They did it!
The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have just released a landmark document formally classifying crypto assets.
They've actually specified which crypto assets are securities and which aren't—and even named them!
This is something Gensler has consistently refused to do.
(He's focused on completely eliminating cryptocurrencies through legal means.)
This rule document grants cryptocurrencies many benefits similar to the Clarity Act—it takes us out of the gray market—it provides direction for every asset.
It's almost as if the Clarity Act had been approved by regulators.
(Of course, a real Clarity Act would enshrine all of this in law, making it irreversible, and even if we encounter another Gensler, we still hope it continues to exist.)
The rule classifies crypto assets into five categories:
1) Digital Goods—Assets pegged to fully functional decentralized crypto systems (e.g., BTC, ETH, SOL, XRP, ADA, DOGE). 1) **Not a security.** (Yes, they list these categories on page 14.)
2) **Digital collectibles—NFTs, emoji coins, art tokens, in-game items.** Not a security (fragmented collectibles may be an exception).
3) **Digital tools—membership tokens, vouchers, domain names (e.g., ENS).** Not a security.
4) **Stablecoins—Payment stablecoins issued under the GENIUS Act are not securities. Other stablecoins are on a case-by-case basis.
5) **Digital securities—Tokenized versions of traditional securities. For example, tokenized stocks. Always a security.**
Fantastic! This is explained so clearly, I can hardly believe this is what regulators say.
Ethereum developers and cryptocurrency exchanges will no longer face enforcement threats.
What about the Howe Test?
This makes more sense! If an issuer makes specific governance commitments, and buyers expect to profit from them, then the issuance is a security until those commitments are fulfilled. After fulfillment, it becomes a commodity. The asset itself is never a security; the trading surrounding it is. (For example, XRP was a security before its issuance, but became a commodity afterward.)
What about things like staking and mining?
Mining? Not a security transaction.
Staking? Also not a security transaction. This includes custody and liquidity staking, even LST!
What about Bitcoin packaging? This is not a security transaction.
Airdrops? Not securities. There are no longer geographical restrictions to protect Americans from free airdrops.
Remember, this is a joint document from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), they are cooperating on this, there are no internal disputes, and it is binding on both parties.
The SEC regulates $80-100 trillion in assets.
The CFTC regulates $5-10 trillion in assets.
The world's two largest capital markets are showing us that crypto assets will exist for a long time and will be as popular as traditional assets.
Every country will follow suit.
This is the biggest step toward legalization I've seen in the cryptocurrency space. It might even be more significant than the Genius Act because it covers all crypto assets.
Well done, @MichaelSelig and @SECPaulSAtkins.
Special praise goes to the tireless @HesterPeirce. Her contributions have been consistent throughout.