The SEC’s posture toward digital assets is gradually shifting, moving from purely reactive applications of securities laws toward a pattern of interpretive guidance and staff-level interpretations to define practical boundaries for market activity. This progression was most visible in July–August 2025 through three developments: the launch of Project Crypto by SEC Chair Paul Atkins, staff guidance clarifying when certain liquid staking arrangements may fall outside securities classification, and Commission approval of in-kind redemptions for select crypto exchange-traded products (ETPs). While not binding rulemakings, these actions function as interpretive benchmarks, offering early blueprints for how the SEC may reconcile crypto’s operational realities with existing securities law.
For market participants, these moves represent more than procedural housekeeping; they offer an early blueprint for how the SEC might reconcile crypto’s operational realities with existing securities regulation. They also signal a greater willingness to engage on technical and protocol-specific questions— an opening that could influence product architecture, compliance planning, and market structure in the years ahead.
This blog examines each of these developments in turn, breaking down what was said, what it changes in practice, and what it signals about the SEC’s evolving posture toward digital assets.
The clearest window into that shift came on July 31, 2025, when SEC Chair Paul Atkins formally launched Project Crypto, a multi-year initiative aimed at modernizing the agency’s treatment of tokenized markets within the U.S. securities framework. While the Commission has issued targeted statements in the past, Atkins’ address was the most comprehensive articulation yet of an emerging regulatory philosophy: one grounded in clarity over ambiguity, functional categorization over default assumptions, and infrastructure design that reflects how crypto actually operates. As Atkins put it in his remarks,
“The SEC’s role is to safeguard markets that allow the spark of human creativity and skill to benefit society...”
— SEC Chair Paul Atkins, July 31, 2025
Atkins criticized the past decade’s reliance on case-by-case enforcement to police token issuance and trading, calling for “clear and simple rules of the road” to replace deterrence-by-litigation. While he did not signal the removal of enforcement entirely from the toolkit, he emphasized that predictable, upfront frameworks should be the starting point. If implemented, this approach would reduce compliance uncertainty and enable issuers and intermediaries to structure offerings with SEC expectations in mind from the outset.
In a marked shift from prior agency rhetoric, Atkins stated that “despite what the SEC has said in the past, most crypto assets are not securities.” This reframing could influence both how the Division of Enforcement prioritizes cases and how staff approach classification discussions with market participants. This framing would direct the SEC’s focus toward assets with clear capital-raising characteristics, while leaving space for tokens that serve utility, settlement, or non-investment purposes to be evaluated on their own terms.
Building on that point, Atkins outlined a classification model grounded in economic function—categorizing tokens as collectibles, commodities, or stablecoins, rather than presuming securities status unless rebutted. Such an approach could reduce the incentive for projects to decentralize prematurely or relocate offshore, and it could encourage domestic launches designed from the outset to meet clear parameters.
Atkins argued that broker-dealers and trading platforms should be able to list and offer both securities and non-securities under a single regulatory structure. He stressed that existing securities laws do not prohibit SEC-regulated venues from supporting non-security assets, provided the framework is designed correctly. To move toward that outcome, he directed staff to draft guidance and consider rulemaking that would enable side-by-side trading of tokenized securities and non-securities on SEC-registered venues. He also raised the possibility of permitting non-security crypto assets to trade on platforms regulated by other bodies, such as state-licensed exchanges or CFTC-regulated markets, under coordinated oversight.
By blurring the operational divide between asset types, this model could lower fragmentation costs for market participants and streamline compliance architecture for multi-asset platforms.
From there, Atkins turned to custody, reaffirming his strong support for self-custody as a “core American value” while acknowledging that many investors will continue to rely on SEC-registered intermediaries. He emphasized that participants should have “maximum choice” in how they custody and trade digital assets.
To that end, he directed staff to examine how the existing custody regime, particularly under the Investment Advisers Act and Exchange Act, can be adapted to crypto-native models. This includes exploring exemptive relief, adjustments to the broker-dealer custody rule (Rule 15c3-3), and even formal rule changes in line with recommendations from the President’s Working Group on Financial Markets.
The subtext here is to ensure that custody policy safeguards investors while preserving the operational flexibility needed for firms to integrate multiple business lines under the most efficient licensing structures.
Atkins’ framing positioned the SEC less as a gatekeeper and more as an architect of market infrastructure. By accepting crypto’s technical architecture as a baseline rather than an anomaly, Project Crypto signals a willingness to build fit-for-purpose oversight from the ground up. This shift — from attempting to retrofit legacy securities law to designing forward-looking regulation, could, over time, reshape the SEC’s strategic posture toward the digital asset sector.
That same week, the SEC’s Division of Corporation Finance reinforced this shift in focus with new staff guidance on liquid staking. Building on its May 2025 interpretation of protocol-level staking, the Division extended that reasoning to liquid staking tokens (LSTs) issued via smart contracts and automated platforms. The statement clarified that certain arrangements do not involve the offer or sale of securities under Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act—particularly where products are protocol-native, non-custodial, and lack the hallmarks of an “investment contract” under the Howey test (the legal standard that deems an arrangement a security if there is an investment of money in a common enterprise with an expectation of profits derived from the efforts of others).
The staff distinguished between staking as network infrastructure and staking as a financial product:
Protocol-Level Liquid Staking — Rewards are generated algorithmically through consensus participation, assets remain under user control, and no intermediary promises returns beyond network operations. When executed via automated smart contracts and without centralized pooling or discretionary reward management, this model may fall outside securities law.
Custodial or Pooled Staking Products — Assets are transferred to a service provider that aggregates, manages, or rehypothecates them, creating reliance on that provider’s managerial decisions and moving the arrangement toward Howey’s definition of a security.
Our reading of the guidance identifies three key factors that, if met, make it less likely a staking receipt token could be deemed a security:
In this model, the provider functions as a technical agent—routing assets, issuing 1:1 receipt tokens, and distributing rewards strictly according to protocol rules.
Exclusions are explicit: the guidance does not cover restaking arrangements or platforms that centralize control or marketing; cases where receipt tokens are used in other yield-generating applications; situations where the underlying asset is itself a security; or provider discretion over validator selection, liquidity, or fixed-return promises.
It’s not a safe harbor, the SEC has made clear it will assess each arrangement on a case-by-case basis—but it does offer a clearer marker of where the securities boundary may lie. That boundary, however, does not eliminate oversight; depending on structure, providers may still fall under CFTC commodity rules, FinCEN MSB registration, or state money transmitter regimes.
On July 29, 2025, the SEC approved orders allowing in-kind creations and redemptions for certain crypto ETPs—bringing them in line with how commodity ETPs like gold and silver operate. Previously, crypto ETPs were restricted to cash-only processing, requiring authorized participants to use U.S. dollars instead of underlying digital assets.
Under the new framework, authorized participants may deliver eligible crypto (e.g., Bitcoin or Ether) directly to a trust in exchange for shares—or redeem shares for crypto rather than cash. The change reduces operational friction, tightens bid–ask spreads, and aligns processes with traditional ETP mechanics, all while preserving existing safeguards for custody, valuation, and surveillance. Only crypto assets specifically authorized under the trust’s terms are eligible for these in-kind transfers, preventing unvetted tokens from entering the process.
On the same day, the Commission also approved several related orders, including:
These approvals offer sponsors greater operational flexibility and enhance liquidity and arbitrage efficiency. At the same time, the SEC clearly reinforced that these innovations stay within structured, regulated frameworks—not outside them.
Taken together, Project Crypto’s emphasis on functional classification, the liquid staking guidance, and the shift to in-kind ETP operations signal an SEC moving toward a more predictable regulatory perimeter. Rather than relying solely on post-hoc enforcement, the agency is laying out functional distinctions—between infrastructure and financial products, between friction-heavy and efficient market operations—that issuers, intermediaries, and institutions can use as design parameters. Oversight remains, but for the first time in years, crypto market participants have a clearer set of structural cues to follow, allowing them to build with a regulatory playbook in hand instead of reading between the lines.
