SEC Framework Aims to Settle Ongoing Regulatory Disputes in Crypto
- 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
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
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 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
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