SEC May Soon Identify Non-Security Digital Assets – Which Crypto Will Get Clearance First?

The U.S. Securities and Exchange Commission (SEC) is on a mission to patch up the regulator's strained relationship with the cryptocurrency industry, and as part of such efforts, it will prioritize the identification of digital assets that it deems are non-securities.

Commissioner Hester Peirce, who also headed the recently formed crypto-centric Task Force in the regulatory agency, said in a statement Tuesday that among the new SEC's priorities was the resolution of questions over the security status of digital assets.

What "Crypto Mom" says the SEC will do

Peirce, lovingly called "Crypto Mom" by the community, acknowledged that it will take time for everything around digital assets to settle. However, she noted that the commission staff were prioritizing 10 specific factors for now, one of which was the legal status of cryptocurrencies.

"The status of crypto assets under the securities laws is fundamental to resolving many other questions. The Task Force is working hard to examine different types of crypto assets," she wrote.

While her statement regarding the security status of crypto and digital assets was quite short and lacked detail, it could be a positive signal toward the resolution of some major cases that the SEC under former Chair Gary Gensler initiated over the years.

Which assets will get non-security status first?

Peirce did not provide further details about the work being done regarding the identification of non-security digital assets. On the other hand, there were specific crypto coins and tokens at the center of the previous SEC leadership's non-security cases.

Chief among all is XRP, the native token of the XRP Ledger.

Since late 2020, the XRP has been battling with the SEC to get a ruling from the court over the altcoin's legal status. In mid-2023, a federal judge ruled that XRP was not a security when offered on exchanges.

The financial regulator appealed the decision last month, before Gensler officially stepped down from his chairmanship role on Inauguration Day.

Another major crypto asset that may also be prioritized for non-security assessment is Ethereum (ETH), the world's second-largest cryptocurrency by market value.

Following the approval of Ethereum exchange-traded funds (ETFs), the SEC still did not clarify whether ETH is a security or not. Gensler repeatedly refused to answer questions about the asset's security status, even under oath and in spite of pressure from lawmakers.

It remains to be seen whether XRP and ETH will finally get status clarity under the new SEC.

Paul Atkins, who was nominated by President Donald Trump to replace Gensler, has yet to be confirmed by the Senate, but Acting Chair Mark Uyeda appeared to be doing a great job.

Since becoming acting chair, Uyeda's SEC has moved fast -- it rescinded the divisive SAB 121 bulletin that discouraged banks from engaging with crypto-related business, and also approved Bitwise's application for a combined Bitcoin and Ethereum ETF.

If it moves at the same speed as it has with SAB 121 and Bitwise's BTC and ETH ETF, the SEC may soon provide legal clarity on some of the market's most valuable crypto assets.