U.S. financial authorities have classified major cryptocurrencies including Bitcoin, Ethereum, Ripple, and Solana as digital commodities rather than securities, ending more than a decade of regulatory uncertainty. With the securities classification debate that had weighed on the virtual asset market now resolved, traditional financial institutions face lower barriers to entry and a wave of spot exchange-traded fund products based on various cryptocurrencies is expected.
The U.S. Securities and Exchange Commission announced this on May 17 (local time) when it released draft guidance on the interpretation of federal securities laws regarding certain virtual assets and related transactions. The SEC classified virtual assets into five categories: digital commodities, digital collectibles, digital utilities, stablecoins, and digital securities, specifying that all four categories except digital securities are not securities.
Digital commodities include most coins such as Bitcoin, Ethereum, and Solana, while digital collectibles include meme coins and non-fungible tokens. The SEC determined these assets are not securities because, unlike stocks (equity securities), bonds (debt securities), derivative-linked securities, and investment contract securities, they lack the characteristic of "expectation of profits derived from the efforts of others." Payment stablecoins were also classified as commodities, with only digital securities—tokenized versions of existing stocks and bonds—designated as securities.
The SEC's guidance largely clarifies determinations regarding the securities status of virtual assets, which had previously drawn conflicting rulings from U.S. federal courts. SEC Chairman Paul Atkins said, "After more than 10 years of uncertainty, we are providing market participants with clear standards," adding, "This interpretation will serve as an important bridge for entrepreneurs and investors while Congress pursues bipartisan market structure legislation (the Clarity Act)."
Market observers expect the guidance to accelerate traditional financial institutions' entry into the market now that legal violation risks have been eliminated. Traditional financial firms had previously hesitated to handle virtual assets due to legal risks of being charged with selling unregistered securities. An industry official said, "This has become an opportunity for conservative institutions such as pensions and insurance companies to begin incorporating virtual assets into their portfolios in earnest," adding, "Once institutional capital inflows accelerate, market prices could recover quickly."
Bitcoin prices have risen more than 12% this month alone, driven by institutional capital inflows despite geopolitical crises. This contrasts with weakness in traditional assets, including a 5% decline in gold prices. According to Farside Investors, Bitcoin spot ETFs saw net inflows of $763.4 million last week. With three consecutive weeks of inflows, cumulative net inflows this month exceed $1.3 billion. Another industry official said, "We expect to see an increase in spot ETF product launches based on various virtual assets, not just Bitcoin," adding, "The market will grow even larger."
As virtual asset institutionalization advances further in the United States, calls are growing in South Korea to expedite legislation of the Digital Asset Basic Act (Virtual Asset Phase 2 Law), which remains stalled. Currently, South Korea only has Phase 1 legislation designed to protect virtual asset users. The absence of clear regulations on the virtual asset market has stalled discussions on allowing corporate investment and launching spot ETFs. An official from the domestic virtual asset industry urged legislation, saying, "The gap with global trends is widening amid the regulatory vacuum." Another industry official pointed out, "Current related legislation and discussions are stuck on the issue of restricting major shareholder stakes in exchanges," adding, "The industry is more than just exchanges, so there is a need to expedite legislation."
