SEC and CFTC Joint Guidance Brings Clarity to Crypto Asset Classification

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have jointly released new guidance on how to classify digital assets, a move that could expand institutional participation in the crypto market.

According to industry experts, the framework introduces a dynamic test for determining when crypto tokens cease to be securities. This means that a token is not inherently a security but may be tied to an 'investment contract' depending on how it is marketed and the expectations set by issuers.

The guidance also clarifies that such classification is not permanent, and the investment contract can fall away as promised milestones are met or re-emerge if new promises are introduced in connection with new sales of an existing token.

Avery Ching, co-founder and CEO of Aptos Labs, stated that the joint guidance resolves a critical question around secondary market activity, providing much-needed clarity for financial services. He believes that this classification will have significant and immediate downstream effects on what banks, asset managers, and exchanges can offer their clients.

The new framework also introduces a broader taxonomy covering digital commodities, stablecoins, collectibles, tools, and securities, while addressing how activities such as staking, mining, airdrops, and token wrapping are treated under federal law. Regulators aim to bring coherence to the fragmented regulatory landscape and align oversight between the SEC and CFTC.