From "Guessing Game" to "Temporary Rules": A Decade of Absurdity in Crypto Regulation

Byline: Thejaswini M A

Compilation: Block unicorn

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

Bitcoin has fallen 44% from its October peak. Ethereum is around $2,000—less than half of what it was seven months ago. The total market cap of altcoins has evaporated by $470 billion since the peak. The Fear and Greed Index is at 11. This is not 11 for a bad week—it’s 11 out of 100. This means people are no longer debating where the bottom is; they’ve started selling the remaining crypto.

And just then, on March 17, the SEC and the CFTC released a document that finally reveals what the tokens you hold actually are. Previously, both sides went through a decade of litigation, 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 finally fell below $1,900, the answer was revealed.

But here’s the thing: even though the token economy itself has been dealt a severe blow, everything underneath it is thriving. The supply of stablecoins has surpassed $316 billion, and the size of on-chain real-world assets (RWAs) has reached $26.5 billion—and it continues to grow. That’s why Morgan Stanley is building a crypto trust bank. Meta has shelved its metaverse project, but is bringing stablecoins to WhatsApp. Stripe is processing $400 billion worth of stablecoin transactions. 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 that came out on March 17 was originally meant for first-generation cryptocurrencies, yet it was only formally implemented after the arrival of the second generation.

But that doesn’t mean it’s meaningless.

SEC Chair Paul Atkins once said: “We are no longer the ‘Securities and Everything Commission.’” Doesn’t that sound a bit late?

U.S. regulators have for the first time given crypto a unified definition. Five categories—every token falls into one of them. Next, I’ll provide these definitions; please read them with the mindset that you’ve never heard of these concepts.

Digital commodities are the main event. A digital commodity is a crypto asset whose value comes from the programmatic operation of a fully functional crypto system and the dynamic of supply and demand. Its value doesn’t depend on the management of a central issuing entity. If the network is truly decentralized and operating properly, and no company is there to back it, then that asset is a commodity. This is regulated 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 formally recognized as digital commodities. Dogecoin and Shiba Inu fit this definition because no promoter or organization is pushing their value higher. They make no promises, have no roadmaps, and no team’s ongoing work is essential to the token’s value. That’s why they’re treated as commodities rather than securities. The standard is whether anyone promises that people will profit based on the results of its work.

Digital securities refer to tokenized stocks, bonds, and U.S. Treasury securities. In short, these assets are securities before being put on the blockchain, and they remain securities afterward. The U.S. Securities and Exchange Commission (SEC) is responsible for regulating these assets. That’s it.

Digital collectibles refer to NFTs tied to specific items or experiences. Digital tools refer to 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 makes clear that receiving mining rewards, participating in on-chain staking, or receiving digital commodity airdrops does not constitute securities trading. This eliminates one of the biggest legal risks facing proof-of-stake networks since the Gensler era. Wrapping non-securities tokens has also been approved.

These 16 named tokens are all underlying infrastructure, backed by years of decentralized development. DeFi protocol tokens—for example JUP, POL, METEOR, and most of the tokens launched in the past two years—are not named and clearly do not meet the criteria. A fully functional crypto system with no centralized entity involvement under regulatory oversight has a high threshold. Most actively developed protocols don’t reach this standard. The gray areas that this interpretation was supposed to resolve remain unclear for the tokens most people actually hold.

Value must come from the programmatic operation of a fully functional system—not from someone’s promises. This one test standard can turn a decade of ambiguity into something that regulators can truly get to work on.

There’s more going on here

This announcement does not constitute a formal rulemaking process as required by the Administrative Procedure Act, nor does it have the binding force of a statute or formally promulgated regulation.

You’d better read that sentence again. The 68-page document we’ve been waiting for is only an interpretive release, not a law or a regulation; it’s simply 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 the SEC and CFTC’s formal agency action and is binding. However, in the absence of relevant legislation, a future government can modify it. The document itself preserves each agency’s right to refine or expand its views. A future SEC chair with a different political stance can overturn the interpretation without congressional approval. The next administration may not even need new laws—just new leadership.

Atkins understands this. On the day the release came out, he voiced that view, urging Congress to take action to provide more durable clarity. He sees this interpretation as a transitional measure while waiting for Congress to take action on comprehensive market structure legislation. That legislation is the CLARITY Act. Right now, the Market Structure Transparency Act is under consideration in the Senate.

“CLARITY Act”

The House passed the CLARITY Act in July 2025 by a vote of 294. Such a high level of support across party lines shows that both sides have reached real consensus.

Then it went to the Senate and stalled.

What’s blocking the bill from passing is, above all, stablecoin yield. Banks believe that allowing crypto platforms to pay interest on stablecoin balances would trigger deposit outflows. People would take money out of savings accounts and move it into USDC to earn higher yields. Banking industry lobbying groups then sprang into action. The Senate Banking Committee canceled the review that was originally scheduled for January 2026. The bill made no progress over the next two months.

On March 20, Senators Tom Tillis and Angella Alsobrooks confirmed a principle-level agreement on stablecoin rewards, an agreement backed by the White House. The terms are: passive yield on stablecoins is prohibited; activity rewards linked to payments and platform usage are still allowed. Neither side is happy, but a compromise is typically how things like this get made.

But the yield agreement is only one of the five items that still needed to be completed before the CLARITY Act can take effect. The remaining four legislative steps are timed right in the tightest period of the year.

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

Coordination with the Agriculture Committee

Coordination with the House version

Presidential signature

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

In addition, the Iran war has taken up a large share of the Senate’s discussion time. There’s also Trump saying he wants to pass a voter ID bill first. Provisions on decentralized finance (DeFi) still haven’t been resolved, and Senate Democrats say they’re concerned about illegal-finance risks. The ethics provisions also aren’t set yet—especially whether senior government officials should be banned from profiting from crypto assets. Given the crypto assets held by this administration, this issue is obviously politically sensitive. Senate Republicans are currently debating adding a provision to loosen regulation on community banks as a bargaining chip into the bill, which would trigger a whole new round of negotiations.

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

So building infrastructure is based on a rules manual that might not exist two years from now. That’s the situation the industry faces right now. Companies are making decisions worth billions of dollars—to build custodial systems, tokenized platforms, and staking infrastructure—and all of those decisions are based on a persuasive interpretive document that still has no legal force.

What is eternal, and what isn’t

For readers holding the 16 tokens above (for example, ETH, SOL, XRP), because of statements from two regulator heads, those tokens are now officially recognized under U.S. law as digital commodities. As long as those two officials—or their successors—continue to maintain this recognition, the classification will remain in effect.

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

If it hasn’t passed by May, then the current classification system can only depend on the opinion of a single government department. Right now, the 16 named assets are temporarily safe, but not all assets are named. Most decentralized finance (DeFi), most new tokens, and any assets that are permissionless and have no clear issuer are still in a gray area, and this issue was not clearly addressed in the earlier interpretation.

The most anticipated sentence feels like a draft written in pencil.

Someone needs to pick up the pen and make this official. Everything depends on what happens in the next six weeks in the Senate. Will these rules last long enough for all of this to become meaningful?