SEC Chairman: Most Virtual Assets Are Not Securities (Comprehensive)

Biden Administration's Policy Reversed: "Most Virtual Assets Are Not Securities"
"Virtual Asset Companies That Left the U.S. Will Be Brought Back"
SEC Names 'Super App' as a Key Priority

On July 31 (local time), Paul Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC), stated, "Most virtual assets are not securities."

Paul Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC). Photo by AFP Yonhap News

Chairman Atkins made this statement while announcing 'Project Crypto', an initiative to advance new cryptocurrency policies, at the America First Policy Institute, a pro-Trump think tank in Washington, D.C. on the same day.

Regarding 'Project Crypto', Chairman Atkins explained, "It is a plan to modernize securities regulations so that the U.S. financial market can move on-chain," and added, "Contrary to what the SEC has previously stated, most virtual assets are not securities. We will establish guidelines for determining whether a virtual asset qualifies as a security and will draft proposals for broad disclosure and exemption regulations." 'On-chain' refers to a system in which all financial transaction records are processed in real time on the blockchain.

With this, the SEC has completely reversed the policy of the previous Joe Biden administration, which had regulated virtual assets under the assertion that "the majority of virtual assets are securities." Chairman Atkins pointed out that confusion over the application of the 'Howey Test', the standard used by the SEC to determine whether something is a security, "has led innovators to consider all virtual assets as securities." He emphasized, "We will ensure that outdated rules do not hinder American entrepreneurship." However, he did not specify which types of coins are not considered securities.

The question of whether virtual assets qualify as securities has been one of the major controversies in the market. Former SEC Chairman Gary Gensler regarded virtual assets as securities and insisted that securities laws should apply, prompting the industry to file lawsuits. In connection with this, litigation between the SEC and XRP (Ripple), the third-largest cryptocurrency by market capitalization, is still ongoing.

Previously, in July 2023, the U.S. District Court for the Southern District of New York ruled that "XRP is subject to securities laws only when sold to institutional investors, and is not a security when sold to the general public." However, due to the SEC's appeal, the case moved to a higher court, and it is now reported that, under President Donald Trump's pro-cryptocurrency policies, both sides are close to reaching a settlement by withdrawing their appeals.

Chairman Atkins stated, "Although Congress is still working to establish a legal definition for virtual assets, the SEC will provide clear guidance so that market participants can determine for themselves whether an asset qualifies as a security or an investment contract." He further emphasized his commitment to realizing the 'golden age of digital assets' in the United States, as President Trump has advocated, and said, "We will bring back to the U.S. those virtual asset companies that left due to regulatory pressure from the previous administration."

In addition, Chairman Atkins mentioned the recent launch of the 'super application (app)' by the cryptocurrency exchange Coinbase, declaring it a key priority during his term. He said, "Such super apps should be allowed to grow under an efficient licensing system, and overlapping regulations from multiple agencies should not be applied." A super app is an application that integrates various services and functions into a single mobile app, similar to WeChat and Alipay in China, and has long been a demand of the industry.

Regarding Chairman Atkins' remarks, Reuters reported, "This is seen as a major victory for the digital asset industry, which has long called for tailored regulation," and added, "Chairman Atkins' proposals could bring broad changes to U.S. securities regulation and serve as a turning point for virtual assets to become more closely connected with traditional finance."