| Key Points: – Project Crypto organizes tokens by taxonomy, focusing on issuance, custody, trading. – Innovation exemption temporarily permits tokenized securities under lighter conditions. – Measured approach prioritizes market integrity, investor safeguards, and predictable rulemaking. |
According to the U.S. Securities and Exchange Commission, Chair Paul Atkins has set out a Project Crypto framework that organizes digital assets by token taxonomy and concentrates policy on issuance, custody, and trading. The approach is intended to apply “basic fairness and common sense” to digital finance while clarifying how existing securities rules should map to tokenized instruments.
As reported by The Block, agency leadership has outlined an innovation exemption as an incremental path to enable tokenized securities. The proposal would temporarily allow certain tokenized products to operate under lighter conditions while the Commission finalizes permanent rules.
The exemption is presented as a measured step rather than a wholesale rewrite, with an emphasis on market integrity and investor safeguards. Policymakers have also signaled a shift toward more predictable rulemaking over case-by-case enforcement to reduce uncertainty for compliant firms.
Which tokenized products could qualify under the exemption
Cointelegraph has highlighted the Depository Trust & Clearing Corporation’s pilot work on tokenization as a signal that traditional instruments could be brought on-chain within existing market plumbing. In practice, that points to real‑world asset tokenization, such as tokenized equities or fund interests, structured to interoperate with legacy clearing, settlement, and transfer infrastructure.
Before drawing bright lines, it is useful to note how the Commission’s leadership has described market boundaries. Paul Atkins, the agency’s chair, said, “most crypto tokens trading today are not themselves securities,” a view he links to how investment contracts can expire while underlying tokens continue to circulate.
Regulatory materials describe a token taxonomy under Project Crypto that distinguishes tokenized securities from other categories like network commodities, collectibles, or tools. Eligibility under a time‑limited exemption would likely hinge on whether the product fits the tokenized securities bucket and satisfies baseline controls around issuance, custody, transfer restrictions, and disclosures.
How firms should prepare now without overcommitting
Immediate compliance priorities for issuers, exchanges, custodians
The Commission’s stated focus areas, issuance, custody, and trading, provide a practical checklist for early readiness. Firms can map existing controls to tokenized workflows, including segregation of client assets, transfer agent functionality, audit trails, and reconciliation between on‑chain records and traditional books.
Policy discussions have emphasized that KYC/AML guardrails will remain central even under an exemption. Designs that support permissioned pools and whitelist‑based transfer controls, including standards such as ERC‑3643, have been discussed in industry coverage by Bee.com.
Risk monitoring: regulatory arbitrage, protections, enforcement consistency
KuCoin News has reported that major institutions including JPMorgan, Citadel, and SIFMA worry an exemption could enable regulatory arbitrage or fragment oversight. CryptoverseLawyers notes that exchanges like Nasdaq and CME are wary of parallel regimes for economically similar assets and want protections aligned with existing securities law.
Coindesk has flagged a separate concern from supporters: that rapid policy change still requires consistent enforcement to avoid uncertainty. This underscores why any time‑limited relief would need clear eligibility criteria, comparable disclosure standards, and robust supervision to preserve market integrity.
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