U.S. Regulators Classify Bitcoin, Ether, XRP as Non-Securities

The U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have jointly issued an interpretation classifying bitcoin, ether, and XRP as non-securities in principle. The announcement came during a symposium at Fordham University School of Law in New York, where CFTC Commissioner Michael Selig presented a draft set of rules for crypto trading. The core proposal aims to bring retail crypto trades involving margin, leverage, or lending under a separate federal regulatory framework.

Selig outlined a plan to create a new registration category, dubbed a “crypto market,” specifically for exchanges handling these types of trades. The CFTC also began seeking public comment on a regulatory framework for retail commodity trading involving cryptocurrencies, with a deadline for submissions set at 60 days after publication in the Federal Register. Selig categorized exchanges into three stages, targeting stage 2 businesses that offer retail trading with margin, leverage, and lending.

The framework proposes that exchanges must demonstrate at the time of listing that an asset is not vulnerable to price manipulation. Additionally, the plan includes imposing a proof-of-reserves requirement on exchanges that hold customer assets in omnibus accounts. Selig also clarified crypto delivery standards, stating that transferring cryptocurrency to a user’s external non-custodial wallet within 28 days would be interpreted as meeting the “actual delivery” requirement under the Commodity Exchange Act.

The regulators suggested prioritizing the overhaul of retail trading that combines leverage and lending, rather than imposing a blanket federal registration requirement on all crypto spot trading. By citing major cryptocurrencies such as bitcoin, ether, and XRP as examples in the non-security category, they also set a baseline for future discussions on exchange registration, listing reviews, and custody regulation.