Eight years ago, on April 29, 2018, I referenced crypto industry founder Emin Gun Sirer while writing about Ethereum (ETH) and its decentralized structure, arguing that it should be treated as a commodity under U.S. law.
For years, uncertainty over whether ETH and other digital assets should be classified as securities or commodities has been a major obstacle to institutional investment. This ambiguity created legal risks, complicated custody solutions, and made compliance difficult, discouraging large-scale participation.
Summary
The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission have issued a joint memorandum classifying most decentralized digital assets, including Ethereum, as commodities under U.S. law.
Oversight is shifting more toward the CFTC, marking a move away from enforcement-led regulation toward a clearer, principles-based approach.
This regulatory clarity is expected to reduce compliance concerns and encourage greater institutional participation in crypto markets.
Early Signals on ETH’s Classification
Two months after my 2018 article, on June 14, 2018, former SEC Director of Corporation Finance William Hinman stated in a speech that, due to Ethereum’s decentralized nature, current sales of ETH were not securities transactions. This suggested ETH functioned more like a commodity, offering temporary clarity.
Legal Battles Over ETH’s Status
Despite this, the absence of formal guidance from the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission led to ongoing legal disputes over whether ETH and similar assets were securities or commodities.
Cases during 2023–2024—including actions involving KuCoin and staking services—highlighted this uncertainty. While some early rulings leaned toward treating such assets as securities, developments in 2025 indicated a shift, with staking increasingly viewed as administrative rather than investment activity.
Landmark SEC–CFTC Memorandum
On March 11, 2026, followed by a joint interpretation on March 17, the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission issued a landmark memorandum of understanding (MOU). This provided the most comprehensive regulatory clarity to date, formally recognizing many decentralized digital assets—including ETH—as commodities.
This move effectively resolved a long-standing barrier to institutional adoption that had persisted since 2018.
The framework represents a shift from “regulation by enforcement” to a principles-based system. It clarifies that most decentralized tokens are not securities and places them primarily under CFTC oversight, allowing them to be traded on regulated derivatives markets.
The CFTC emphasized that assets may be treated as commodities if they are fully decentralized—meaning no single party maintains operational, economic, or governance control. It also acknowledged that tokens initially issued as securities can evolve into commodities once networks become sufficiently decentralized.
Digital Commodities and Market Impact
Under the framework, digital assets tied to functional, decentralized systems are classified as commodities. Sixteen major tokens fall into this category, marking a major shift from earlier regulatory positions.
These include:
Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP, Cardano (ADA), Chainlink (LINK), Avalanche (AVAX), Polkadot (DOT), Hedera (HBAR), Litecoin (LTC), Dogecoin (DOGE), Shiba Inu (SHIB), Tezos (XTZ), Bitcoin Cash (BCH), Aptos (APT), and Stellar (XLM).
Together, these assets represent roughly 78–80% of the total crypto market capitalization as of March 2026, with BTC and ETH alone accounting for nearly 70%.
Broader Token Classification
The MOU also introduces clearer distinctions across digital asset categories:
Digital Commodities: Functional tokens used for transactions or governance are generally not securities under the Howey test.
Digital Collectibles (NFTs): Typically not securities unless fractionalized or marketed with profit expectations tied to managerial efforts.
Digital Tools: Utility-based assets like membership tokens are not considered securities.
Stablecoins: Payment stablecoins regulated under the GENIUS Act are excluded from securities classification.
Digital Securities: Tokenized traditional financial assets remain securities regardless of blockchain use.
Safe Harbor Activities
The framework clarifies that several blockchain activities typically do not involve securities transactions, including:
Mining (proof-of-work validation)
Staking (including custodial and liquid staking under administrative roles)
Wrapping assets across chains
Airdrops where no payment or service is exchanged
Market and Global Implications
This regulatory shift—alongside the GENIUS Act and pending CLARITY Act—marks the end of long-standing jurisdictional conflicts between regulators. It is expected to stabilize the market and encourage crypto activity to return to the United States.
Experts believe this clarity will accelerate tokenization, enabling fractional ownership of assets like real estate, infrastructure, and private credit, improving liquidity and accessibility.
At the same time, global competition is intensifying. While the U.S. is leaning toward stablecoins to maintain dollar dominance, China continues advancing its central bank digital currency initiatives.
Amid ongoing market volatility, sectors such as AI and real-world asset (RWA) tokenization are showing resilience. Larry Fink has described tokenization as the “next generation of markets,” comparing its current stage to the internet in the 1990s and emphasizing its potential to transform global finance.
