Author: Liang Yu
Editor: Zhao Yidan
The regulation of cryptocurrency assets in the United States has finally ushered in a historic shift from "enforcement-led" to "rules-led," marking the quiet beginning of a transformation that bids farewell to the "decade of fog." The SEC's establishment of the principle of "economic substance over form" will reshape the global regulatory landscape for cryptocurrency assets.
"We will never let the fear of the future bind us, trapping us in the past." On November 12, 2025, Paul Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC), declared this during a keynote speech titled "Project Crypto" at the Federal Reserve Bank of Philadelphia.
This highly anticipated speech systematically outlined the SEC's new framework for cryptocurrency regulation, acknowledging for the first time at the federal regulatory level that most cryptocurrency tokens are not securities, and proposing a new regulatory philosophy of "economic substance over form."
This shift in regulatory principles signifies a fundamental change in the SEC's approach to blockchain technology, moving from a rigid application of securities law to a differentiated regulatory approach based on the economic functions and actual circumstances of the assets.
1. Regulatory Turning Point: Ending the "Decade of Fog"
Over the past decade, the most common confusion faced by participants in the cryptocurrency market has been: "Is this token a security?" This seemingly simple question has always lacked a clear answer, becoming a major obstacle to the industry's development.
Atkins admitted in his speech, "Cryptocurrency assets are not a statutory term in securities law; it merely describes the way records are kept and value is transferred." This statement directly addresses the core issue—regulation should focus on the legal rights and economic substance behind the assets, rather than their technical form.
For a long time, the market has been trapped in a regulatory misconception: once a token is deemed part of an "investment contract," it is forever labeled a security. This "once a security, always a security" view not only lacks legal basis but also deviates from the dynamic reality of digital asset development.
According to a report released by the Blockchain Association in 2024, over 78% of U.S. cryptocurrency projects have considered relocating overseas due to regulatory uncertainty. The regulatory ambiguity has severely constrained the United States' innovation capacity in the blockchain field.
Atkins clearly stated that this rigid viewpoint is "unsustainable, unworkable, costly, and yields minimal benefits," and has directly led to innovation flowing to jurisdictions with clearer regulations.
The new framework established by the SEC will reshape the regulatory environment with "clear boundaries" and "understandable language," fundamentally responding to the market's urgent demand for certainty.
2. Economic Substance Over Form: A Fundamental Shift in Regulatory Philosophy
In constructing the new regulatory framework, Atkins emphasized two core principles that form the cornerstone of the "economic substance over form" regulatory philosophy.
The essence of a security does not change based on its form. This means that whether an asset exists in the form of a paper certificate, a database record, or a blockchain token, as long as its essence represents a claim to a company's profits and relies on the efforts of others for management, it falls under the jurisdiction of securities law. Stocks do not change their security attributes simply because they are presented in token form.
Economic reality supersedes all labels. 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.
This shift in regulatory thinking reflects a full recognition of the dynamic evolution characteristics of blockchain networks. The fundamental difference between digital assets and traditional financial instruments lies in the fact that the networks they inhabit mature, the code is implemented, and control becomes decentralized, necessitating corresponding flexibility in regulation.
According to research by the Brookings Institution in 2024, over 60 jurisdictions worldwide have established dedicated regulatory frameworks for cryptocurrency assets, most of which adopt an economic substance-based classification approach. The SEC's shift in position aligns U.S. regulatory practices with international mainstream trends.
3. Token Classification System: From Chaos to Order
To implement the principle of "economic substance over form," Atkins proposed a clear token classification system, dividing cryptocurrency assets into four categories to provide the market with clear regulatory guidance.
Digital goods/network tokens are explicitly defined as non-security assets. The value of these cryptocurrency assets is fundamentally related to the programmatic operation of a "well-functioning" and "decentralized" cryptocurrency system, rather than deriving from the expected profits generated by others' key management efforts.
This classification means that mainstream cryptocurrencies like Bitcoin and Ethereum, if their underlying networks are truly decentralized, may be clearly recognized as "non-securities." According to CoinGecko data, approximately 35% of the top 100 cryptocurrencies by market capitalization may meet this definition.
Digital collectibles are also not considered securities. These cryptocurrency assets are intended for collection and use, potentially representing or granting holders rights to digital expressions or references to artworks, music, videos, in-game items, etc. NBA Top Shot's collectible cards are a typical example.
Digital tools include cryptocurrency assets with practical functions, such as memberships, tickets, vouchers, proof of ownership, or identity badges. A report by Sequoia Capital in 2024 indicated that the issuance of utility tokens has increased by 300% over the past two years, reflecting strong market demand for functional tokens.
The only category explicitly defined as securities is "tokenized securities." These cryptocurrency assets represent ownership of traditional financial instruments such as stocks and bonds. The tokenized fund launched by BlackRock in 2023 is a typical representative of this category.
4. Investment Contracts Can Be Terminated: A Revolutionary Breakthrough in Regulatory Logic
In the application of the Howey test, Atkins proposed a milestone viewpoint: investment contracts can be fulfilled, can expire, and can be terminated. They are not a permanent legal label.
The legal basis for this viewpoint can be traced back to SEC Commissioner Hester Peirce's "safe harbor" proposal in 2020. This proposal systematically outlined the legal path for tokens to transition from investment contracts to non-securities.
Atkins used the historical changes of the Howey orange grove as an enlightening metaphor. The land that was once the subject of an investment contract has now become a golf course and residential area, no longer possessing security attributes. This analogy reveals the dynamic nature of asset characteristics as environments change.
According to an analysis by Stanford University's Blockchain Research Center in 2024, approximately 40% of the top 50 cryptocurrency projects by market capitalization have entered or are close to a "fully decentralized" state, meaning they may be able to shed their security labels through the principle of investment contract termination.
The practical significance of this groundbreaking idea is profound. Taking Ethereum as an example, the project has evolved from its ICO financing in 2014 to today, achieving a high degree of decentralization. According to the new framework, Ethereum's current token transactions may no longer constitute securities transactions.
Commissioner Peirce pointed out in a speech in January 2025 that "the maturity of the network should be a key factor in determining the nature of the token." This viewpoint has now been mainstreamed by the SEC, marking a significant advancement in regulatory thinking.
5. Global Regulatory Landscape: A New Frontier of Institutional Competition
The SEC's policy shift should be understood against the backdrop of the accelerated evolution of global cryptocurrency asset regulation. Over the past year, major jurisdictions have shown a clear trend of institutional competition in cryptocurrency regulation.
The European Union's Markets in Crypto-Assets Regulation (MiCA) has established unified market access and information disclosure requirements, setting comprehensive operational standards for cryptocurrency service providers. According to data from the European Banking Authority, over 200 cryptocurrency companies have submitted authorization applications under the MiCA framework.
The Asian region has exhibited a diversified development path. The Monetary Authority of Singapore continues to implement a "strict but fair" regulatory approach, issuing licenses to qualified digital asset issuers. Japan has revised its Payment Services Act to explicitly include stablecoins within the regulatory scope.
China's regulatory path is unique. While maintaining a ban on domestic cryptocurrency trading, China is actively promoting the digital yuan pilot. According to data from the People's Bank of China, as of June 2025, the transaction volume of the digital yuan has exceeded 15 trillion yuan. Meanwhile, Hong Kong is actively building a virtual asset center to attract global innovation resources.
International regulatory coordination mechanisms are also continuously improving. The Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) recently jointly released regulatory recommendations for cryptocurrency assets, providing a foundation for global standard convergence.
6. Profound Industry Impact: A New Balance of Innovation and Compliance
The SEC's new regulatory framework will have a profound impact on the cryptocurrency industry, providing clear development directions for market participants across different fields.
Decentralized finance (DeFi) protocols may become one of the biggest beneficiaries. According to DeFiLlama data, the total value locked in DeFi currently exceeds $80 billion, with U.S. users accounting for about 28%. The new framework provides a clear path for compliant development of these protocols.
Decentralized exchanges like Uniswap may gain more development space due to the new classification. Atkins explicitly stated in his speech that decentralized financial systems such as automated market makers (AMMs) can fundamentally achieve non-intermediated financial market activities and should be granted legitimate status at the institutional level.
Cryptocurrency super applications will also welcome development opportunities. Atkins proposed the concept of "Super-App," suggesting that future trading platforms should be able to integrate various services, including non-security cryptocurrency assets, security cryptocurrency assets, traditional securities, as well as staking and lending, under a single license.
This vision resonates with the development trend of super applications in the Asian region. According to McKinsey's 2024 Digital Finance Report, Asian super applications average over 50 financial services, while similar platforms in the U.S. offer only about 15.
The tokenization of real-world assets (RWA) also receives clear guidance. Atkins explicitly stated in his speech that he will promote the tokenization of traditional assets, specifically naming ERC-3643 as a token standard worth referencing in the regulatory framework.
This statement is significant because ERC-3643 is a standard specifically designed for compliant security tokens and has been adopted by mainstream compliant platforms such as Mantra and HashKey. According to projections by the Boston Consulting Group, the market size for tokenized assets could reach $16 trillion by 2030.
7. Future Outlook: Co-creating a New Financial Ecosystem with Regulation and Innovation
The new regulatory framework established by the SEC is not only a response to the industry's confusion over the past decade but also a strategic consideration for maintaining U.S. competitiveness in the digital finance era.
In the coming months, the SEC will consider a series of exemption clauses to establish a tailored issuance system for cryptocurrency assets related to investment contracts. These measures aim to reduce compliance costs while maintaining investor protection levels.
According to the SEC's roadmap, the first specific rules are expected to be published in early 2026, at which point the market will receive more detailed operational guidance.
Regulatory coordination will also be an important topic in the future. The SEC has committed to closely collaborating with the Commodity Futures Trading Commission (CFTC) and banking regulators to ensure that non-security cryptocurrency assets have an appropriate regulatory framework. This inter-agency collaboration is crucial for avoiding regulatory arbitrage and fragmentation.
From a global competition perspective, a clear regulatory framework will significantly enhance the United States' attractiveness in the field of blockchain innovation. According to a report released by the Digital Chamber in 2025, for every 10% increase in regulatory clarity, related investments grow by approximately 15%.
More importantly, this framework represents a modernization of regulatory thinking—shifting from technological fear to economic rationality, and from defensive enforcement to constructive guidance. As Atkins stated, "In a free society, the rules governing economic life should be knowable, reasonable, and appropriately constrained."
As Atkins pointed out in his speech, the land surrounding the Howey mansion was never a security; it became the subject of an investment contract through specific arrangements, and when that arrangement terminated, it was no longer bound by the investment contract.
Today, the United States is building a new paradigm for cryptocurrency regulation that can protect investors while promoting innovation. When developers no longer need to worry about compliance issues, when investors can clearly distinguish between asset types, and when traditional financial institutions have a clear path to market entry, a healthier and more vibrant cryptocurrency ecosystem is beckoning us.
The innovative vitality brought by regulatory clarity will drive the United States to reclaim its leadership position in the blockchain financial sector, laying a solid foundation for the next round of digital financial innovation.
Sources of some materials:
· "Latest Speech by SEC Chairman: Clarifying the New Paradigm of Cryptocurrency Regulation, Project Crypto Pathway Clarified, Bidding Farewell to 'One-Size-Fits-All', Establishing Four Categories of Token Regulatory Standards"
· "Detailed Explanation of SEC Token Classification: Why NFTs, Network Tokens, and Digital Tools Are Not Considered Securities"
· "SEC Chairman Announces 'Token Classification Law' Plan, Bitcoin (BTC) May Be Renamed as Non-Security"
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