SEC regulatory landscape clarified: Most ICOs are not securities, and the crypto market makes a mild rebound

SEC Chair Paul Atkins explicitly stated on December 10 that many types of initial coin offerings should be regarded as non-securities transactions and therefore fall outside the SEC’s jurisdiction.

He also emphasized that the SEC will focus on regulating the only category identified as securities—tokenized securities, meaning those securities trading on-chain under SEC oversight.

01 Regulatory Turning Point

U.S. Securities and Exchange Commission Chairman Paul Atkins delivered a speech at the Blockchain Association Annual Policy Summit on December 10 that could reshape the regulatory landscape of the industry.

He clearly stated that many types of initial coin offerings should be regarded as non-securities transactions and therefore are outside the SEC’s regulatory scope.

Atkins specifically mentioned the token classification system he introduced last month, which divides the crypto industry into four major categories of tokens. Last month, he pointed out that three of these—network tokens, digital collectibles, and digital tools—should not be considered securities.

In his remarks on Tuesday, he further clarified that ICOs involving these three categories of tokens should also be regarded as non-securities transactions, meaning they are not subject to SEC regulation.

02 Regulatory Division of Responsibilities

Atkins provided an unprecedented clear explanation of the division of regulatory responsibilities. He explained that initial coin offerings span four themes, three of which fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

“The SEC will let the CFTC handle related matters, while it itself will focus on regulating tokenized securities,” Atkins said. Regarding ICOs, the SEC believes its sole jurisdictional category of tokens is tokenized securities.

This clarification of the regulatory stance marks a new height in the understanding of the crypto industry by U.S. regulators and provides clearer guidance for compliant development within the industry.

Atkins’ remarks are seen as encouragement for innovation in the crypto industry. He stated that, according to his definition, these types of assets do not fall into the securities category, which is exactly what the SEC aims to promote.

03 Classification Breakdown

Based on Atkins’ token classification system, the crypto industry is divided into four major types of tokens, which directly determine the regulatory path each token will face.

Network tokens refer to functional tokens primarily used to access blockchain network services, such as tokens used to pay transaction fees.

Digital collectibles include NFTs and other unique digital assets, typically representing ownership of artworks, collectibles, or other unique digital items.

Digital tools may encompass tokens with practical functions within specific ecosystems, such as in-game currencies or governance tokens in decentralized applications.

Only the fourth category—tokenized securities, meaning tokens representing ownership of traditional securities—will continue to be regulated by the SEC.

04 Market Reaction

Against the backdrop of a clearer regulatory environment, the crypto market has shown a moderate rebound. According to market analysis released by Gate Research Institute on December 10, BTC experienced a brief dip but was then supported by buying interest, currently quoted at 92,005 USDT, up 2.07% in 24 hours.

Meanwhile, ETH performed even stronger, rising 5.84% over the past 24 hours, with a current quote of 3,290 USDT.

Popular tokens in the market exhibited varied performances. The AI narrative-boosted PIPPIN surged 66.39% in 24 hours; WET, gaining attention due to TGE launch and Solana ecosystem expansion, rose 37.01%; PENGU, driven by Pudgy Penguins game downloads surpassing one million, increased by 10.46%.

According to Santiment data, approximately 403,200 BTC have been removed from exchanges over the past year, indicating a significant amount of holdings are flowing from exchanges to self-custody or long-term holding addresses. This trend often signifies a shift toward long-term investment, reducing active sell pressure in the market and providing more stable support for spot prices.

05 Industry Impact

This regulatory stance by the SEC will directly influence project fundraising choices and legal risks. For projects planning to issue network tokens, digital collectibles, or digital tools, a clearer compliance path is now available.

This change may encourage more innovative projects to fundraise via ICOs without fearing securities law violations. Previously, due to regulatory uncertainty, many project teams were cautious about token offerings in the U.S.

It also means that project teams need to carefully design and position their tokens to ensure they meet the definition of non-securities tokens. The importance of legal frameworks and tokenomics design will become even more prominent.

For investors, clearer regulation may reduce legal risks associated with investing in certain types of tokens, but caution is still advised when assessing the fundamentals and potential value of projects.

06 On-Chain Development

With a more favorable regulatory environment, on-chain infrastructure and innovative applications are experiencing new growth opportunities. Polygon network has completed the Madhugiri hard fork upgrade, increasing network throughput by approximately 33% after architecture optimization, reaching nearly 1,400 TPS.

The core of this upgrade is the introduction of a configurable block time mechanism, allowing future adjustments to block generation speed directly within the chain, eliminating reliance on hard forks, thereby significantly reducing upgrade costs and system disturbances.

Meanwhile, decentralized AI model platform FLock.io announced collaborations with AI-native liquidity infrastructure Deluthium and the Base chain’s core liquidity hub Aerodrome to jointly build the next-generation on-chain inclusive finance platform CARiFIN.

This collaboration aims to address long-standing structural issues in the micro-insurance market, such as trust deficits, liquidity shortages, and complex regulatory requirements, providing more transparent, efficient, and sustainable insurance support to target communities.

07 Future Outlook

As the SEC’s regulatory stance becomes clearer, the US crypto industry may enter a new phase of more orderly development. Clearer regulation provides a more stable legal environment for traditional financial institutions to participate in the crypto market.

The implementation of the token classification system will also promote industry standardization, with clearer definitions and regulatory paths for different types of tokens. This could reduce regulatory arbitrage and foster healthy industry competition.

The role of the CFTC in crypto regulation will become more prominent. As the SEC transfers regulatory authority over three categories to the CFTC, coordination and cooperation between the two agencies will become increasingly important.

In the coming months, we may see more guidance documents on token classification and regulatory details, providing industry participants with more specific compliance instructions.

Future Outlook

Crypto market sentiment indicators show the current fear and greed index at 28, still in the “fear” zone, indicating cautious investor sentiment.

However, against the background of gradually clarified regulation, market structure is undergoing fundamental changes. According to data from Gate Research Institute, over the past year, the available BTC supply on exchanges has decreased by more than 400,000 coins, indicating more investors are choosing long-term holding rather than short-term trading. This structural change provides a more solid foundation for market prices.

SEC’s lenient regulatory approach toward most ICOs aligns with the trend of Bitcoin gradually moving away from exchanges into long-term holders’ wallets, jointly outlining a scenario of regulatory and market revival.