In a long-awaited announcement, the Securities and Exchange Commission has adopted a largely hands-off approach to regulating cryptocurrency. In coordination with the Commodity Futures Trading Commission (CFTC), the SEC declared that most digital assets will not be considered securities under federal law, including stablecoins and major crypto assets like Bitcoin, Ethereum, and Solana.
The SEC said the new guidance is intended to support innovation in the crypto sector, marking a shift from the agencies’ approach under the previous administration. Under the Biden administration, the SEC focused primarily on enforcement in the crypto space. Then-SEC Chair Gary Gensler had maintained that most cryptocurrencies qualified as securities.
The New Taxonomy
The new framework divides crypto assets into five categories:
- Digital commodities
- Digital collectibles
- Digital tools
- Stablecoins
- Digital securities, which SEC chair Paul Atkins defined as traditional securities using new technology
Only the final category will be treated as securities and subject to the SEC’s full regulatory scrutiny.
“This is good news,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Despite the ETFs and the growing participation in crypto investments over the last few years, most investors—especially at the institutional level—do not want to get involved a potential investment that doesn’t have a clear regulatory framework.”
Further Defining a Security
The guidance also allows certain assets to lose their status as regulated securities under specific conditions. A digital asset may be deemed a security when it is offered as an investment with an expectation of profits derived from the efforts of others. However, the existence of an investment contract involving a non-security crypto asset doesn’t, by itself, convert the asset into a security. According to the guidance, such investment contracts conclude when the issuer has either satisfied its stated obligations or failed to meet them.
The framework further clarifies the division of authority between the SEC and the CFTC. The SEC will oversee investment contracts and tokenized securities, while the CFTC will regulate digital commodities and crypto-based derivatives.
While the crypto industry has largely welcomed the guidance, the outcome was widely anticipated given the Trump administration’s generally crypto-friendly stance.
“It’s been expected that most, if not all, won’t be classified as securities,” said Hugentobler. “That’s probably why markets aren’t moving on it, since it’s priced in. Had it been the other way around, we’d see a bigger selloff and have more challenges to deal with.”
