The New Approach
The Securities and Exchange Commission (SEC) has taken a less regulatory stance towards cryptocurrency, in collaboration with the Commodity Futures Trading Commission (CFTC). The SEC announced that most digital assets will not be deemed securities under federal law. This includes stablecoins and major cryptocurrencies such as Bitcoin, Ethereum, and Solana.
The guidance, detailed in this document, aims to promote innovation within the crypto sector, signaling a shift from previous administration policies. During the Biden era, the SEC concentrated on enforcement measures concerning cryptocurrency investments. Former SEC Chair Gary Gensler had insisted that most cryptocurrencies were securities.
The New Classification
The new framework categorizes crypto assets into five distinct groups:
- Digital commodities
- Digital collectibles
- Digital tools
- Stablecoins
- Digital securities, described by SEC Chair Paul Atkins as traditional securities utilizing new technology
Only the last category will face full regulatory scrutiny from the SEC.
“This is positive,” commented Joel Hugentobler, a Cryptocurrency Analyst at Javelin Strategy & Research. “Despite recent advancements and increasing institutional involvement in crypto investments over the past few years, many investors—particularly at the institutional level—prefer clarity on regulatory frameworks.”
Conditions for Classification
The guidance also outlines that certain assets can lose their securities classification under specific conditions. An asset may be considered a security if it is offered as an investment with the expectation of profits from the efforts of others. However, this doesn’t automatically convert non-security crypto assets into securities. According to the guidance, such investment contracts conclude when the issuer either fulfills its stated obligations or fails to do so.
The framework further clarifies the division of regulatory responsibilities between the SEC and CFTC. The SEC will oversee investment contracts and tokenized securities, while the CFTC will regulate digital commodities and crypto-based derivatives.
Despite industry approval, this outcome was anticipated due to the Trump administration’s generally favorable stance on cryptocurrencies.
“It’s been expected that most, if not all, won’t be classified as securities,” stated Hugentobler. “That’s likely why markets aren’t reacting strongly; it’s already priced in. Had the opposite been true, we would see a more significant selloff and face greater challenges.”
