SEC positively defines Crypto classification for the first time, BTC is recognized as a digital commodity

Source: Blockchain Knight

On February 21, the U.S. Securities and Exchange Commission (SEC) Crypto Task Force met with Michael Saylor, Executive Chairman of Strategy, the Crypto Asset Innovation Council (CCI), and representatives of the Massachusetts Institute of Technology Research Corporation (MITRE) to discuss the best way to regulate Crypto assets in the United States.

According to the memo shared by the SEC, the task force staff reviewed a framework document during the meeting that defines the Crypto taxonomy and regulatory structure.

The document classifies digital commodities, including BTC, digital securities pegged to the issuer, digital currencies backed by legal currency, digital tokens with clear uses, non-fungible tokens (NFTs) for unique digital applications, and digital asset-backed (ABT) assets pegged to physical commodities.

The document clarifies the rights and responsibilities of issuers, exchanges, and asset owners by calling for fair disclosure, transparent custody practices, and compliance with local laws. The framework also proposes standardized disclosures, industry-led compliance processes, and limits on asset issuance and maintenance costs.

In addition, Saylor’s speech highlighted the potential for faster and lower-cost asset issuance, broader market access, and a shift in capital markets that could strengthen the dollar and reduce national debt through strategic measures such as BTC reserves.

Revisiting the Staking Business

CCI representatives suggested clarifying the regulatory treatment of staking services, passive blockchain data platforms, and incentive-based rewards.

The meeting included 20 representatives from a number of crypto-sector companies, including Coinbase, a16z, and the Filecoin Foundation.

They recommend issuing guidance or no-action relief notices to confirm that bona fide staking services and related infrastructure providers are not subject to securities laws. This change could allow Crypto exchange-traded products (ETPs) to include staking activities in their filings.

CCI also recommends that platforms that provide blockchain exploration tools and non-custodial Web3 markets be excluded from the definition of broker, exchange, or alternative trading system when the platform only provides access or data display functions.

The recommendation also calls for guidance to define non-security status for NFTs, which are tokens primarily used as works of art, collectibles, virtual land, or similar non-financial applications.

Other recommendations include issuing no-action letters, suspending compliance-only enforcement actions, and modifying the rulemaking process to consider decentralization and on-chain transactions. These measures are intended to balance investor protection with support for industry innovation.

The Board urges the SEC to build on prior decisions and industry momentum to enhance regulatory clarity and investor protection in the United States.

Research-Driven Insights on Stablecoins

The MITRE Corporation presented its research and development activities focused on the Crypto market and its regulatory implications.

A federal research and development center funded by the U.S. Treasury, the firm outlined its work on a logic-based approach to stablecoin regulation, developed workflow tools to support comment processing, and used a policy visualization system to identify regulatory dependencies.

MITRE also detailed its Digital Asset Threat Sharing Platform and Cyber ​​Threat Framework for the Crypto Sector.

The research findings discussed at the meeting revealed hidden centralization issues in decentralized finance (DeFi), emphasized the need for bank stress testing in scenarios where DeFi is combined with traditional finance, and recommended the implementation of circuit breakers at the smart contract level to mitigate risk propagation.

MITRE's technical work aims to support the SEC's rulemaking by providing data-driven insights and innovative tools to establish a regulatory framework that can respond to the evolving challenges in the digital asset ecosystem.

The meeting concluded with a comprehensive review of various proposals and research aimed at establishing a regulatory framework that can both support innovation and ensure market integrity.