The two major institutions "reach a handshake," ending the regulatory ambiguity period for U.S. crypto assets

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A formal coordination mechanism between the two major U.S. regulators in the oversight of crypto assets has been officially established.

On March 11, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) signed a Memorandum of Understanding on Coordinated Oversight in Areas of Common Interest, jointly launching the “Joint Crypto Project,” aimed at eliminating the long-standing “territory dispute” between the two regulators. This move signals that the two regulators have established their coordinated stance in the supervision of crypto assets, marking the formal establishment of a coordination mechanism in this field.

On March 17, the SEC released a landmark interpretive document titled Federal Securities Law Regarding the Applicability to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets. For the first time, it systematically set out a five-category classification system for crypto assets and clarified the standards for the definition of “securities” to apply in the crypto space. At the same time, the SEC released related documents approving Nasdaq stock market rule amendments, allowing securities to be traded on exchanges in tokenized form and to circulate on the stock ledger, opening a new channel for deep integration between traditional securities markets and blockchain technology. As a result, the U.S. oversight of crypto assets has shown a new trend.

Regulators’ statements: Policy direction of the SEC and CFTC

The evolution history of the U.S. financial regulatory system is a story of “reflecting during crises and balancing during change,” known worldwide for its highly market-oriented approach, complexity, and innovation. In 1974, the U.S. Congress passed the Commodity Futures Trading Commission Act, significantly expanding the definition and boundaries of “commodities.” The coverage expanded from statutory enumerations of actual commodities to include goods, commodities, services, and rights and interests, encompassing both tangible and intangible assets. It also granted the newly established CFTC “exclusive jurisdiction” over all commodity futures trading.

However, this act preserved the SEC’s existing jurisdiction over securities trading, thereby creating overlapping jurisdictions at the legislative level in the United States and forming a “two-headed regulation” model for the U.S. financial regulatory system. Under this model, the SEC is responsible for regulating the securities market, while the CFTC is responsible for regulating the commodities and derivatives markets. This “two-headed regulation” directly led to regulatory friction lasting nearly fifty years, especially facing serious challenges in the crypto assets sector. Crypto assets have hybrid characteristics and are difficult to classify simply as either securities or commodities, resulting in unclear division of regulatory authority. With the SEC and CFTC relying on enforcement rather than regulation, market participants are left unsure about how to proceed.

The second term of the Trump administration in the United States adopted a loosening strategy for crypto assets, relaxing regulatory trends. In April 2025, Paul S. Atkins became the SEC Chair and quickly initiated a reform plan for crypto asset regulation, aiming to take specific measures in line with the policy direction of the Trump administration, modernizing the rules and regulations under federal securities law to clarify the regulatory status of crypto assets. Atkins emphasized on multiple occasions that the SEC’s mission is to protect investors and maintain fair, orderly, and efficient securities markets while promoting capital formation. He pointed out that in the era of digital assets, the SEC must adapt to technological changes, providing clear regulatory guidance for market participants rather than only “drawing red lines” through enforcement actions. The SEC’s core goals for crypto asset regulation include clarifying the standards for determining whether a crypto asset is a security, providing clear compliance pathways for the issuance, trading, and custody of crypto assets, promoting the development of innovative products such as tokenized securities, and strengthening coordination with other regulators such as the CFTC.

CFTC Chair Michael S. Selig also takes a proactive stance on crypto asset regulation. He believes the CFTC’s mission should be to promote the integrity, resilience, and vitality of U.S. derivatives markets through robust, principles-based regulation. In the crypto asset field, the CFTC has long insisted on treating mainstream crypto assets such as Bitcoin and Ether as commodities and exercising regulatory authority over their derivatives markets. Selig emphasized that cooperation between the CFTC and the SEC is not a “zero-sum game,” but “synergy and mutual enhancement.” Both sides should leverage their respective strengths within their jurisdictions to provide clear regulatory guidance for the market together. The rapid development of the U.S. crypto asset market requires the SEC and CFTC to break away from the traditional “compartmentalized silos” state and establish a more flexible and coordinated regulatory framework. By signing the memorandum in the form of a “Joint Crypto Project,” the SEC and CFTC are pushing forward their cooperation process, coordinating federal regulation of the crypto asset market, signaling that U.S. crypto asset regulation has entered a new stage of “coordinated oversight.”

Clear U.S. regulatory boundaries are favorable for promoting the development of tokenized securities

On March 17, the SEC released its interpretive document Federal Securities Law Regarding the Applicability to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, establishing a five-category classification system for crypto assets. Based on economic substance and intended function, crypto assets are rigorously divided into digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. This provides clear classification standards for market participants and helps U.S. regulators define clear regulatory boundaries. The establishment of the crypto asset classification framework is conducive to promoting the development of tokenized securities in the United States. The concrete promoting effects are reflected in multiple aspects.

First, improving U.S. regulatory clarity reduces legal risk for market participants in the U.S. Compared with before, due to the lack of clear regulatory guidance, U.S. companies and investors have been taking a wait-and-see attitude toward tokenized securities, worrying that they may face enforcement actions for violating securities laws. The SEC’s document clarifies the legal attributes and regulatory requirements of digital securities, enabling market participants to carry out tokenized securities business with greater confidence.

Second, improving U.S. regulatory clarity has attracted traditional financial institutions to enter the tokenized securities market. Large asset management firms such as BlackRock and Franklin Templeton have already issued and traded tokenized securities on blockchain. The participation of these traditional financial institutions not only brings capital and professional capabilities to the tokenized securities market, but also enhances market credibility.

Third, improving U.S. regulatory clarity promotes innovation in tokenized securities products. Under a clearly defined regulatory framework, market participants in the U.S. can explore new tokenized securities products and business models more boldly. For example, some companies have tried tokenizing illiquid assets such as real estate and art, issuing tokenized securities to enhance asset liquidity.

Finally, improving U.S. regulatory clarity boosts investors’ confidence in tokenized securities. Investor protection is the core goal of securities regulation. The SEC’s document clarifies that tokenized securities must follow the same investor protection rules as traditional securities, allowing U.S. investors to invest in tokenized securities with greater peace of mind.

Reducing compliance costs for the U.S. market and improving market efficiency

The development of tokenized securities benefits not only from improved U.S. regulatory clarity, but also from its clear advantages in lowering compliance costs and improving market efficiency.

First, tokenized securities can significantly reduce securities issuance costs. Traditional securities issuance requires complex processes such as underwriting, roadshows, and registration, involving a large number of intermediaries, resulting in high costs. By adopting blockchain technology, tokenized securities can achieve automation and disintermediation of securities issuance. Research shows that costs can be reduced by 30%~50%.

Second, tokenized securities can improve securities trading efficiency. Traditional U.S. securities trading relies on centralized exchanges and clearing and settlement systems, making trading processes complex and settlement cycles long (typically T+2). By adopting blockchain technology, tokenized securities can enable near real-time trading and settlement (T+0 or T+1), significantly improving trading efficiency.

Third, tokenized securities can reduce U.S. securities custody costs. Traditional securities custody requires reliance on professional custody institutions, which is costly. Tokenized securities can enable self-custody through digital wallets, allowing investors to directly hold and manage their own securities, thereby reducing custody costs.

Fourth, tokenized securities can enhance liquidity in the securities market. The traditional U.S. securities market has many illiquid assets, such as private equity and real estate. Because these assets lack liquidity, they are difficult to attract investors. Tokenized securities can split these illiquid assets into small-denomination tokens, significantly improving liquidity and attracting more investors to participate.

Promoting U.S. capital formation and financial innovation

The establishment of the U.S. crypto asset classification framework has had a positive impact on U.S. capital formation and financial innovation. The SEC’s document states that the purpose of the document is to enhance pricing efficiency for digital securities, securities related to crypto assets, and non-securities crypto assets by providing clarity and reducing legal advisory costs; increase capital formation; and improve competition, thereby promoting innovation and entrepreneurship in the U.S. crypto asset market.

Improving U.S. regulatory clarity can lower companies’ financing barriers. In the past, due to regulatory uncertainty, many small and medium-sized enterprises in the U.S. found it difficult to raise funds through tokenized securities. The release of the SEC’s document provides a clear compliance path for these companies, enabling them to raise funds through tokenized securities more conveniently. Tokenized securities can provide new financing channels for U.S. companies. Traditional securities financing mainly relies on methods such as bank loans and equity financing, which are relatively limited; by adopting blockchain technology, tokenized securities can enable fundraising on a global scale, providing companies with more diversified financing channels. Tokenized securities can promote innovation in U.S. financial products. Under a clearly defined regulatory framework, market participants can explore new financial products and business models more boldly. For example, some companies have started trying to issue hybrid tokenized securities that combine the characteristics of equity and debt to offer investors more flexible investment choices.

Tokenized securities can also promote inclusiveness in U.S. financial markets. Traditional securities markets have relatively high barriers to investment, and many ordinary investors find it difficult to participate. Tokenized securities can significantly lower the investment barrier by splitting assets into small-denomination tokens, enabling more ordinary investors to participate in securities investment.

In summary, the establishment of the U.S. crypto asset classification framework will enhance the competitiveness of the United States in the global crypto asset market. By issuing a memorandum, the SEC and CFTC coordinate regulation, reduce regulatory friction, encourage lawful innovation, and ensure that the U.S. market maintains its position as the deepest, most competitive, and most trustworthy in the world.

(Chen Yang is a doctoral student at the School of Law, South China University of Technology; Chen Hongyan is a professor at the School of Law, South China University of Technology, and the Deputy Chairperson of the International Law Research Association of the Guangdong Law Society.)