A Detailed Explanation of the SEC Chairman's Classification of Crypto Assets: NFTs, Network Tokens, and Digital Tools Are Not Securities

On November 13, Paul Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC), elaborated on his plan for the crypto “token classification method” to clearly distinguish which crypto assets are considered securities. In the SEC's press release, Paul Atkins mentioned his current views on various types of crypto assets, summarizing that Atkins only emphasizes tokenization products as securities, while non-tokenized NFTs, network tokens (ETH, SOL), and “digital tools” with “real functionality” (such as identification) are not securities. His views are detailed as follows: “Digital commodities” or “network tokens” are not securities. Their value is essentially related to the programmatic operation of a “functionally complete” and “decentralized” encryption system, arising from this, rather than from the expected profits derived from the key management work of others; “digital collectibles” are not securities. These assets are intended for collection and/or use and may represent or confer rights to the digital expression or reference of artworks, music, videos, trading cards, in-game items, or internet memes, characters, current events, or trends to the holder. Buyers of digital collectibles do not expect to profit from the daily management work of others; “digital tools” are not securities. These crypto assets have real functions, such as membership, tickets, vouchers, proof of ownership, or identification badges, and buyers of digital tools do not expect to profit from the daily management work of others. “Tokenized securities” are now and will always be securities. These crypto assets represent ownership of the financial instruments listed in the definition of “securities,” which are maintained on the crypto network. Paul Atkins stated that this list is not exhaustive and will be further refined.