SEC Plans to Establish 'Token Taxonomy' for Crypto Assets Despite CLARITY Act Uncertainty

U.S. regulators are poised to provide clearer guidance for the cryptocurrency sector, even if the CLARITY Act—an important market structure bill—does not become law. The U.S. Securities and Exchange Commission (SEC) has already released interpretive guidance on the application of federal securities laws to specific crypto assets.

Key Takeaways

The SEC plans to create a 'token taxonomy' for crypto assets even if the CLARITY Act does not pass.
Clear guidelines could help crypto firms comply with regulations and engage with investors.
The CFTC is also working on setting rules for prediction markets in the crypto space.
Ongoing rifts within the banking and crypto sectors may affect the advancement of the CLARITY Act.
Pro-crypto regulators aim to provide the necessary regulatory clarity for the industry.

SEC CLARITY Act

Currently, this guidance is under review by the White House. As reported by Bloomberg, it aims to create a 'token taxonomy' that will help classify crypto assets under the SEC's jurisdiction. An SEC spokesperson emphasized, “As Chairman Atkins stated, the Commission is considering interpretive guidance regarding a token taxonomy for crypto assets, aligned with market structure legislation, to ensure that both investors and innovators understand their regulatory obligations.”

It is important to highlight that this is distinct from the SEC’s ongoing rulemaking proposal related to crypto asset offerings. According to Nate Geraci of ETF Prime, this initiative is positive, especially if the CLARITY Act remains stalled. “While the CLARITY Act would be more beneficial, the SEC seems unwilling to wait for politicians to sort out how to classify crypto assets.”

SEC CLARITY Act

The establishment of such regulatory clarity would create a functional framework for crypto companies to register with the regulator, fulfill disclosure obligations, and interact with investors, among other requirements. Some analysts, who viewed the CLARITY Act as unfavorable, have advocated for this route to ensure market protection.

CFTC Moves to Regulate Prediction Markets

In a related development, the Commodity Futures Trading Commission (CFTC), which oversees derivatives trading, is committed to introducing clear regulations for the rapidly growing prediction markets. Like the SEC, the CFTC has also submitted a proposal for rulemaking concerning these multi-billion-dollar markets. Additionally, CFTC Chairman Mike Selig has promised to release guidelines for crypto perpetual contracts by next month.

Together, these regulatory initiatives could enable key market players to operate even if the CLARITY Act fails. The bill has already faced delays earlier this year as the cryptocurrency and banking sectors could not agree on stablecoin yield issues. Notably, the White House has criticized banks for their stringent positions on stablecoin rewards, siding with the cryptocurrency industry. This ongoing tension may hinder achieving full bipartisan support for advancing the bill.

Nonetheless, current pro-crypto regulators may still provide essential guidance that will allow industry participants to navigate the landscape with clearer rules.