The U.S. Securities and Exchange Commission (SEC) has issued an interpretation clarifying how federal securities laws apply to certain crypto assets and the transactions involving them. According to the agency, this represents an important step in its efforts to provide greater clarity on how it treats crypto assets and complements Congress’s efforts to codify a comprehensive market structure framework into law. In addition, the Commodity Futures Trading Commission (CFTC) joined this interpretation to indicate that it and its staff will administer the Commodity Exchange Act in a manner consistent with the Commission’s interpretation.
“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 regulators are supposed to do: draw clear lines in clear terms,” said Paul S. Atkins, Chair of the SEC.
Specifically, the Commission’s new interpretation provides a coherent taxonomy of tokens for digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. It also addresses how a “crypto asset not considered a security”, that is, a crypto asset that is not itself a security, may become subject to an investment contract, and how it may cease to be so.
Finally, it clarifies the application of federal securities laws to airdrops, protocol mining, protocol staking, and the bundling of a crypto asset not considered a security.
As a result, market participants, from innovators and issuers to retail investors, should review this interpretation to better understand the regulatory jurisdiction between the SEC and the CFTC.
Key takeaways
According to Atkins, “it also recognizes what the previous administration refused to admit: that most crypto assets are not, in 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 while Congress works to advance bipartisan legislation on market structure, which I hope to implement alongside Chairman Selig in the near future.”
For his part, Michael S. Selig, Chair of the CFTC, stated: “For too long, American creators, innovators, and entrepreneurs have waited for clear guidance on the status of crypto assets under federal securities and commodities laws. With this interpretation, that wait is over. Chairman Atkins and I are committed to fostering a regulatory environment that allows the crypto industry to thrive in the United States with clear and rational rules of the game. This joint action by both agencies reflects a shared commitment to developing workable and harmonized regulations for this new frontier of finance.”
