Cryptos Defined: CFTC and SEC clarify crypto assets and services
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The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have jointly issued an interpretation clarifying how federal securities laws apply to certain crypto assets.
While the Trump administration signaled a shift toward a more crypto-friendly regulatory stance, the landscape has remained clouded by uncertainty around how these rules are interpreted and enforced in practice.
Landmark cases such as XRP, where charges were initially brought and later partially dropped, have created sharp swings in token prices and reinforced perceptions of inconsistency.
This ambiguity has, in turn, contributed to continued hesitation among institutions who remain cautious about entering the space both as investors and as issuers of crypto-related products.
Regulators Align
This joint crypto interpretation release landed just a week after the SEC and CFTC formalized closer coordination through a Memorandum of Understanding, aimed at tightening oversight across both crypto and traditional financial markets.
As digital assets increasingly sit across securities and derivatives regimes, the agreement sets out a clearer framework for how the two regulators will work together.
The aim is to:
align definitions
coordinate rulemaking
reduce inconsistencies in how crypto is classified and supervised.
It also tackles one of the biggest friction points in crypto regulation: overlapping oversight.
Instead of both agencies supervising the same activity, the framework assigns responsibility based on the function and risk profile of each activity.
At the same time, the SEC and CFTC will expand data-sharing and jointly monitor firms operating across both jurisdictions, with more coordinated surveillance and risk assessment to better capture cross-market exposures and systemic links within crypto markets.
The agreement still preserves each regulator’s statutory authority, but enables more practical coordination in supervision and enforcement.
Alongside this, “Project Crypto” has been introduced as a joint initiative to align federal oversight of digital assets and clarify how different asset types are treated.
The CFTC’s guidance is also being developed in parallel with the SEC’s approach, reinforcing consistency across the regulators.
Defined: 5 Crypto Assets
In particular, the SEC and CFTC have moved toward a more structured approach by classifying crypto assets into five categories based on their characteristics, uses, and functions:
digital commodities
digital collectibles
digital tools
stablecoins
digital securities.
The interpretation seeks to define which asset types fall under the SEC’s jurisdiction, meaning they will be classified as a security. Importantly, for these tokens not to be considered securities, they must not grant rights to profits or income.
Breakdown
“Digital commodities” are crypto assets that derive their value from the operation of a decentralised crypto system rather than from managerial efforts and are generally not securities, although classification depends on facts and circumstances. Digital commodities are integral to the functioning of a crypto system and may be required for participation in network activities such as validation and governance. Examples of digital commodities include Bitcoin (BTC), Ether (ETH), Solana (SOL), and Cardano (ADA). While not automatically under CFTC jurisdiction (despite their name) certain non-security crypto assets may meet the definition of a commodity under the Commodity Exchange Act.
“Digital collectibles” are crypto assets primarily valued for cultural, artistic, or social significance and are generally not securities, but may be securities in specific cases depending on how they are structured or marketed. Their value is driven by factors such as scarcity and popularity, with examples including artistic NFTs and meme coins such as Pepe (PEPE) and Dogwifhat (WIF).
“Digital tools” are crypto assets that perform practical functions such as membership access, credentials, or tickets and are generally not securities, provided they are used for utility rather than investment purposes. Digital tools are often non-transferable or “soul-bound” and derive value from their functional utility. Examples of digital tools include Ethereum Name Service (ENS) domain tokens and tokenised event tickets such as NFT-based conference passes.
"Stablecoins" such as USD Coin (USDC), issued by permitted issuers are excluded from the definition of a security by statute. Other stablecoins may or may not be securities depending on their specific characteristics and circumstances. Their nature of pegging an underlying crypto or non-crypto asset creates a close overlap to the definition of digital securities and may or may not be securities depending on their structure, issuer, and rights attached.
"Digital securities" such as tokenised shares and blockchain-based representations of traditional equities or bonds are securities and remain securities regardless of whether they are issued Crypto services provide an even murkier grey area, with each needing to be independently distinguished to determine whether they fall under the SEC’s jurisdiction. In practice, these categories are not treated as distinct legal classes; rather, they serve as analytical guidance as to whether a service constitutes an “investment contract” or not.
Defined: 5 Crypto Services
The SEC has also highlighted five services in particular:
"Protocol Mining" refers specifically to proof-of-work (PoW) networks, where participants validate transactions and secure the network by solving cryptographic puzzles e.g. Bitcoin (BTC) and Monero (XMR). In return, miners receive newly generated digital commodities as rewards under the rules of the network protocol. This activity is not considered a security because it is classified as administrative or ministerial in nature, with rewards functioning as compensation for computational services rather than profits derived from the managerial efforts of others. Proof-of-stake (PoS) systems are not included within Protocol Mining and are instead treated separately under "Protocol Staking".
"Protocol Staking" refers to participation in proof-of-stake networks, where users lock tokens to validate transactions and earn rewards. e.g. Ethereum (ETH) staking (post-merge) and Solana (SOL) staking. It is not considered a security as the activity is treated as administrative or ministerial, with rewards tied to protocol rules rather than discretionary managerial efforts.
"Staking Receipt Tokens" represent ownership of deposited digital assets and associated rewards. For example, liquid staking tokens such as Lido’s stETH represent a user’s staked ETH position plus accrued rewards. They are not securities when linked to non-security assets outside an investment contract, but they can be securities if they represent underlying assets that are themselves securities or part of an investment contract.
"Wrapping" involves depositing a crypto asset and receiving a redeemable token on a one-to-one basis e.g. Wrapped Bitcoin (WBTC). It is not considered a security when applied to non-security assets, as the process is administrative and does not involve discretionary management, although wrapped versions of securities remain securities.
"Airdrops" refer to the distribution of tokens for little or no consideration, often used to build user bases and decentralise networks. They are generally not investment contracts, although this may change if accompanied by promotional activity creating an expectation of profit from managerial efforts.