The U.S. Securities and Exchange Commission has introduced new guidance to clarify the classification of crypto assets under federal securities laws. The framework groups assets by function and acknowledges that past reliance on the Howey test and enforcement actions may have slowed industry innovation. This move aims to provide long-sought regulatory clarity for the crypto market.
The U.S. Securities and Exchange Commission has introduced clearer guidance on how crypto assets are treated under federal law. This new document explains how existing securities laws apply to different types of digital assets.
The guidance aims to bring clarity after years of uncertainty and criticism about regulatory handling of the crypto market. It marks a shift from an approach that may have slowed innovation through enforcement and reliance on the Howey test. The agency has now grouped crypto assets into categories based on their function and use.
For over a decade, the agency used the Howey test to decide if a crypto asset was a security. It did not create specific crypto rules and focused on enforcement actions.
The new interpretation aligns with efforts by lawmakers to build a structured legal framework. Digital assets like bitcoin are excluded as their value derives from the broader market, not a central team’s efforts. Digital collectibles such as NFTs and digital tools like utility tokens are also excluded from securities classification.
Certain stablecoins defined under the GENIUS Act and tokenized assets representing traditional securities fall under different classifications. The SEC explained that an asset’s status depends on how it is offered to buyers. If people invest money into a project with the expectation of profit based on the efforts of a team, it may be considered an investment contract under the Howey test.
This securities status is not necessarily permanent for a crypto asset. The agency clarified it may cease if the creators’ promises are fulfilled or become irrelevant.
