The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have released new guidelines related to the classification of cryptocurrencies under American law.
According to a 68-page document, the regulators have introduced a new system that divides crypto assets into five different categories.
Under the new framework, popular cryptocurrencies such as Bitcoin, Ethereum, XRP, Solana and Dogecoin are described as digital commodities. This means they are generally not treated as securities.
Other tokens like Cardano, Avalanche, Litecoin, Polkadot and Chainlink are also included in this group.
The regulators have also created other categories, namely, digital collectibles, digital tools, stablecoins and digital securities. Digital collectibles may include NFTs, meme coins or tokens connected to artwork, music and gaming items. Digital tools are tokens that provide practical functions like access, membership or identity verification within a platform.
However, the SEC has clarified that a crypto asset is not automatically a security, but it can become one depending on how it is sold. If investors buy a token expecting profits from the efforts of others, it could still fall under securities law.
To decide whether an investment qualifies as a security, regulators will continue using the Howey Test, a legal method being used for decades.
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