodities, acts such as false statements, market manipulation, and embezzlement will be severely punished.

He specifically pointed out that even if a token does not fall under securities, as long as it involves false promises during the sales process, the SEC can still hold parties accountable under anti-fraud provisions. At the same time, the CFTC also has anti-fraud and anti-manipulation authority over commodity-type crypto assets.

This indicates that regulatory flexibility does not equate to leniency. The boundaries of compliance can be broadened, but the legal baseline cannot be challenged.

VI. Simplifying Processes for Innovation and Value: Leaving Room for Experimentation and Growth

In the final part of his speech, Atkins called for the SEC to introduce a package of exemptions to create a "tailored issuance mechanism" for crypto assets. This mechanism aims to simplify compliance processes, lower the barriers to innovation, and allow project parties to focus their energy on product development and user interaction rather than being exhausted by regulatory uncertainty.

He emphasized that the goal of regulation should not be to "bind the future," but to "serve the people"—including entrepreneurs building solutions, workers investing for the future, and ordinary Americans sharing in national prosperity.

Chairman Atkins' speech not only serves as a systematic response to the regulatory dilemmas of the past decade but also represents a solemn commitment to the future leadership of financial innovation in the U.S. It marks the transition of regulatory agencies from "defensive enforcement" to "constructive guidance," from "technological fear" to "economic rationality."

"We will never let the fear of the future bind us, trapping us in the past." This statement may well be the best footnote to the new era of U.S. crypto regulation. When regulators begin to acknowledge that investment contracts can terminate, when tokens are no longer permanently questioned due to their "origins," and when innovators no longer have to worry about ambiguous rules—we see not only the dismantling of regulatory barriers but also the opening of a new era: code can foster innovation, protocols can operate based on community needs, and the law will ultimately safeguard rather than obstruct.

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