Paul Atkins, SEC Commissioner "Many ICOs Are Non‑Securities…May Be Excluded from Oversight"

Paul Atkins, a commissioner of the U.S. Securities and Exchange Commission (SEC), said that many virtual asset issuances (ICOs) do not constitute securities, suggesting the regulatory scope could be reorganized. According to Decrypt on the 10th (local time), Atkins said at the Blockchain Association's annual policy summit, "Three types of token-based ICOs are not included in the definition of a security."

Atkins reiterated the "token taxonomy" he released last month, explaining that three types—network tokens, digital collectibles, and digital tools—do not have securities characteristics. He said, "This is precisely the type of issuance we want to encourage," and added, "These ICOs are not securities, so they fall outside SEC jurisdiction."

Atkins said, "ICOs encompass four token types overall, but three of these are under the Commodity Futures Trading Commission (CFTC)'s oversight," and "the SEC only needs to oversee 'tokenized securities' that represent existing securities on-chain." This suggests there may be room to ease the token issuance environment in the U.S., independent of the cryptocurrency market structure bill.

ICOs were a primary means for companies to raise funds during the 2017 crypto market surge, but they were effectively curtailed by a series of lawsuits the SEC filed alleging unregistered securities sales. The remarks are being interpreted as a signal that the regulatory environment could shift. The SEC has already been reviewing ways to allow some ICOs under exemptions or safe harbors through "Project Crypto."

Under the token taxonomy, tokens considered non‑securities include decentralized network-based tokens; digital collectibles reflecting internet memes, characters, and topical subjects; and digital tools with practical functions such as tickets and memberships. This broadens the types that can be distributed to general investors via ICOs compared with before.

The private market is already moving quickly. Coinbase acquired the token issuance platform Echo in October for about $375 million and then launched an ICO issuance platform accessible to U.S. users. The industry is watching the possibility of the ICO market restarting, regardless of the outcome of the Senate market-structure bill.