SEC and CFTC End Era of Crypto Uncertainty

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) provided greater clarity about their respective rules around crypto assets.

The SEC issued an interpretation that clarifies how federal securities laws apply to certain crypto assets and transactions involving crypto assets, it said in a Tuesday (March 17) press release. The regulator added that this move complements congressional efforts to codify a comprehensive market structure framework.

The SEC’s interpretation provides a coherent token taxonomy for digital commodities, digital collectibles, digital tools, stablecoins and digital securities; addresses how a crypto asset that is not a security may become subject to, or stop being subject to, an investment contract; and clarifies the application of federal securities laws to airdrops, protocol mining, protocol staking and the wrapping of a nonsecurity crypto asset, according to the release.

“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,” SEC Chairman Paul S. Atkins said in the release. “This is what regulatory agencies are supposed to do: draw clear lines in clear terms.”

The CFTC provided guidance Tuesday that said it will administer the Commodity Exchange Act (CEA) consistent with the SEC’s interpretation, per the release.

The CFTC’s guidance says certain nonsecurity crypto assets could fall under the CEA’s definition of “commodity,” the regulator said in its own press release.

“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,” CFTC Chairman Michael S. Selig said in the release. “Today’s joint agency action reflects a shared commitment to developing workable, harmonized regulations for the new frontier of finance.”

It was reported March 12 that the SEC and the CFTC took a significant step toward coordinated oversight of digital assets and other emerging financial technologies by announcing a memorandum of understanding designed to harmonize how the two agencies regulate overlapping areas of financial markets, including the crypto sector.

The agreement reflects a long-awaited effort to reduce regulatory conflicts between the two agencies, whose jurisdictions frequently intersect, and who have both claimed authority over digital assets and crypto trading platforms that fell into gray areas.