Experts from the American exchange Nasdaq have sent a letter to the SEC’s cryptocurrency task force with recommendations regarding the regulation and taxonomy of digital assets.
“The existing market ecosystem can easily absorb digital assets by establishing proper taxonomy and calibrating certain rules to reflect what is truly innovative in digital assets,” the document states.
The experts proposed dividing digital assets into four main categories:
- Securities — tokenized versions of financial instruments defined as securities under the Securities Act of 1933, such as equity, debt, ETFs, and options. Nasdaq specialists believe this class should be regulated similarly to their underlying assets;
- Digital asset investment contracts — tokenized investment contracts that meet the criteria of the Howey Test. Typically, these instruments take the form of a “promise of profit” in exchange for investment, with the return depending on parties other than the investor. The experts recommended that the Commission clarify the interpretation to prevent market participants from evading regulations by arbitrarily labeling their asset as an “investment contract”;
- Digital asset commodities — instruments that meet the definition of “commodities” under the Commodities Exchange Act;
- Other digital assets — instruments not included in the previous three categories. These assets are neither securities nor commodities.
According to the experts, tokenized versions of securities and investment contracts fall under the jurisdiction of the SEC, while commodities are under the U.S. Commodity Futures Trading Commission (CFTC).
“The classification of digital assets as securities, commodities, or neither has confused regulators, legislators, and courts for years. Clear classification is crucial. […] It determines whether such assets fall under the jurisdiction of the SEC, CFTC, both, or neither agency,” Nasdaq emphasized.
They also noted that securities and their tokenized versions should adhere to the same trading rules. The commission’s staff were advised to clearly state that tokenization “does not alter the applicability of federal securities laws.”
Earlier, participants in the crypto industry shared their expectations for the new SEC chairman.