On March 17, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly released a document titled "Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets." This 68-page regulatory document systematically answers core questions regarding the classification of crypto assets, their security characterization, and the compliance of typical transactions. It marks a shift in U.S. crypto asset regulation from a long-standing "regulation by enforcement" model to a more rule-based and transparent regulatory framework. This article by Beosin will interpret the core content of the report to help industry professionals gain a deeper understanding of the latest U.S. regulatory policies and compliance guidelines.
I. Regulatory Background
For a long time, the regulation of crypto assets in the United States has lacked clear rules. The SEC has mainly defined the security attributes of crypto assets through enforcement actions rather than a dedicated regulatory framework, resulting in extremely high compliance uncertainty for participants in the crypto market. To change this situation, the SEC established the Crypto Task Force in 2025 and launched "Project Crypto," aiming to cooperate with the CFTC to unify federal regulatory standards and provide clear legal boundaries for crypto assets.
The core objective of this document is to provide a clear set of classification standards and legal interpretations for the crypto market. The document explicitly classifies crypto assets, delineates the boundaries between securities and non-securities, defines common on-chain activities (POW mining, POS staking, liquidity staking, token packaging, and airdrops), and states that the core principle of regulation should be "economic substance" rather than the name or form of the asset.
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II. Five Categories of Crypto Assets
The document categorizes all crypto assets into five classes, each subject to different regulatory rules, completely changing the previous vague qualitative model.
1. Digital Commodities
Digital goods are not securities in themselves. Their value comes from the programmatic operation of decentralized systems and market supply and demand, rather than from the administrative efforts of others.
● Core Feature: Intrinsically related to functional encryption systems
● Case Study: The document explicitly lists assets that fall under the category of digital goods, including: Bitcoin (BTC), Ether (ETH), Solana (SOL), XRP (XRP), Cardano (ADA), Avalanche (AVAX), Dogecoin (DOGE), Polkadot (DOT), etc.
● Regulatory Authority: CFTC
● Compliance Requirements: Goods must meet the definition specified in the Commodity Exchange Act and must comply with the Commodity Exchange Act.
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2. Digital Collectibles
This includes NFTs and memecoins. Because their value primarily derives from artistic, entertainment, or social significance and they do not possess the economic characteristics of securities, they are not considered securities.
● Key characteristics: Designed for collection or use, representing rights to artworks, game items, etc., with no corporate revenue ties.
● Case Study: The document explicitly lists CryptoPunks, Chromie Squiggles, FanTokens, and Memecoin.
● Regulatory jurisdiction: No specific regulatory body.
The original offering does not require securities registration, but if it involves the fragmentation of digital collectibles, it may constitute securities and be subject to SEC regulation.
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3. Digital Tools
It refers to an asset used to obtain services or functions in a specific application, and is not a security in itself.
● Core characteristics: Certificate-type assets with practical functions, such as memberships, tickets, and domain names; their value stems from their functionality.
● Case Studies: Ethereum Name Service (ENS), CoinDesk conference NFT tickets
● Regulatory jurisdiction: No specific regulatory body.
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4. Stablecoins
Under the GENIUS Act, regulated payment stablecoins that meet certain conditions are not considered securities. The issuance and redemption of such stablecoins do not require registration with the SEC. However, it's important to note that payment stablecoins must comply with the GENIUS Act requirements, while non-payment stablecoins must be assessed on an economic substance basis to determine whether they constitute securities.
5. Digital Securities
"Tokenized securities" are the digital representation of traditional securities and are legally classified as securities.
● Core Definition: Tokenized financial instruments possessing the core characteristics of securities
● Case Study: Tokenized Stocks
● Regulatory Authority: SEC
● Compliance Requirements: Must comply with the registration requirements of the Securities Act of 1933, and applicable information disclosure and investor protection rules.
III. Key Explanation of "Investment Contracts": Separation of Crypto Assets from Investment Contracts
(1) Detailed application of the Howey test
This document does not replace the classic Howey test, but rather provides more detailed guidelines for the characteristics of crypto assets: a crypto asset transaction must simultaneously meet three elements to constitute an "investment contract" (security):
● Investment elements: Capital invested by investors or valuable consideration (including crypto assets)
● Joint ventures: Investors' returns are highly correlated with the operating activities of the issuer or a third party.
● Earnings Expectations: Investors reasonably expect returns primarily to derive from the issuer's "essential managerial efforts," rather than from their own labor or changes in market supply and demand.
The document specifically clarifies the criteria for judging "necessary management efforts": including but not limited to key activities that affect the success or failure of a project, such as project development, technology upgrades, and business promotion; while purely administrative and transactional work (such as node maintenance and transaction settlement) does not constitute this element.
(2) Risks and mitigation of "securitization" of non-securities crypto assets
This is the most innovative interpretation of the document: non-security assets (such as digital goods) can be sold as part of an investment contract, but the assets themselves do not become securities in the process.
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1. Securitization Triggering Conditions
When an issuer explicitly promises through white papers, social media, or other channels that it will make necessary management efforts to enhance asset value and thereby induces investors to purchase, non-security crypto assets will be considered as a vehicle for an "investment contract" and will be subject to securities regulatory requirements.
2. Three scenarios for desecuritization
● Fulfillment of commitments: The issuer completes the necessary management efforts promised (such as decentralized deployment of the project and completion of feature development) and makes public disclosure;
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● Time Expiration: Long-term failure to fulfill commitments and lack of a clear progress plan leads to the disappearance of investors' reasonable expectations;
● Unable to fulfill: The issuer publicly and widely announces the waiver of the necessary management efforts to fulfill the commitment, and the market is fully aware of this.
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This rule provides a clear compliance path for projects in the crypto industry, allowing a project to start from the "securitization" financing stage and, through hard work, transform the crypto assets it issues from security-like to non-security-like.
IV. Qualitative Analysis of Common Activities in the Crypto Industry
The policy clarifies the compliance boundaries for common activities in the cryptocurrency market, such as mining, staking, token wrapping, and airdrops.
1. Proof-of-Work (PoW) mining
● Activity Description: In a PoW network, miners provide computing power to maintain the network and receive rewards.
● Regulatory determination: It does not involve the issuance or sale of securities.
● Analysis: Miners earn rewards through their own "administrative or transactional" work (providing computing power), not by passively profiting from "necessary managerial efforts" of others. Even when joining a mining pool, the pool operator's role is transactional and does not constitute "necessary managerial effort."
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2. Agreement Pledge
● Activity Description: In a PoS network, users stake tokens to run validator nodes or delegate to validator nodes and earn staking rewards.
● Regulatory determination: It does not involve the issuance or sale of securities.
● Analysis: Whether it's self-pledged, entrusted to a third party, or managed through a centralized institution, the essence is that users provide "pledge services" to maintain network security and receive service fees, rather than investing in a common enterprise. The document specifically points out that providing additional services such as forfeiture insurance and early release of pledges does not affect its non-securities nature.
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3. Staking Certificate Tokens
● Activity Description: Users deposit tokens on liquidity staking platforms such as Lido and receive certificates (such as stETH) representing their staked assets and returns.
● Regulatory Determination: As long as the underlying asset is a non-security digital commodity, and the certificate only represents the ownership and right to income of the underlying asset, then the issuance and trading of the certificate itself do not involve securities trading. If the pledged certificate token is a certificate against digital securities or non-security crypto assets bound by an investment contract, then it needs to be regulated by the SEC.
● Analysis: It is viewed as a "receipt" whose value comes from the underlying assets rather than the issuer's management efforts.
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4. Token Packaging
● Activity Description: Generate tokens (such as WBTC) representing ownership of an on-chain asset (such as BTC) on another chain via a cross-chain bridge or custodian.
● Regulatory Determination: Similar to the determination of liquidity staking, as long as the underlying asset is a non-security digital commodity that is redeemable and does not come with any guarantee of returns, then the issuance and trading of the packaged token does not involve securities trading. However, if the underlying asset is a digital security or a certificate of a non-security crypto asset bound by an investment contract, then it is subject to SEC regulation.
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5. Airdrop
● Activity Description: A method by which a crypto asset issuer issues its crypto assets to the market on the condition of free or symbolic consideration.
● Regulatory determination: If an issuer airdrops non-security crypto assets to a recipient and the recipient does not pay the issuer currency, provide goods or services, or offer other consideration in exchange for such airdropped assets, then such non-security crypto assets do not constitute an investment contract.
● Analysis: Airdrops do not meet the first element of the Howey Test, "investment," even when airdropped to active users (as a reward for past behavior). The key point is that the recipient did not provide any consideration to the issuer in exchange for the non-security crypto assets airdropped, meaning the issuer is not required to register the transaction with the SEC under the Securities Act of 1933. However, this determination does not apply to airdrops of digital securities.
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It is important to note the policy's definition of the "gray area": if a mining pool promises fixed returns, provides principal protection for staking services, or requires recipients to complete specific promotional tasks for airdrops, these may all exceed compliance boundaries and be considered as securities issuance.
Conclusion
The release of this document marks a crucial shift in US crypto-asset regulation, moving from "regulation through enforcement" to "providing clear rules." Its core logic is to create space for innovation in the crypto market by clarifying classification standards and compliance boundaries. This US regulatory interpretation and guidance emphasizes "functional regulation" and "substantive regulation," stressing that regardless of the technological form, the applicable regulatory rules apply to whatever economic function it possesses. For market participants, this policy provides a clear compliance path, thoroughly clarifying the long-standing debate over "assets versus securities." In the future, with the full implementation of the GENIUS Act and the subsequent release of supplementary rules, the US crypto-asset regulatory framework will be further improved to achieve compliant operation of the crypto industry.
