The Securities and Exchange Commission (SEC) has issued another statement pertaining to “crypto assets” and federal securities law. The Commodity Futures Trading Commission joined in the statement. The statement is an interpretation of the definition of “security” as applied to certain types of crypto assets and transactions involving crypto assets.
This is part of the Commission’s efforts to provide regulatory structure to the digital asset ecosystem, which the previous adminstration allowed to fester in compliance purgatory, taking a stance of non-clarification and regulation by enforcement.
Digital assets, or crypto, have fostered a new generation of financial innovation, removing legacy friction while enabling a new era of assets, including digital securities or tokenized assets.
The SEC said today’s statement is a “major step in the Commission’s efforts to provide greater clarity regarding the Commission’s treatment of crypto assets, and complements Congressional endeavors to codify a comprehensive market structure framework into statute.
“After more than a decade of uncertainty, this interpretation will provide market participants with a clear understanding of how the Commission treats crypto assets under federal securities laws. This is what regulatory agencies are supposed to do: draw clear lines in clear terms,” said SEC Chairman Paul S. Atkins. “It also acknowledges what the former administration refused to recognize – that most crypto assets are not themselves securities. And it reflects the reality that investment contracts can come to an end. This effort serves as an important bridge for entrepreneurs and investors as Congress works to advance bipartisan market structure legislation, which I look forward to implementing with Chairman Selig in the near future.”
CFTC Chairman Michael S. Selig said that today’s interpretation means the wait is over for clear guidance on the status of crypto.
“Chairman Atkins and I are committed to fostering a regulatory environment that allows the crypto industry to flourish in the United States with clear and rational rules of the road. Today’s joint agency action reflects a shared commitment to developing workable, harmonized regulations for the new frontier of finance.”
The Commission interpretation:
- Provides a coherent token taxonomy for digital commodities, digital collectibles, digital tools, stablecoins, and digital securities.
- Addresses how a “non-security crypto asset”—which is a crypto asset that itself is not a security—may become subject to, and how it may cease to be subject to, an investment contract.
- Clarifies the application of federal securities laws to airdrops, protocol mining, protocol staking, and the wrapping of a non-security crypto asset.
- Market participants—from innovators and issuers to individual investors—should review this interpretation to better understand the regulatory jurisdictional overlap between the SEC and the CFTC. The interpretation will be published on SEC.gov and in the Federal Register.
The SEC and CFTC have been working diligently to provide bright-line rules for the digital asset industry, which has long sought a path toward compliance. The Trump Administration has set a goal of making the US the crypto capital of the world. Clear rules in the US will help to guide global regulation.
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