A Framework for Crypto Asset Regulation

This past March, traditional institutions and cryptocurrency firms alike welcomed long‑awaited guidance on crypto asset regulation from the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC). In this client update, we summarize the guidance - issued as an official interpretive release - and offer perspective on what this may mean for crypto assets. The full text of the release is available here.

Takeaways

• A Framework. The release establishes a “taxonomy” for crypto assets. As outlined below, a framework now exists for determining when a crypto asset is a security, a commodity, a stablecoin or merely a collectible or even a “digital tool.”   Importantly, the release also makes clear that a crypto asset that is not structured as a security can still be offered as a security. In other words, even if a crypto asset is inherently a digital commodity, digital tool, or a collectible (generally not securities), it can give rise to a securities transaction if it is offered or marketed in an overly promotive or promissory manner.
• Onshoring Crypto. Over the last several years, and especially during the prior SEC administration, a growing share of crypto development relocated offshore to jurisdictions with clearer digital asset legal and regulatory frameworks. Keeping the crypto asset industry rooted in the United States remains a core priority of the current administration. The release is intended to advance onshoring by providing legal clarity that entrepreneurs and investors need to build and transact with confidence in U.S. markets.
• Still Not Law. The release is not law - meaning a future administration could rescind it, and federal courts are not bound by it. That said, in a rare cross-agency collaboration, the SEC and CFTC worked together on the release and both agencies have committed to administering federal law consistently with it. Because the guidance is from two regulators, it carries greater practical authority and is more likely to endure.
• The Clarity Act. In parallel, the Trump administration is pressing for federal crypto market structure legislation in the form of the Digital Asset Market Clarity Act (Clarity Act). Although the SEC-CFTC release is a significant step forward, the Clarity Act would provide statutory permanence that interpretive guidance alone cannot. SEC Chair Atkins has consistently emphasized that lasting regulatory certainty ultimately requires Congressional action.

Crypto Taxonomy

The release categorizes crypto assets into five categories based on their characteristics, uses, and functions. Whether a particular asset falls into a given category is a facts-and-circumstances analysis — and the release acknowledges that some assets may have hybrid characteristics or fall outside all five categories.

1. Digital Commodities

   Digital commodities are crypto assets that are intrinsically linked to the operation of a functional crypto system and that derive their value from the system and related supply-and-demand dynamics, rather than from the expectation of profits or managerial efforts of others.  Bitcoin is a clear example: it exists solely as part of the Bitcoin blockchain and its value is driven by market supply and demand. Digital commodities fall squarely within the CFTC’s regulatory jurisdiction. By contrast, a crypto asset that depends on a company or core development team for its success is more likely to be analyzed as a security. The release explicitly names sixteen well-known crypto assets as digital commodities, including Bitcoin (BTC), Ether (ETH), Solana (SOL), and XRP.

2. Digital Collectibles

   Digital collectibles are crypto assets primarily designed for consumption, collection, or use. They may represent or provide rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends, among other things. Importantly, digital collectibles can be held for investment purposes but should not be marketed as part of a profit-generating plan or provide any economic properties or rights (e.g., yield). Fractionalized collectibles — where multiple investors hold interests in a single digital asset — may cross into securities territory and require separate analysis.

3. Digital Tools

   A digital tool is a crypto asset that performs a practical function, such as a ticket, credential, title instrument, or identity badge. For example, a digitized concert ticket. The asset’s value derives from its utility, not from any expectation of profit.

4. Stablecoins

   The release treats payment stablecoins as a distinct category and clarifies that stablecoins designed to maintain a stable value relative to fiat currency generally do not constitute securities. This interpretation aligns with the recently enacted Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), which creates a federal licensing framework for stablecoin issuers and expressly excludes qualifying payment stablecoins from the definition of security. Stablecoins that do not meet the GENIUS Act’s criteria remain subject to a case-by-case analysis. 
   
   5. Digital Securities

   If an asset would be a security in its traditional form, it remains a security when placed on a blockchain. Digitizing or “tokenizing” an asset does not change its legal nature. A tokenized share of stock is still a share of stock. And if a crypto asset carries rights typically associated with equity or debt — such as economic distributions, voting rights, or claims on the assets of a business — it is likely a digital security subject to the full scope of the federal securities laws. 

When a Transaction Creates a Security

A security can be created even if the underlying crypto asset is not thought to or intended to be a security. Consider a few common scenarios. A new crypto project offers tokens to early backers as part of an initial fundraising, with promises to build a platform that will generate returns for investors. Or an entrepreneur raises money from investors by pledging to create and market a new collectible, instilling value in the item through active promotion. In each case, even if the crypto asset itself is not a security, the transaction — particularly how it is marketed and what promises are made — can constitute a security under federal law. 

The Road Ahead

The SEC-CFTC release is historic on several fronts: it represents genuine cross-agency collaboration on a topic that has divided regulators for years, and it addresses foundational legal questions that have hung over the industry since Bitcoin’s earliest days. But it leaves meaningful work undone. The release is not binding on federal courts. In enforcement actions and private litigation, courts will continue to apply existing case law and may reach conclusions that differ from the agencies’ interpretive views. Congressional action on digital asset market structure therefore remains a pressing need — and the Clarity Act, if enacted, would provide the statutory foundation that the release cannot.

Meanwhile, federal regulators are not standing still. The day before the release, the SEC and CFTC entered into a Memorandum of Understanding and announced a Joint Harmonization Initiative to coordinate ongoing policy development between the two agencies. Based on Chair Atkins’s public statements, additional rulemaking is expected in the coming months, potentially including a startup exemption, a fundraising exemption, and an investment contract safe harbor for token issuers.

For questions about how these developments may affect your business or investment activities, please contact the authors.