SEC, CFTC Clarify Crypto Security Definitions

The U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have jointly issued interpretive guidance to clarify how they will determine whether a cryptocurrency qualifies as a security. This guidance aims to reduce ambiguity for the industry by outlining specific categories of crypto assets, including digital securities which are tokenized assets meeting traditional security definitions like the Howey Test. Most crypto assets are expected to fall outside the SEC's purview unless issuers engage in activities that align with securities regulations, such as fractionalizing tokens or marketing them with promises of profit derived from managerial efforts.