The U.S. Securities and Exchange Commission (SEC) plays a pivotal role in regulating the cryptocurrency market, ensuring investor protection, market integrity, and compliance with federal securities laws. As digital assets continue to evolve, the SEC has intensified its oversight, classifying certain cryptocurrencies as securities, enforcing compliance on exchanges, and cracking down on fraudulent activities. 

While the U.S. SEC has the most significant influence on global markets, every country has its own equivalent regulatory body overseeing securities and financial markets, such as the Financial Conduct Authority (FCA) in the UK, the European Securities and Markets Authority (ESMA) in the EU, and the Monetary Authority of Singapore (MAS). 

For businesses operating in the crypto space, understanding the SEC’s role and how it interacts with global regulatory frameworks is crucial to navigating compliance requirements, avoiding legal pitfalls, and ensuring long-term success.

How the SEC Regulates Crypto Assets

The SEC’s primary mandate is to regulate securities markets, protect investors, and maintain fair, orderly, and efficient markets. When it comes to cryptocurrencies, the SEC determines whether a digital asset falls under its jurisdiction based on the Howey Test, a legal framework used to assess whether an asset qualifies as an investment contract (i.e., a security).

1. Classifying Cryptocurrencies as Securities

Under the Howey Test, an asset is considered a security if it involves:

• An investment of money

• In a common enterprise

• With an expectation of profit

• Derived from the efforts of others

The SEC is responsible for classifying and regulating securities in the U.S. financial markets, ensuring compliance with federal securities laws. One of its key roles is determining whether certain digital assets qualify as securities, which it assesses using the Howey Test—a legal framework that evaluates whether a transaction involves an investment contract. 

Based on this test, the SEC has identified many crypto tokens, particularly those issued through Initial Coin Offerings (ICOs) or token sales, as securities. This classification requires issuers to register with the agency or meet specific exemptions to ensure investor protection and market transparency.

However, assets like Bitcoin (BTC) and Ethereum (ETH), which are considered decentralized and not reliant on a central issuer, are generally classified as commodities and fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC). 

Through its oversight, the SEC maintains records of securities, enforces compliance measures, and ensures that cryptocurrency-related financial products adhere to U.S. securities laws.

2. Regulating Crypto Exchanges and Trading Platforms

The SEC oversees securities exchanges and trading platforms to ensure they comply with federal securities laws, protecting investors and maintaining fair, orderly, and efficient markets. Traditional stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq operate under SEC regulations, requiring them to register and adhere to strict reporting, transparency, and compliance standards.

In the crypto sector, the SEC applies similar oversight to exchanges and trading platforms that facilitate the buying and selling of digital assets classified as securities. Platforms offering securities must register as securities exchanges or alternative trading systems (ATSs), ensuring regulatory compliance, investor protections, and proper disclosures. 

However, many crypto exchanges have operated without SEC registration, leading to legal action. Major platforms like Binance and Coinbase have faced lawsuits for allegedly offering unregistered securities and operating as unregulated exchanges, highlighting the SEC’s ongoing enforcement efforts in the crypto space.

3. Enforcing Compliance and Cracking Down on Fraud

The SEC actively investigates and prosecutes companies engaging in fraudulent or deceptive practices across both traditional finance (TradFi) and the cryptocurrency industry. In 2023, the SEC filed 46 enforcement actions related to cryptocurrency against 124 defendants, marking the highest number in a decade.

Notable cases include:

• FTX Collapse: The SEC charged FTX and its founder, Sam Bankman-Fried, with defrauding investors out of billions by misusing customer funds.

• Kraken’s Staking Services: The SEC fined Kraken $30 million and forced it to shut down its U.S. staking services for offering unregistered securities.

4. Oversight of Crypto Asset Custody and Investor Protections

The SEC has introduced custody rules requiring firms managing digital assets to meet strict safekeeping standards. In February 2023, the SEC proposed a “Custody Rule” amendment that would require registered investment advisers to hold crypto assets with qualified custodians.

Recent SEC Actions Shaping Crypto Regulation

Cryptocurrency remains one of the most debated topics in financial regulation due to its rapid growth, evolving technology, and decentralized nature. Unlike traditional assets, which fit neatly within established legal frameworks, crypto presents unique challenges that regulators like the SEC are still grappling with. The core controversies surrounding SEC crypto regulations stem from regulatory uncertainty, jurisdictional disputes, and enforcement actions that have sparked backlash from the industry.

One major issue is the lack of clear classification for digital assets. While the SEC argues that many cryptocurrencies qualify as securities under the Howey Test, industry leaders and legal experts contend that the current laws, written decades before blockchain technology, are ill-equipped to address digital assets.

Another point of contention is the overlap between regulatory bodies. While the SEC claims jurisdiction over crypto assets it deems securities, the Commodity Futures Trading Commission (CFTC) oversees commodities, such as Bitcoin. This regulatory gray area has created friction between agencies, leading to inconsistent enforcement and legal uncertainty for businesses operating in the space.

Furthermore, the SEC’s historical skepticism toward crypto ETFs contributed to years of delays in approving Bitcoin spot exchange-traded products (ETPs). Despite this, in January 2024, the SEC approved 11 Bitcoin spot ETFs, marking a major shift in institutional acceptance of crypto investments. However, the approval process was riddled with debates over market manipulation risks, liquidity concerns, and investor protections.

The SEC’s regulatory stance has evolved in response to market developments, legal challenges, and policy discussions. Some key recent actions include:

• Lawsuits Against Major Crypto Firms: The SEC’s lawsuits against Binance and Coinbase in 2023 sparked widespread regulatory debates, with both companies accused of offering unregistered securities.

• Bitcoin Spot ETF Approvals: On January 10, 2024, the SEC approved 11 spot Bitcoin exchange-traded products (ETPs), signaling increasing institutional acceptance of cryptocurrency investments.

SEC’s Role in Crypto Under the Trump Administration

The regulatory landscape is shifting once again under President Donald Trump, who has expressed stronger support for the crypto industry. In January 2025, Trump signed Executive Order 14178, reversing previous crypto-related directives and explicitly prohibiting the creation of a U.S. central bank digital currency (CBDC). 

The order also called for a 180-day review period to establish a new federal regulatory framework for digital assets, signaling a potential departure from the SEC’s previously aggressive enforcement stance.

Additionally, SEC Acting Chair Mark Uyeda has expanded the agency’s crypto regulation department, forming a task force to develop clearer guidelines for businesses and investors. This move indicates a shift toward a more structured regulatory approach rather than enforcement-first tactics. 

Meanwhile, Senator Cynthia Lummis has taken the lead on shaping digital asset policy as Chair of the Senate Banking Subcommittee on Digital Assets, reinforcing congressional oversight on the SEC’s role in crypto regulation.

How Businesses Can Stay Compliant

For businesses operating in the crypto space, compliance with securities regulations is essential to avoid legal penalties, maintain credibility, and ensure long-term growth. While the U.S. Securities and Exchange Commission (SEC) plays a leading role in shaping global crypto regulations, every country has its own regulatory authority overseeing digital assets. 

Businesses must verify which regulatory body governs their jurisdiction—whether it’s the Financial Conduct Authority (FCA) in the UK, the Monetary Authority of Singapore (MAS), the European Securities and Markets Authority (ESMA), or their respective national regulators.

The first step is determining whether a business’s digital assets qualify as securities under their country’s legal framework. In the U.S., the SEC applies the Howey Test to assess whether a token constitutes a security, while other countries may follow similar or distinct guidelines. 

Companies that issue tokens, operate exchanges, or offer investment products must seek legal counsel to understand their regulatory obligations and avoid potential enforcement actions.

If an offering falls under securities regulation, businesses must register with the appropriate regulator or qualify for an exemption. 

Crypto exchanges, token issuers, and investment platforms must ensure proper licensing and compliance, including adherence to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

Additionally, implementing strong investor protection measures—such as transparent disclosures, risk mitigation strategies, and robust security safeguards—is crucial for regulatory compliance and building trust with both investors and authorities. Businesses should adopt clear terms of service, risk disclosures, and auditing mechanisms to enhance transparency and accountability.

Given the rapidly evolving regulatory landscape, businesses must also stay updated on rulings, enforcement actions, and legislative changes in their operating regions. With governments worldwide tightening digital asset regulations, proactive compliance will be a key factor in navigating the regulatory environment successfully.

By staying informed and aligning with local and international regulations, crypto businesses can avoid legal pitfalls, attract institutional investment, and establish themselves as trusted entities in the financial ecosystem.

The Importance of SEC Compliance

Securities regulators worldwide play a fundamental role in shaping the regulatory landscape for cryptocurrencies, balancing the need for innovation with investor protection. 

As global enforcement actions increase and crypto regulations evolve, businesses operating in the digital asset space must take proactive steps to comply with their respective regulatory authorities. Ensuring compliance is critical for long-term viability, mitigating legal risks, and fostering trust among investors, regulators, and institutional partners.

By understanding their country’s securities laws and aligning with legal requirements, crypto firms can operate with confidence and contribute to the broader adoption of digital assets. Adhering to regulatory guidelines not only prevents penalties but also opens doors for mainstream adoption, institutional partnerships, and sustainable business growth.

For businesses looking for compliance solutions, ChainUp offers regulatory support, risk assessment tools, and secure infrastructure to help crypto firms navigate the evolving regulatory environment. Contact us today to learn how we can assist your business in staying compliant with regional and global regulations.