In one of its first actions after signing a memorandum of understanding with the Commodity Futures Trading Commission (CFTC), the US Securities and Exchange Commission (SEC) said it would clarify how “non-security crypto assets” are treated under federal securities laws.
In a Tuesday notice, the SEC said its interpretation would serve as an “important bridge” while Congress considers market-structure legislation that would codify how regulators oversee digital assets. The commission said the interpretation will provide a “coherent token taxonomy for digital commodities, digital collectibles, digital tools, stablecoins, and digital securities,” address when a “non-security crypto asset” may or may not be considered an investment contract under the SEC’s purview, and clarify federal securities laws on airdrops, protocol mining, protocol staking, and the wrapping of a non-security crypto asset.
“This is what regulatory agencies are supposed to do: draw clear lines in clear terms,” said SEC Chair Paul Atkins. “It also acknowledges what the former administration refused to recognize — that most crypto assets are not themselves securities. And it reflects the reality that investment contracts can come to an end.”
According to Atkins’ prepared remarks for the DC Blockchain Summit, “only one crypto asset class remains subject to the securities laws” under the interpretation: “traditional securities that are tokenized.” The commission urged market participants to review the interpretation to better understand regulatory jurisdiction between the SEC and CFTC on cryptocurrencies.
The SEC notice arrives as Senate negotiators work toward a digital asset market-structure bill expected to give the CFTC greater authority over cryptocurrencies.
Shakeup in SEC enforcement leadership draws criticism
On Monday, the SEC announced that Enforcement Division Director Margaret Ryan resigned from the agency. Principal Deputy Director Sam Waldon was named acting enforcement director.
Former SEC official John Reed Stark criticized the agency’s stated priorities in response to Ryan’s departure, saying critics did not believe the commission’s claims about prioritizing investor protection and focusing on holding individuals accountable. Stark, a 19-year SEC veteran who founded and led the Office of Internet Enforcement, said the agency has “transformed from the cop on Wall Street’s beat into something far more troubling.”
Atkins and SEC Commissioners Mark Uyeda and Hester Peirce — all Republicans — remain the only three commissioners on a panel intended to be bipartisan with five members. As of Tuesday, the White House had not announced plans to nominate additional commissioners to the SEC or to the CFTC, which currently has only one Senate-confirmed member.
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