The classification of a cryptocurrency carries real consequences. A token deemed a security faces registration requirements, mandatory disclosures, and strict trading restrictions.
Understanding who controls this rapidly expanding market is essential for identifying opportunities, navigating compliance requirements, and positioning your organisation appropriately. This guide maps the key players that are shaping stablecoins in 2025, from the issuers minting stablecoins to the regulators writing the rules that will govern their future.
Classify it as a commodity, and those burdens largely disappear. The difference can determine whether a project survives regulatory scrutiny or faces enforcement action.
For years, the US’s SEC and CFTC fought over jurisdiction whilst crypto companies operated in regulatory limbo. 2025 brought change. Both agencies began coordinating through Project Crypto and Crypto Sprint, moving towards clearer guidelines. But the classification question remains complex, with different tokens receiving different treatment based on their structure, purpose, and distribution method.
The basics: commodities vs securities
Commodities are fungible goods traded on markets for uniform quality and value. Crude oil, wheat, gold, and natural gas are commodities. They're physical or virtual goods that can be bought, sold, and traded in standardised contracts. The Commodity Futures Trading Commission (CFTC) oversees commodities, focusing on derivatives markets and preventing fraud and manipulation.
Securities are investment contracts where investors put money into an enterprise expecting profits from the efforts of others. Shares in companies, bonds, and similar financial instruments are securities. The Securities and Exchange Commission (SEC) regulates securities markets, requiring registration, disclosure, and compliance with investor protection frameworks.
Securities face more stringent regulatory requirements than commodities. Securities offerings must typically be registered with the SEC, issuers must provide extensive disclosures, and trading venues need specific licences. Commodities have more regulatory flexibility, particularly in spot markets.
Crypto as a commodity
Bitcoin is the clearest example of a cryptocurrency classified as a commodity. The CFTC has repeatedly stated that Bitcoin qualifies as a commodity under the Commodity Exchange Act. This classification stems from Bitcoin's decentralised nature: no central company or identifiable group drives its value through their efforts.
The CFTC's authority over Bitcoin extends to derivatives contracts, such as Bitcoin futures traded on regulated exchanges like the Chicago Mercantile Exchange. The agency oversees these markets to prevent fraud, manipulation, and abusive practices.
The CFTC has enforcement authority over fraud and manipulation in commodities markets but lacks direct regulatory authority over spot markets where digital currencies are traded for immediate delivery. This creates a regulatory gap for commodity crypto assets in spot trading form.
The commodity classification provides regulatory clarity for derivatives products, enables institutional participation through regulated futures contracts, and avoids the registration and disclosure requirements associated with securities. Bitcoin's commodity status has facilitated the launch of Bitcoin futures ETFs and, more recently, spot Bitcoin ETFs that have attracted billions in institutional capital.
Crypto as a security
When it comes to securities, the SEC's position is more expansive. The agency relies on the Howey Test, established by the U.S. Supreme Court in 1946, to determine whether a cryptocurrency qualifies as an investment contract and therefore a security.
The Howey Test has four prongs, all of which must be satisfied:
- Investment of money: Has someone committed capital or value?
- Common enterprise: Are investors' fortunes tied together in a joint venture?
- Expectation of profit: Is there an anticipation of financial returns?
- Efforts of others: Do profits depend primarily on the work of a third party, such as developers or a founding team?
Under the SEC's 2025 guidance, cryptocurrency tokens are likely to be classified as securities if they act like investment contracts. Tokens sold with promises of profits driven by a central team's efforts will be categorised as securities. This interpretation has led to enforcement actions against numerous crypto projects
The highest-profile enforcement action has been the SEC vs Ripple Labs and its XRP token. In 2023, Judge Analisa Torres ruled that XRP trading on exchanges does not violate securities law, but offering the cryptoasset to institutional investors breached securities law. Following leadership changes at the SEC in 2025, both parties dropped their appeals, ending the case.
Initial coin offerings (ICOs) have faced particular scrutiny when it comes to classifications. Especially around 2017 and 2018, many projects raised capital by selling tokens with explicit or implicit promises that the founding team would build a platform or protocol that would increase the token's value. The SEC has pursued enforcement actions against dozens of such projects, arguing they should have registered their token sales as securities offerings.
Yet determining whether any particular cryptocurrency qualifies as a security remains difficult. The Howey Test depends on factual circumstances that can shift as a project evolves: decentralisation increases, the founding team's role diminishes, or token utility expands. A token might be a security at launch but not years later, or a security when sold in one context but not another.
Ethereum and the grey area
Ethereum operates in this uncertain regulatory territory. Former CFTC Chairman Heath Tarbert stated in 2019 that Ether is a commodity, and the CFTC has treated it as such for derivatives purposes.
But Ethereum's evolution has created complications. After Ethereum's 2022 Merge upgrade, the network shifted from energy-intensive mining to a staking mechanism. Holders can now lock up their ETH to help secure the network and earn rewards. As of September 2025, approximately 35 million ETH is staked, roughly 29% of the total circulating supply.
This staking model raises a securities question. If returns depend on validators' efforts to maintain the network, does that create an investment contract under the Howey Test? The SEC's May 2025 staff statement on protocol staking attempted to clarify that third-party staking services may not constitute investment contracts, but the guidance has been criticised for lacking clear boundaries.
The SEC has not pursued enforcement actions against Ethereum itself or its staking mechanism directly. The July 2024 approval of spot Ethereum ETFs signalled implicit acceptance of ETH's commodity status, at least for certain purposes.
Stablecoins represent another grey area. Fiat-backed stablecoins with transparent reserves, designed for payments rather than investments, are generally not viewed as securities by the SEC. Algorithmic stablecoins, which maintain their peg through complex mechanisms rather than reserves, face greater scrutiny, particularly after collapses like TerraUSD.
Global perspectives on classification
Whilst the United States grapples with overlapping jurisdictions, other regions have taken different paths.
European Union
The EU has taken a comprehensive approach with its Markets in Crypto-Assets (MiCA) regulation. MiCA entered full application across all EU member states on 30 December 2024, creating the world's first major comprehensive regulatory framework for cryptoassets.
MiCA categorises crypto assets into three classes: utility tokens, asset-referenced tokens (ARTs), and e-money tokens (EMTs), each with specific regulatory requirements. This approach provides clearer guidance than the U.S. case-by-case analysis under the Howey Test.
MiCA introduces requirements for issuers, including reserve backing, transparency reports, capital requirements, detailed white papers, and regular audits. Crypto Asset Service Providers (CASPs) must obtain licences to operate within the EU, with applications beginning in January 2025.
Asia
Jurisdictions like Singapore, Japan, and Hong Kong have developed their own frameworks, seeking to balance innovation with investor protection. Singapore's Payment Services Act provides a licensing regime for crypto businesses, whilst Japan's revised Payment Services Act recognises cryptoassets as a distinct asset class with specific regulatory requirements.
Why a cryptoasset’s classification matters for investors and institutions
The commodity versus security distinction creates several implications for market participants.
- Compliance and legal risks: Misclassifying a cryptoasset exposes projects, exchanges, and investors to enforcement actions, penalties, and potential criminal liability. The lack of clear guidance has made compliance challenging, forcing companies to seek expensive legal opinions whilst still facing regulatory uncertainty.
- Market trust and investor protection: Securities regulations protect investors through mandatory disclosures, anti-fraud provisions, and market integrity rules. Commodity markets have different protections focused on derivatives trading. The appropriate classification ensures investors receive suitable protections for the type of asset they're investing in.
- Liquidity and market access: Securities face restrictions on who can buy them, how they can be marketed, and where they can be traded. Commodities have fewer such restrictions. This affects liquidity, price discovery, and market efficiency. The XRP case showed this clearly: the token's value fluctuated wildly based on regulatory developments, and exchanges delisted it when the SEC's lawsuit created legal uncertainty.
- Innovation and adoption: Restrictive classification can make it prohibitively expensive to launch new projects or products. Insufficient regulation creates risks that deter institutional participation. Finding the balance matters for the sector's development.
The future of crypto regulation
Several trends are shaping how crypto regulation will develop.
Hybrid frameworks: Rather than forcing all crypto assets into either the commodity or security category, regulators are exploring more nuanced approaches. Some tokens may have different classifications depending on how they're sold. Others may occupy a middle ground with tailored regulatory requirements.
Legislative clarity: Legislative proposals like the CLARITY Act aim to establish clearer divisions between CFTC and SEC authority, providing statutory guidance rather than relying on enforcement actions and case law. Such legislation could provide the certainty markets have been seeking.
Regulatory coordination: The September 2025 joint SEC-CFTC statement reflects growing coordination between agencies. This cooperative approach could produce more coherent and predictable oversight.
Global harmonisation: As more jurisdictions develop crypto frameworks, there's increasing pressure to align approaches internationally. Complete harmonisation is unlikely, but common principles around disclosures, market abuse, and investor protection may emerge.
The classification debate reflects deeper questions about crypto's nature and purpose. Is it primarily an investment vehicle requiring securities-style protection? A new form of digital commodity enabling peer-to-peer transactions? Or something that transcends traditional categories?
The answer varies by asset and use case. Bitcoin's role as digital gold suggests commodity treatment. Governance tokens sold to fund protocol development look more like securities. Payment stablecoins might be neither, falling under money transmission rules instead.
How CoinCover helps institutions build trust
In this evolving regulatory landscape, institutions need resilience. As crypto regulation matures and the commodity versus security question continues to be refined, the infrastructure supporting digital assets must meet high standards of security and compliance.
CoinCover provides institutional-grade protection for digital assets. Whether assets are classified as commodities, securities, or something in between, robust custody and security solutions support institutional participation. Partner with CoinCover to safeguard your digital future and build the trust that enables institutional adoption.
