From guessing games to temporary rules: A decade of absurdity in crypto regulation

On March 17, the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) issued a rules manual that the crypto industry has been waiting for since 2013. I feel relieved about it, and I’m working hard to make this happen.

Bitcoin is down 44% from its October peak. Ethereum is around $2,000, less than half of its price from less than seven months ago. The total market capitalization of altcoins has already evaporated by $470 billion since the peak. The Fear and Greed Index hit 11. This isn’t a bad week’s 11 out of 100—it’s 11 out of 100 full points. That means people are no longer arguing about where the bottom is; they’ve started selling the remaining crypto.

And right then, on March 17, the SEC and the CFTC released a document that finally reveals what the tokens you hold actually are. The two sides had previously gone through a decade-long lawsuit, hundreds of enforcement actions, and billions of dollars in legal fees. Some companies even chose to relocate to Singapore rather than keep playing guessing games with Gary Gensler. And in the week when Ethereum’s price broke below $1,900, the answer was finally revealed.

But here’s the thing: even though the token economy itself has been badly shaken, everything underneath it is thriving. The circulating supply of stablecoins has surpassed $316 billion, and the size of on-chain real-world assets (RWA) has reached $26.5 billion—and it’s still growing. That’s why Morgan Stanley is building a crypto trust bank. Meta has dropped its metaverse project, but is bringing stablecoins into WhatsApp. Stripe is processing stablecoin transactions worth $400 billion. Nasdaq is building a tokenized stock trading platform. Crypto is becoming a pillar of global finance, and in most cases, it doesn’t rely on tokens.

Crypto is no longer just a speculative asset class. The regulatory policy rolled out on March 17 was originally designed for first-generation crypto, but it wasn’t put into practice until after the second-generation era had arrived.

But that doesn’t mean it’s meaningless.

SEC Chair Paul Atkins once said, “We are no longer the ‘Commission on Securities and Everything.’” Is that line a little late?

U.S. regulators have, for the first time, provided a unified definition of crypto. There are five categories, and every token falls into one of them. Next, I’ll give you these definitions—read them with the mindset you’ve never heard of these concepts before.

Digital commodities are the main event. A digital commodity is a crypto asset whose value comes from the programmatic functioning of a well-functioning crypto system and the dynamics of supply and demand. Its value does not depend on the management of a central issuing entity. If the network is truly decentralized and functioning properly, with no company propping it up, then the asset is a commodity. This move is governed by the U.S. Commodity Futures Trading Commission (CFTC), not the U.S. Securities and Exchange Commission (SEC).

Sixteen mainstream tokens—including Bitcoin, Ethereum, Solana, XRP, Cardano, Avalanche, Polkadot, Chainlink, Dogecoin, and Shiba Inu—have been officially recognized as digital commodities. Dogecoin and Shiba Inu meet this definition because no promoter or institution is driving the growth of their value. They don’t make promises, don’t have roadmaps, and don’t have teams doing ongoing work that is essential to the token’s value. That’s why they’re treated as commodities rather than securities. The criterion is whether someone is promising that returns will come from the results of their work.

Digital securities refer to tokenized stocks, bonds, and U.S. Treasury securities. In short, these assets are securities before they’re put on a blockchain—and they remain securities after. The U.S. Securities and Exchange Commission (SEC) oversees these assets. That’s it.

Digital collectibles are NFTs tied to specific items or experiences. Digital tools are assets used to access software or services, with no expectation of investment returns. Stablecoins have their own dedicated category under the GENIUS Act framework.

Staking, mining, and airdrops have all been approved. The ruling explicitly states that receiving mining rewards, participating in on-chain staking, or receiving digital commodity airdrops do not constitute securities transactions. It eliminates one of the biggest legal risks that proof-of-stake networks have faced since the Gensler era. Wrapping non-securities tokens has also been approved.

These 16 named tokens are all underlying infrastructure, supported by years of decentralized development behind them. DeFi protocol tokens—for example, JUP, POL, METEOR, and the vast majority of tokens launched in the past two years—are not named and clearly don’t qualify. A well-functioning crypto system with no centralized institution involved in regulatory oversight has a high threshold. Most actively developed protocols can’t meet this standard. The gray area this interpretation should have cleared up remains unclear for the tokens most people actually hold.

Value must come from the programmatic operation of a well-functioning system, not from someone’s promises. This single test can turn a decade’s worth of ambiguity into something that compliance officers can genuinely get started on.

There’s more to it

This announcement does not constitute the formal rulemaking process required under the Administrative Procedure Act, nor is it binding as a regulation with legal or formal effect.

You’d better read that sentence again. The 68-page document we’ve been waiting for is only an interpretive release, not law or regulation. It’s just an institutional position statement issued by the current chairs of the SEC and the CFTC, which they can withdraw at any time.

This interpretation is a formal, binding action by the SEC and the CFTC. However, in the absence of relevant legislation, a future government can modify it. The document itself preserves each institution’s right to further refine or expand its viewpoints. A future SEC chair with a different political stance could overturn the interpretation without needing congressional approval. The next administration wouldn’t even need new laws—only new leadership.

Atkins understands this. On the day he issued it, he made the point and urged Congress to take action to provide more lasting clarity. He viewed this interpretation as a transitional measure while waiting for Congress to take action on comprehensive market-structure legislation. That legislation is the CLARITY Act (Market Structure Transparency Act). At present, the CLARITY Act is under consideration in the Senate.

The CLARITY Act

The House passed the CLARITY Act in July 2025 with 294 votes. The extremely high level of support achieved through bipartisan cooperation signals that both sides have reached genuine consensus.

Then it went to the Senate and stalled.

The key obstacle to passage is stablecoin yields. Banks believe that allowing crypto platforms to pay interest on stablecoin balances would trigger deposit outflows. People would pull money out of their savings accounts and put it into USDC for higher yields. Banking lobbying groups then mobilized. The Senate Banking Committee canceled the scheduled review that was set for January 2026. The bill made no progress over the next two months.

On March 20, Senators Tom Tillis and Angeris Ursobrooks confirmed a principles-based agreement on stablecoin rewards, supported by the White House. The terms are: passive yield on stablecoins is prohibited; activity rewards tied to payments and platform usage remain allowed. Neither side is happy, and a compromise is usually produced this way.

But the yield agreement is only one of five items that need to be completed before the CLARITY Act can take effect. The timing of the other four legislative steps falls right in the busiest period of this year.

• Senate Banking Committee review; and full Senate vote (requires 60 votes)

• Coordination with the Agriculture Committee

• Coordination with the House version

• Presidential signature

The Banking Committee’s review schedule is planned for late April, after the Easter recess. Senator Bernie Moreno warned that if the bill isn’t submitted for a full Senate vote before May, digital-asset legislation may not make progress for the next few years.

In addition, the Iran war is also consuming a large amount of Senate discussion time. And there is also Trump’s stated hope to pass the voter identity bill first. The provisions on decentralized finance (DeFi) remain unresolved, and Senate Democrats are concerned about illegal-finance risks. The ethics provisions also have not been finalized—especially whether senior government officials should be banned from profiting from crypto assets, which is clearly politically sensitive given the crypto held by this administration. Senate Republicans are currently debating adding a bill-relaxing clause for community banks as a political bargaining chip, which would trigger an entirely new round of negotiations.

Recently, the U.S. House Financial Services Committee held a hearing titled “The Future of Tokenization and Securities: Modernizing Capital Markets.” Witnesses included Kenneth Bentsen from the Securities Industry and Financial Markets Association (SIFMA), Summer Mersinger from the Blockchain Association, Christian Sabella from the Depository Trust & Clearing Corporation (DTCC), and John Zecca from Nasdaq. Nasdaq and the New York Stock Exchange are both building tokenized stock trading platforms. The DTCC handles current settlement. If the DTCC recognizes the efficiency of blockchains, then this debate is effectively over.

So the building of infrastructure is based on a rules manual that, two years from now, may not even exist. That’s the predicament the industry is facing right now. Each company is making decisions worth billions of dollars to build custody systems, tokenized platforms, and staking infrastructure—all based on a persuasive interpretive document that has no legal force.

What’s eternal and what isn’t

For readers holding the 16 tokens mentioned above (such as ETH, SOL, and XRP), because of the statements by the two regulators, these tokens have now been formally recognized under U.S. law as digital commodities. As long as these two officials—or their successors—continue to maintain this recognition, the classification will remain valid.

If the CLARITY Act is passed, it becomes law. Any future chair would not be able to overturn it without congressional approval. The listed assets will be permanently defined, and the classification criteria will be binding.

If it still hasn’t passed by May, then the current classification system will have to depend only on the opinion of a single government agency. For now, the 16 named assets are temporarily safe, but not all assets have been named. Most decentralized finance (DeFi), most new tokens, and any asset that is permissionless and has no clearly identifiable issuer remain in a gray area—and this issue was not clearly resolved in the earlier interpretation.

The most anticipated single line reads like a draft written in pencil.

Someone needs to pick up a pen to make this real and official. Everything depends on what the Senate does in the next six weeks. Will these rules last long enough to make all of this matter?