Is the “Wild West” era of crypto assets officially over?

On March 17, local time, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly issued an explanatory document numbered 33-11412. The 68-page regulatory framework officially announced: U.S. encryption supervision bid farewell to the decade-long era of "law enforcement instead of supervision" and entered a new era of clarity and harmony driven by "Project Crypto".

This document is not only the result of rare regulatory collaboration between the SEC and CFTC, but also the most landmark guidance document in the history of U.S. encryption regulation. The following is the full text interpretation of the essence version:

1. Background: “Project Crypto” from conflict to collaboration

In 2017, the SEC applied the Howey test to crypto assets for the first time through "The DAO Report." In the following ten years, supervision mainly relied on law enforcement actions to define asset attributes, and the market has long been in uncertainty and controversy.

In early 2025, the SEC established the "Crypto Task Force" and subsequently launched the "Project Crypto" initiative co-led by SEC Chairman Paul S. Atkins and CFTC Chairman Michael S. Selig, aiming to coordinate the powers of the two major regulatory agencies, establish a unified asset classification law, and provide a clear path for crypto innovation to stay in the United States. In January 2026, the project was officially upgraded to a joint action by the SEC and CFTC.

2. Asset Classification: The “Five Category Method” Logic of Crypto-Assets

The document divides crypto assets into five categories based on asset characteristics, uses and functions, providing the market with clear classification standards for the first time:

1. Digital Commodities

   Definition: Refers to assets whose value comes from the programmed operation and supply and demand dynamics of a "functional" encryption system, rather than relying on the management efforts of others.

   Core list: The document clearly names mainstream tokens such as BTC, ETH, SOL, XRP, ADA, DOT, AVAX, and LINK as digital commodities. These assets are not controlled by any single centralized entity and have no inherent economic rights to generate passive income.

2. Digital Securities

   Definition: "Tokenized securities" refer to traditional securities expressed in the form of encrypted assets, or digital assets with the economic essence of securities (such as representing corporate ownership and dividend rights).

   Regulation: Whether it is on the chain or off the chain, as long as it meets the economic substance, it falls under the scope of SEC supervision.

3. Regulated Payment Stablecoins

   Definition: Stablecoins issued by permitted institutions that meet the definition of the 2025 GENIUS Act.

   Qualitative: This type of stablecoin is expressly excluded from the definition of "security" and is mainly used as a payment instrument and is subject to specific legal constraints.

4. Digital Tools

   Purpose: Tokens that only have a utility function within a specific cryptographic system (such as access rights or payment for services) are generally not considered securities.

5. Digital Collectibles

   Definition: Assets intended to be collected and/or used, representing artwork, music, videos, in-game items, or Internet memes, etc.

   Examples: CryptoPunks, Chromie Squiggles, WIF, VCOIN, etc.

   Qualitative: It is not a security in itself, and its value comes from the relationship between supply and demand rather than the management efforts of others. However, if it is divided and sold in pieces, it may constitute securities.

3. Innovation: “stripping” and “dynamic conversion” of securities attributes

This is the most groundbreaking legal innovation in the document - the SEC admitted for the first time that the "security attributes" of crypto assets are not permanent.

"Separation" mechanism

• Principle: In the early stage of financing, a project may be regarded as a security (investment contract) because it meets the Howey test. However, when the project completes the roadmap, realizes the autonomous operation of open source code, and decentralizes network power, the asset can be "stripped" from the investment contract

• Judgment criteria: When investors no longer reasonably rely on the issuer's "core management efforts" to obtain profits, but rely on the operation of the system itself and market supply and demand, the asset changes from "security" to "digital commodity"

• Divestiture timing: It can occur immediately when the asset is delivered to the buyer, or it can occur at a future date

Three situations of stripping

1. The issuer has fulfilled its commitment: after completing its core management efforts, even if it continues to provide non-core maintenance, the assets will no longer be subject to the investment contract

2. The issuer abandons the project: If it publicly announces that it has given up development and will no longer fulfill its commitments, the assets will be out of the jurisdiction of securities laws (but the issuer may still bear legal liability for fraud)

3. Secondary market transactions: If the subsequent purchaser no longer reasonably expects to rely on the issuer's efforts to make a profit, the transaction does not constitute a securities transaction

Transparency recommendations

SEC encourages project parties to publicly disclose roadmap progress and milestone achievement so that the market can identify "divestment points."

4. Qualitativeness of on-chain activities: “clearing mines” for decentralization

For the long-term controversial staking, mining, packaging, airdrop and other activities, the document gives an extremely detailed and favorable explanation:

Protocol Mining

• Qualitative: PoW mining is an "administrative or transactional" activity to ensure network security and verify transactions

• Conclusion: Neither solo mining nor joining a mining pool involves the issuance of securities

• Mine pool operation: The activities of the mining pool operator are administrative matters and do not constitute core management efforts

Protocol Staking

• Qualitative: Staking is an administrative activity to maintain network operation

• Coverage: including solo pledge, entrusted third-party pledge, custody pledge, liquidity pledge

• Custodian pledge: The custodian pledges on behalf of the user. As long as it does not involve secondary lending of assets, leverage or discretionary transactions, it does not constitute securities activities

• Supporting services: slash insurance, early pledge release, flexible income distribution, asset aggregation and other ancillary services are all administrative matters

Staking Receipt Tokens

• Qualitative: If the underlying asset is a non-security commodity and is not subject to an investment contract, the certificate itself is not a security

• Principle: The voucher only exists as a "receipt" and does not generate income. The income comes from the underlying pledge activities

Wrapping

• Definition: Users deposit crypto assets into a custodian or cross-chain bridge and obtain redeemable wrapped tokens anchored at 1:1

• Qualitative: If the underlying asset is a non-securities commodity and is not subject to an investment contract, wrapping tokens is an "administrative function" aimed at enhancing interoperability and does not constitute a securities transaction

• Key restrictions: The custodian must lock the assets and may not lend, mortgage or re-pledge

Airdrops

• Qualitative breakthrough: As long as the recipient does not provide money, goods, services or other consideration, the "money investment" element of the Howey test is not met

• Applicable scenarios:

  Airdrop to wallets holding specific tokens and not announced before the airdrop

  Reward testnet early users

  Airdrop to eligible users based on application usage

• Red line: If the recipient needs to provide services (such as social media promotion) in exchange for airdrops, it may constitute a securities issuance

5. Consolidation of U.S. leadership

The document provides a detailed analysis of its economic significance at the end:

1. Eliminate the "chilling effect": Encourage crypto innovation to return to the United States by providing legal clarity, reducing business stagnation caused by opaque compliance

2. Reduce compliance costs: clear classification and divestiture paths significantly reduce corporate legal consulting and regulatory response costs

3. Enhance market transparency: the new framework requires more detailed disclosure at the "investment contract" stage to better protect investors

4. Promote competition and innovation: Clear rules will attract more issuers and entrepreneurs to enter the market

5. Improve pricing efficiency: reduce price distortions caused by uncertainty

6. Historic breakthrough in regulatory collaboration

From a structural point of view, the document establishes a clear analysis path: first classify the assets, then determine the transaction structure, and finally analyze whether the investment relationship continues to exist.

More importantly, this is a rare result of coordination between the SEC and CFTC on encryption regulatory issues. Previously, the two agencies had long-standing differences on the definition of "securities vs. commodities." However, this joint framework has essentially made a preliminary division of the main asset classes, marking the formal shift from the "competition for agency rights and responsibilities" stage in the United States to a "unified rules-based division of labor system."

This 68-page document not only ended a decade of regulatory chaos, but also established the United States’ leadership in global encryption regulation. For practitioners, this is a must-read "industry constitution"; for investors, it is a clear "rights protection guide"; for entrepreneurs, it is a clear "compliance roadmap."

The “Wild West” era of crypto assets has officially come to an end.