US financial regulator issues long-awaited cryptocurrency guidance

The US Securities and Exchange Commission (SEC) on Tuesday issued an interpretation clarifying which types of cryptocurrencies are considered securities and how a “non-security” digital asset could meet certain conditions to become an investment contract.
The SEC’s new interpretation – which the US Commodity Futures Trading Commission also joined – classifies crypto tokens into five categories: digital commodities, digital collectibles, digital tools, stablecoins and digital securities, with the agency specifying that federal securities laws only apply to digital securities.
The SEC also said that a “non-security” crypto asset could become subject to securities laws if an issuer offers it by promoting investment in a common enterprise from which a purchaser could expect to profit.
Under its chair, Paul Atkins, the SEC has laid out sweeping plans to overhaul capital markets regulations to accommodate cryptocurrencies and blockchain-based trading. Atkins has previously said that most cryptocurrencies are not securities, a designation that requires registration with the SEC along with certain disclosures.
The crypto sector has for years argued that existing US regulations are inappropriate for cryptocurrencies and has called for Congress and regulators to write new ones that clarify when a crypto token is a security, commodity or falls into another category, such as stablecoins.
Also on Tuesday, Atkins laid out a safe harbor proposal for cryptocurrency companies that would make it easier to sell tokens and raise money. Atkins said the SEC should consider a “fit-for-purpose startup exemption”, which would allow crypto entrepreneurs to raise a certain amount of money or operate for a certain period of time while exempt from the agency’s rules.
“It’s way past time for us to stop diagnosing the problem and start delivering the solution,” Atkins said in remarks at an event held by the Digital Chamber crypto trade group in Washington DC.
Atkins said he anticipates the SEC will release a proposal on crypto safe harbors for public comment in the coming weeks. He also said the agency’s so-called innovation exemption, which he has previously said will exempt companies from securities laws to allow them to engage in new business models, will be incorporated in the coming proposal.