SEC Issues 2025 Crypto Guidance

New Rules Aim to Clarify Digital Asset Laws for U.S. Market Participants

The U.S. Securities and Exchange Commission (SEC) has taken a pivotal step toward resolving one of the most contentious issues in the cryptocurrency industry: determining which digital assets qualify as securities under federal law. Released in April 2025, the SEC’s comprehensive guidance provides long-awaited clarity for token issuers, exchanges, investors, and financial intermediaries navigating the complex intersection of blockchain innovation and regulatory compliance. This landmark framework not only refines the application of the Howey test but also introduces new pathways for projects to avoid securities classification—signaling a shift toward balancing investor protection with technological progress.

Breaking Down the SEC’s 2025 Guidance

The SEC’s 2025 guidance centers on a modernized interpretation of the Howey test, a legal standard established in 1946 to identify investment contracts. Under the updated rules, a crypto token is likely a security if it meets the following criteria:

• Profit Expectation: Buyers anticipate financial gains primarily from the efforts of a centralized team or promoter.
• Centralized Control: The project lacks sufficient decentralization, with a core team actively influencing the token’s value or functionality.
• Promotional Context: The token is marketed as an investment opportunity rather than a utility or medium of exchange.

The guidance introduces a three-pronged framework to assess tokens:

1. Initial Sale Context: How the token was marketed at launch (e.g., emphasizing future price appreciation).
2. Ongoing Utility: Whether the token serves a functional purpose on a decentralized network post-launch.
3. Issuer Influence: The degree to which the founding team or foundation retains control over the token’s ecosystem.

For example, Ethereum’s ETH is cited as a non-security due to its post-Merge utility and decentralized governance, while governance tokens tied to profit-sharing mechanisms may still fall under securities regulations.

Key Implications for Market Participants

For Token Issuers: Compliance or Redesign

Projects must now rigorously evaluate their token models. Those deemed securities face two choices:

• Register with the SEC, disclosing financials, risks, and operational details.
• Redesign Tokens to emphasize utility and decentralization, potentially excising features like dividend distributions or centralized roadmaps.

The SEC specifically targets:

• ICOs marketed with profit-centric messaging.
• Pre-mined tokens controlled by a core development team.
• Governance tokens offering revenue-sharing or dividend-like rewards.

Failure to comply risks enforcement actions, delistings from major exchanges, or legal challenges akin to the LBRY and Ripple cases.

For Exchanges: Stricter Listings and Operational Shifts

Crypto exchanges, both centralized and decentralized, are pressured to adopt stricter listing standards:

• Conduct legal reviews of tokens before listing.
• Provide explicit warnings for assets classified as securities.
• Register as securities brokers or alternative trading systems if handling security tokens.

U.S.-based platforms like Coinbase may avoid listing borderline tokens entirely to mitigate regulatory risk, while decentralized exchanges (DEXs) face unresolved questions about their obligations under the new rules.

For Investors: Safer Markets, Fewer “Moon Shots”

Retail and institutional investors gain protection from fraudulent or high-risk projects, as the SEC’s clarity discourages speculative tokens. However, the guidance may limit access to early-stage projects, pushing risk-tolerant investors toward offshore platforms.

The Four-Year Safe Harbor: A Path to Decentralization

Embedded in a draft bill under congressional review is a four-year safe harbor provision, allowing token projects to transition from SEC oversight to the CFTC’s jurisdiction as commodities—if they achieve sufficient decentralization. Criteria include:

• Eliminating centralized control over protocol upgrades.
• Ensuring no single entity owns more than 20% of tokens or governance power.
• Demonstrating functional utility unrelated to profit-seeking.

During this period, issuers must file simplified disclosures with the SEC, including network architecture details and governance processes. Successful projects could bypass securities regulations entirely, fostering innovation while maintaining accountability.

Broker-Dealers and Custody: A Regulatory Thaw

In a parallel move, the SEC’s Division of Trading and Markets updated rules for broker-dealers and transfer agents handling crypto assets:

• Dual Activity Approval: Firms can now custody both securities and non-security tokens (e.g., Bitcoin) within the same entity, reversing the 2020 Special Purpose Broker-Dealer (SPBD) restrictions.
• Custody Flexibility: The SEC confirmed that non-security tokens aren’t subject to the same physical custody requirements as traditional securities, reducing operational burdens.

This shift opens doors for traditional financial institutions like Fidelity or BlackRock to expand crypto services without establishing separate entities.

Industry Reactions: Cautious Optimism

The Crypto Council for Innovation (CCI) praised the guidance as a “major step forward,” noting it aligns with global standards emerging in the EU and UK. “After years of enforcement-by-litigation, this is the first meaningful progress toward a workable framework,” said CCI CEO Sheila Warren.

However, skepticism persists. “The SEC’s criteria for decentralization remain vague,” argued Marta Belcher, general counsel at Protocol Labs. “Projects may face arbitrary judgments unless clearer benchmarks are established.”

What’s Next? Staking ETFs and Comprehensive Legislation

The SEC’s 2025 guidance sets the stage for further developments:

• Staking ETFs: Analysts predict approval of Ethereum staking ETFs by late 2025, leveraging the new clarity around non-security tokens.
• Crypto Task Force Report: Led by Commissioner Hester Peirce, the SEC’s internal task force will release recommendations for a holistic regulatory framework by Q3 2025.
• Congressional Action: Bipartisan bills like the Digital Asset Market Clarity (CLARITY) Act aim to codify the SEC-CFTC jurisdictional divide, potentially superseding parts of the guidance.

The SEC’s 2025 guidance marks a turning point in U.S. crypto regulation, replacing ambiguity with structured criteria for securities classification. While challenges remain—particularly around decentralization benchmarks and DeFi oversight—the framework provides a foundation for sustainable growth. By acknowledging the unique attributes of blockchain technology while upholding investor safeguards, the SEC strikes a balance that could position the U.S. as a leader in the next era of financial innovation. As Commissioner Peirce noted, “This isn’t the finish line, but it’s a critical milestone in the marathon toward coherent digital asset policy.”