The PWG Report on Digital Asset Markets
Two weeks ago, the President’s Working Group on Digital Asset Markets (PWG) released its report outlining recommendations for federal agencies to establish a regulatory framework for digital assets. The report focuses on ensuring that U.S. markets remain competitive while addressing investor protection, market integrity, and financial stability concerns.
Key recommendations include:
Establishing clear rules for crypto asset distributions, custody, and trading.
Encouraging coordination among the SEC, CFTC, Treasury, and banking regulators.
Using rulemaking, guidance, and exemptions to provide clarity while legislation develops.
SEC Response: Launch of Project Crypto
Following the PWG report, SEC Chairman Paul Atkins announced the launch of Project Crypto, a regulatory initiative aimed at implementing the report’s recommendations.
Project Crypto will:
Be led by the SEC’s policy divisions in collaboration with the Crypto Task Force, chaired by Commissioner Hester Peirce.
Focus on drafting new rules for token issuance, custody, and trading platforms.
Consider use of interpretive, exemptive, and no-action relief in the near term to address outdated regulations while formal rulemaking progresses.
Chairman Atkins’ Remarks
In remarks delivered alongside the initiative, Chairman Atkins stated:
“Many of the Commission’s legacy rules and regulations do not make sense in the twenty-first century—let alone for on-chain markets.”
“Despite what the SEC has said in the past, most crypto assets are not securities. But confusion over the application of the Howey test has led some innovators to prophylactically treat all crypto assets as such.”
This indicates a potential shift in the Commission’s approach to categorizing digital assets and a recognition that Howey alone may not provide sufficient clarity for the industry.
Next Steps and Industry Impact
Rulemaking: The SEC staff has been directed to prepare proposals for public notice and comment.
Interim Relief: Until rules are finalized, the SEC may rely on exemptive and interpretive authorities to provide near-term clarity.
Legislation: While the PWG report and Project Crypto provide momentum, Congressional action will likely be necessary to establish a durable regulatory framework.
Market Implications: If implemented, the SEC’s initiatives could reduce regulatory uncertainty, attract crypto businesses back to the U.S., and provide a clearer compliance roadmap for token issuers, custodians, and trading venues.
Conclusion
The PWG report and the SEC’s announcement of Project Crypto mark the most significant federal policy movement in digital assets to date. While the statements carry a strong political tone, the practical question for industry participants is whether these initiatives translate into binding rules and legislation. Until that occurs, regulatory uncertainty remains, but the trajectory toward a more structured framework is clearer than it has been in years.
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