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SEC Framework Aims to Settle Ongoing Regulatory Disputes in Crypto

SEC Framework Aims to Settle Ongoing Regulatory Disputes in Crypto

Bitget-RWA2025/11/13 05:58
By:Bitget-RWA

- SEC proposes a token taxonomy framework using the Howey Test to classify crypto assets into four categories, balancing regulation and innovation. - The framework allows tokens to transition from securities to non-securities as projects decentralize, addressing evolving blockchain dynamics. - It enables CFTC/state-regulated trading for certain tokens while legislative efforts aim to shift major crypto oversight to the CFTC. - Implementation faces challenges including CFTC capacity limits and pending Senat

The U.S. Securities and Exchange Commission (SEC) is moving forward with a new "token taxonomy" initiative designed to clarify how digital assets are categorized under securities regulations, basing its framework on the 1946 Howey Test for investment contracts. SEC Chairman Paul Atkins introduced the proposal at the Federal Reserve Bank of Philadelphia's Fintech Conference, highlighting that the taxonomy would sort digital assets into four main types: decentralized digital commodities, digital collectibles such as artwork or gaming items, digital utilities like memberships or event tickets, and tokenized securities that represent ownership stakes, as detailed in a

. The goal of this framework is to provide clear regulatory guidance while supporting innovation, helping both developers and investors identify which tokens are subject to securities laws, according to the .

SEC Framework Aims to Settle Ongoing Regulatory Disputes in Crypto image 0
A significant feature of this taxonomy is its acknowledgment that tokens initially issued as securities may lose that classification as projects become more decentralized. Atkins explained that investment contracts—tokens linked to specific promises or efforts—can eventually "run their course" once the issuer's involvement ends, allowing these tokens to be traded as non-securities, as described in the . This flexible approach responds to industry concerns about inflexible regulatory definitions, especially for blockchain initiatives that change over time, according to . The SEC also intends to permit certain tokens tied to investments to be traded on platforms overseen by the Commodity Futures Trading Commission (CFTC) or state regulators, broadening market participation, as mentioned in the .

This initiative is part of a larger legislative push to resolve the ongoing jurisdictional dispute between the SEC and CFTC over cryptocurrency regulation. Two Senate proposals—the Agriculture Committee's Digital Asset Market Clarity Act and the Banking Committee's Responsible Financial Innovation Act—suggest transferring oversight of leading cryptocurrencies like

and to the CFTC as commodities, as reported by and . These legislative drafts would impose tighter capital, custody, and disclosure requirements on exchanges, while the SEC would continue to regulate tokenized securities and "ancillary assets" that blur the line between securities and commodities, as outlined in . However, there are still obstacles, such as the CFTC's limited workforce and resources to enforce new responsibilities, as highlighted in the article.

Atkins stressed that the new taxonomy does not indicate a relaxation of enforcement. He warned that fraudulent activities and market manipulation will continue to be met with strict penalties, reaffirming the SEC’s dedication to protecting investors, as stated in the

. The SEC is also collaborating with Congress to support legislative initiatives rather than replace them, as demonstrated by recent cooperation on market structure legislation, according to the . Meanwhile, the Senate Agriculture Committee’s draft, which treats crypto as commodities, has received bipartisan backing but still faces challenges in gathering enough Democratic support to overcome a filibuster, as the notes.

The rollout of this framework depends on upcoming Senate decisions and CFTC leadership. Mike Selig, nominated by Trump and currently heading the SEC’s Crypto Task Force, is scheduled for a Senate confirmation hearing on November 19, 2025, as lawmakers finalize the legislation, according to a

report. If Selig is confirmed, he would lead the CFTC during a pivotal time of regulatory transition, which could significantly alter the U.S. crypto landscape by 2026, as the notes.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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