As the Digital Asset Market Clarity Act advances out of the US Senate Banking Committee and moves closer to becoming law, long-standing questions of regulatory clarity take on renewed urgency. In the United States, regulators and courts are trying to fit digital assets into legal categories designed for a financial era long gone. At the centre of these efforts is the question of appropriate legal classification: whether certain tokenized assets should be treated as securities, commodities or payment instruments as forms of money. While these may sound like mere technical legal distinctions, they carry real consequences. Legal classification determines who regulates a financial instrument, which obligations apply to its issuer and to what extent private digital assets can enter domains traditionally tied to monetary authority.
The consequences of this classification were evident recently, when reports that US law makers could restrict stablecoin arrangements offering yield resulted in a sharp decline in the stock price of Circle Internet Group, an issuer of USDC. This episode shows how quickly questions of legal classification can shape market outcomes. As other jurisdictions look to the United States’ approach for guidance, the risk is that solutions developed within a particular legal and financial system could be adopted elsewhere without sufficient regard for the institutional assumptions that make them work.
At the centre of the United States’ approach is an interesting idea: an asset’s legal status need not remain fixed throughout its life cycle. Under certain conditions, an instrument may begin as part of an investment contract subject to securities law, while it may later or simultaneously be treated as a commodity, once the managerial or promotional efforts of the original investment are no longer essential to its value. For example, an oil and gas exploration agreement with a partnership interest in the drilling program that is subject to securities law can coexist with a separate commodities contract for the oil produced from the same venture, with each instrument governed by its respective regulatory framework. Recent proposals and joint guidance from the Securities and Exchange Commission and the Commodity Futures Trading Commission have sought to make that transition more explicit by implementing a regulatory hand-off from one authority to another once the investment relationship with the issuer is deemed to have ended.
This “decoupling” strategy, separating an asset from the fiduciary relationship that initially defined it, is not entirely new. Financial law has long distinguished between assets and the legal arrangements built around them. However, applying this logic to digital assets at scale depends on conditions that are not universally present. Essentially, it requires regulators to determine when a fiduciary relationship has truly ended, to transfer oversight to a specialized commodities trading regulator without gaps or loss of accountability, and to rely on markets deep enough to sustain trading once the primary relationship with the issuer is no longer central to the asset’s value.
Where those conditions exist, this decoupling approach may be manageable. In systems with deep capital markets, clear regulatory divisions and currencies that already benefit from strong global network effects, the shift from securities to commodity treatment, as well as periods when an instrument may effectively straddle both classifications, can be absorbed without significant disruption. Market liquidity can sustain trading even as the issuer’s importance declines or the fiduciary relationship ends; regulatory authority can shift or overlap without creating gaps in oversight; and the broader financial system can accommodate new instruments without undermining existing channels of credit and settlement. In such environments, legal classification may, at least in part, track the asset’s evolving economic role.
However, digital assets such as stablecoins bring this presumed seamless transition into sharp focus. Unlike many digital tokens, stablecoins depend on the quality of the reserves, ongoing management efforts and continued confidence in the institution behind them. As such, their value does not stand apart from the entity that supports and issues them in the first place, even when they are described as non-security crypto-assets, payment instruments or commodities. In this sense, the fiduciary relationship does not disappear and is not expected to end. In fact, the relationship is reflected in the continued dependence on the issuer’s balance sheet, its management of reserves and its ability to honour redemption requests. All of these influence the network effects necessary for the adoption of stablecoins.
Why the Model Doesn’t Travel
For countries without the same market depth, regulatory coordination or monetary reach as the United States, adopting a similar approach may not produce the same results. Rather than clarifying the regulatory landscape, it may further blur it, thereby weakening oversight, eroding economic sovereignty and complicating the allocation of responsibility as these instruments cross borders. This dynamic is already visible in stablecoins, most of which are backed by US dollars and whose network effects extend beyond their domestic systems.
In more pronounced cases, privately issued digital instruments that are treated as both securities and commodities in the United States may begin to function as alternative stores of value, as well as transaction and investment media, beyond their borders. As these instruments circulate, they can reallocate liquidity away from domestic financial institutions and into external or less regulated channels, with implications for credit intermediation, market structure and the effectiveness of monetary policy transmission. While these effects are increasingly well understood, the more difficult question arises when the relationships underpinning their classification as securities or commodities become unclear, making it harder to determine where such relationships exist, who is responsible and how such instruments should be governed.
In a global financial system that is increasingly heterogeneous, and in which new “actors” and “agents” — including AI-driven systems — may enter markets without clear legal status, the basis for legally accepted or recognized fiduciary responsibility becomes less stable. The decoupling logic in the United States, which supports the transition from securities to commodities, depends on the idea that reliance on an identifiable actor can come to an end. Yet in contexts where market activity is increasingly shaped by systems that cannot bear duties or be held legally accountable, the reliance on an identifiable actor does not disappear entirely; it simply becomes harder to locate, and in some cases, impossible to assign.
Before codifying the United States’ approach into legislation and adopting a similar coordinated regulatory framework, policy makers from all countries would be well advised to consider whether the conditions that support it are present in their own systems. Ultimately, what appears to be a flexible solution to a classification problem may, in practice, be a context-specific strategy. More importantly, it could be a solution that acts as an extension of US policy influence rather than as a framework for adoption by jurisdictions seeking to preserve economic sovereignty.
