#USSECPushesCryptoReform

The U.S. Securities and Exchange Commission is undergoing a historic transformation under Chair Paul Atkins. After years of "regulation by enforcement," the agency is building a comprehensive, transparent framework for digital assets. Here is everything you need to know about the reforms taking shape in 2026.

1. Project Crypto: A Unified SEC-CFTC Front

The centerpiece of the reform agenda is the expansion of "Project Crypto" into a joint initiative between the SEC and Commodity Futures Trading Commission (CFTC), formally announced in late January 2026 .

SEC Chair Paul Atkins and CFTC Chair Michael S. Selig have described this as "one of the most ambitious initiatives between our two agencies in a generation" . The goal is simple: eliminate duplicative rules and ease uncertainty as Congress advances bipartisan market-structure legislation .

Key objectives include :

· Building a shared crypto-asset taxonomy
· Drawing clearer lines between securities and commodities
· Eliminating duplicate registrations that currently burden firms overseen by both regulators
· Establishing joint surveillance, data sharing, and coordinated rulemaking
· Creating durable frameworks that survive regardless of future administration changes

A formal Memorandum of Understanding between the agencies is forthcoming, locking in weekly leadership calls and coordinated policy development .

2. Clear Crypto Asset Classification: The Four-Category Framework

For years, the biggest question has been: Is it a security or a commodity? The SEC is now developing definitive interpretive guidelines to provide answers .

SEC Corporation Finance Director Jim Moloney confirmed in February 2026 that the agency is preparing to submit explanatory guide recommendations that will provide clear crypto asset classification and describe the framework for determining when digital assets fall under—or cease to be subject to—investment contract constraints .

The emerging classification system divides digital assets into four categories :

· Commodity-type/Network Tokens (like Bitcoin)
· Functional-type/Utility Tokens
· Collectible-type (NFTs)
· Security-type (tokenized securities)

Crucially, if the first three categories achieve "sufficient decentralization" or "functional completeness," they can exit the securities regulatory framework entirely. Once an investment contract is deemed "terminated," subsequent trading is not automatically considered a securities transaction .

3. Tokenized Securities Guidance: Legal Clarity for Issuers

On January 28, 2026, SEC staff issued groundbreaking guidance on tokenized securities taxonomies, providing market participants with much-needed clarity .

The guidance defines a "tokenized security" as a financial instrument that qualifies as a security under federal securities laws but is formatted as or represented by a crypto asset, with ownership records maintained on crypto networks .

The guidance identifies three primary categories :

A. DLT-Integrated Recordkeeping: Issuers integrate distributed ledger technology into their master securityholder files so on-chain transfers automatically update official ownership records.

B. Mirror Recordkeeping: Issuers maintain traditional off-chain records while issuing separate on-chain tokens, using on-chain transfers to record ownership changes in off-chain master files.

C. Third-Party Sponsored Securities: Further divided into:

· Custodial Tokenized Securities: Where underlying assets are held in custody and tokens evidence ownership
· Synthetic Tokenized Securities: Including linked securities and tokenized security-based swaps

The guidance also clarifies that a single class of securities can be issued in multiple formats (both on-chain and off-chain), provided they offer substantially similar rights and privileges .

4. Innovation Exemption: The Regulatory Sandbox

Perhaps the most consequential reform is the "Innovation Exemption" policy, which took effect in January 2026 .

This temporary "safe harbor" allows digital asset companies to operate without immediately bearing the full registration and disclosure burdens of traditional securities laws .

Key features include :

· Duration: 12 to 24 months, providing an "incubation period" for networks to achieve maturity or sufficient decentralization
· Simplified registration: Projects submit streamlined disclosures instead of complex S-1 registration documents
· Funding limits: Aligned with the CLARITY Act's "on-ramp" design, allowing up to $75 million in annual public fundraising
· Principles-based compliance: Quarterly reporting, risk warnings for retail investors, and investment limits

Eligibility requirements include demonstrating high decentralization potential, robust technical security via audits, and implementation of reasonable user verification procedures .

5. Dramatic Shift in Enforcement: 60% Decline in Actions

The numbers tell a striking story. According to Cornerstone Research's January 2026 report, the SEC initiated only 13 crypto-related enforcement actions in 2025—a 60% decline from 33 actions in 2024 .

Even more dramatic :

· Of the 13 actions, five were brought under former Chair Gensler before his January 2025 departure
· Only eight actions were initiated during the remaining 11 months under Chair Atkins
· Seven cases were dismissed entirely
· Monetary penalties totaled just $142 million in 2025—**less than 3%** of the approximately $4.7 billion recovered in 2024
· The number of SEC attorneys leading crypto investigations dropped from 101 in 2023 to just 33 in 2025

Chair Atkins has emphasized, however, that "fraud remains fraud" and the agency will continue aggressively challenging manipulative or deceptive practices .

6. Coordination with Congressional Legislation

The SEC reforms are designed to work in tandem with two major legislative pillars :

The CLARITY Act: Addresses SEC-CFTC jurisdictional conflicts by:

· Placing primary issuance/fundraising under SEC authority
· Granting CFTC regulatory power over digital commodity spot trading
· Introducing a "mature blockchain" test for determining when projects qualify as digital commodities

The GENIUS Act: Signed into law in July 2025, this first comprehensive federal digital asset legislation:

· Excludes payment stablecoins from securities/commodities definitions
· Places stablecoins under banking regulator oversight (OCC)
· Requires 1:1 high-liquidity asset reserves
· Prohibits interest payments on stablecoins

The Innovation Exemption thus focuses on areas beyond stablecoins, particularly DeFi protocols and novel network tokens .

7. Modernizing Legacy Rules: Custody, Disclosure, and Reporting

Beyond crypto-specific measures, the SEC is updating traditional regulations for the blockchain era :

· Custody: Following the rescission of SAB 121 (which forced custodians to record client crypto assets as on-balance-sheet liabilities), banks and trust companies can now scale digital asset custody services with lower regulatory capital costs
· Disclosure burden: The SEC is comprehensively reviewing Regulation S-K to reduce redundant information disclosure requirements
· Reporting frequency: Studying the possibility of converting mandatory quarterly reports to semi-annual reports
· Insider trading: Foreign private issuers' directors and executives must comply with Exchange Act Section 16(a) insider trading reporting obligations starting March 18, 2026

8. Industry Reactions: Polarized Responses

The reforms have generated strong, divided reactions across the ecosystem :

Supporters celebrate:

· Reduced entry costs for compliant projects
· Attraction of institutional capital through regulatory clarity
· Product innovation within clear frameworks
· Major institutions (JPMorgan, Morgan Stanley) entering with defined legal paths

DeFi community warns of "traditionalization" risks:

· Mandatory KYC/AML requirements contradict decentralized ideals
· Protocols may need permissioned vs. public liquidity pool splits
· ERC-3643 compliant token standards embed transfer restrictions and freeze capabilities
· Uniswap's founder argues regulating software developers as financial intermediaries harms competitiveness

Traditional finance opposition:

· World Federation of Exchanges and Citadel Securities urge abandoning the Innovation Exemption
· Concerns about regulatory arbitrage—same assets under different rules
· SIFMA insists tokenized securities must follow traditional investor protection rules

9. Global Context: U.S. vs. EU Approach

The American model contrasts sharply with Europe's MiCA framework :

U.S. Approach (Innovation Exemption + CLARITY):

· Tolerates initial uncertainty for innovation speed
· "Control transfer" philosophy allows projects to "graduate" from securities status
· Attractive to中小型 fintech companies and startups

EU Approach (MiCA):

· Pre-authorization and harmonized rules across member states
· Structural safeguards and predictable markets
· Attractive to large established institutions seeking stability

This divergence forces global companies into "market-by-market" dual compliance strategies .

10. Looking Ahead: The Path Forward

The window for action is narrowing. With 2026 mid-term elections approaching, the SEC is racing to implement durable frameworks .

Key priorities :

· Finalizing the SEC-CFTC Memorandum of Understanding
· Issuing final interpretive guidance on crypto asset classification
· Implementing Innovation Exemption applications
· Coordinating with Congress on CLARITY Act passage
· Developing guidance on tokenized collateral for derivatives markets
· Clarifying rules for leveraged crypto trading and prediction markets

Chair Atkins has emphasized that these reforms aim to ensure "the future of finance is built here, under rules that protect investors, promote innovation and cement America's leadership in the global financial system" .

The bottom line: The SEC is building on-ramps for institutional capital. By providing clear definitions, safe harbors for builders, and modernized custody rules, the agency is inviting Wall Street and global innovators to participate in U.S. markets under a unified, predictable federal framework .

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Stakeholders are encouraged to monitor developments closely, participate in public consultations, and adopt strategies aligned with regulatory expectations to ensure the digital asset ecosystem develops responsibly, professionally, and sustainably .