Sidley Blockchain Bulletin April 2025

1. SEC Staff Provides Guidance on Certain Crypto Asset Activities That Are Not Securities Transactions
2. CFTC Withdraws Digital Asset Advisories, Reaffirms Consistent Treatment of Derivatives Products
3. Banking Regulators Clear Path for Crypto Asset Activities
4. UCC Minute: Leveraging Recent Changes in Commercial Law for Digital Assets
5. Hashing it out: A Byte on Tokenized Real-World Assets

1. SEC Staff Provides Guidance on Certain Crypto Asset Activities That Are Not Securities Transactions

As part of the SEC’s renewed efforts to support blockchain innovation in the United States, the staff from the SEC Division of Corporation Finance (Staff) issued three statements clarifying the application of federal securities laws to crypto assets. Each statement addresses specific categories of crypto asset transactions that the Staff does not consider to be securities offerings requiring registration under the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act). We anticipate this is only the start of SEC guidance on these issues, with more to come from the Staff and the Commission related to blockchain guidance and rulemaking, especially after the SEC receives additional industry feedback in response to Commissioner Hester Peirce’s statement requesting public input and the Crypto Task Force’s ongoing series of roundtable discussions.¹

Meme coins. The first statement, published on February 27, indicates the Staff generally does not view “meme coin” transactions as securities transactions. According to the statement, a “meme coin” is a type of crypto asset inspired by internet memes, characters, current events, or trends and typically is purchased for entertainment, social interaction, and cultural purposes. The Staff reasoned that meme coins do not meet the “investment contract” criteria established by the Supreme Court in SEC v. W.J. Howey Co.,² as their value arises from speculative trading or sentimentality rather than relying on the promoter’s efforts to develop an enterprise using pooled funds.

Proof-of-work blockchains. The second statement, issued on March 20, explains the Staff’s views that certain crypto asset mining activities, specifically those involving proof-of-work blockchain networks, do not constitute securities offerings under federal securities laws. “Proof-of-work” is a consensus mechanism that incentivizes the validation of transactions on a blockchain network by rewarding network participants, called “miners,” who provide computational resources to the network. This guidance covers both activities performed independently and collectively as part of “mining pools.” According to the Staff, these activities fail the Howey test because miners rely primarily on the computational resources they themselves provide to receive rewards for validating transactions and maintaining network security. The Staff writes that mining is “ministerial” in nature (as opposed to entrepreneurial), and the efforts of operators of mining pools are similarly ministerial. The Staff’s guidance is limited to proof-of-work consensus mechanisms and does not address any other consensus mechanisms that power other blockchains in use.

Stablecoins. The Staff issued a third statement on April 4, describing the Staff’s rationale for concluding that offers and sales of “covered stablecoins” do not involve the offer and sale of securities under the Securities Act or Exchange Act based on analyses of whether such transactions involve the offer of a “note” under Reves v. Ernst & Young³ or investment contract under Howey. Covered stablecoins are limited to stablecoins that can be redeemed for U.S. dollars (USD) on a one-for-one basis (i.e., one stablecoin to one USD) and are backed by assets held in a reserve that are considered low-risk and readily liquid with a USD value that meets or exceeds the redemption value of the stablecoins in circulation. Stablecoins that are designed to maintain a stable value through another mechanism (e.g., algorithmic stablecoins), designed to maintain a stable value relative to an asset other than USD (e.g., non-USD fiat currencies or commodities), and stablecoins designed to provide holders with yield, interest, or other passive income are not covered by the statement. The guidance comes as at least two major stablecoin bills are being considered in Congress, with the GENIUS Act passing out of the Senate Banking Committee on March 18 and the STABLE Act passing out of the House Financial Services Committee on April 2.

SEC Commissioner Caroline Crenshaw criticized the Staff’s guidance, saying the meme coin statement lacked clarity in defining meme coins or distinguishing them from other crypto assets. She described the mining statement as flawed due to assumptions about miners’ financial motivations and their reliance on managerial efforts of others. Her critique of the stablecoin statement was particularly forceful, with Commissioner Crenshaw calling the Staff’s analyses legally and factually flawed, as she questioned what, if any, existing stablecoins actually meet the stated criteria. She also noted that the statement from Staff of the Division of Corporation Finance did not address issues related to the market structure for stablecoins, including the role that intermediaries such as trading platforms play. Crenshaw further emphasized that each of these Staff statements represents limited, fact-specific applications of the Howey test and urged caution regarding their narrow scope.

The three Staff statements each came with the standard disclaimer that like all staff statements, it has no legal force or effect. On April 5, Acting Chair Mark Uyeda issued a statement via the SEC’s official X account that he was asking the Staff to review certain statements concerning digital assets made during prior administrations — including the “Framework for ‘Investment Contract’ Analysis of Digital Assets” and Staff response to the Wyoming Division of Banking opinion on the status of state-chartered trust companies as “qualified custodians” under the Investment Advisers Act — to identify whether they should be “modified or rescinded consistent with current agency priorities.”⁴

2. CFTC Withdraws Digital Asset Advisories, Reaffirms Consistent Treatment of Derivatives Products

On March 27 and 28, the staff of the Commodity Futures Trading Commission (CFTC) withdrew two advisories related to digital asset derivatives.⁵ The move implies the CFTC no longer sees a need to treat digital asset derivatives differently from other types of derivatives listed on CFTC-regulated markets. Instead, the agency emphasized that its existing rules under the Commodity Exchange Act (CEA) are sufficient to govern listing, trading, and clearing of derivatives, regardless of the nature of the assets underlying the derivatives.

Advisory 23-07 (Clearing of Digital Assets)

Advisory 23-07, issued in 2023, had highlighted areas of focus for the Division of Clearing and Risk (DCR) in reviewing clearing activities for digital asset products, including system safeguards and physical settlement. In withdrawing the advisory, DCR explained that it wanted to avoid suggesting that digital asset derivatives are subject to different standards. The DCR staff reaffirmed that its oversight of clearinghouses applies equally to all products, including those involving digital assets.

Advisory 18-14 (Virtual Currency Listings)

Advisory 18-14, issued in 2018, provided guidance on staff expectations for how exchanges and clearinghouses should approach listing virtual currency derivatives. In withdrawing the advisory, the Division of Market Oversight (DMO) and DCR pointed to increased experience with these products and growing market maturity. DMO and DRC staff emphasized that existing regulatory standards remain in place and continue to apply to digital asset derivatives just as they do to other contracts.

3. Banking Regulators Clear Path for Crypto Asset Activities

In March, the OCC and FDIC each took action to allow supervised institutions to engage in certain crypto asset activities without OCC supervisory nonobjection or FDIC approval, respectively. The OCC rescinded Interpretive Letter 1179, which had required supervisory nonobjection for supervised entities to engage in certain crypto asset custody, distributed ledger, and stablecoin activities.⁶ The OCC reaffirmed that these crypto asset custody, distributed ledger, and stablecoin activities remain permissible. Similarly, the FDIC rescinded a prior Financial Institution Letter (FIL-16-2022), which instituted a prior notification requirement for FDIC-supervised institutions that wished to engage in crypto-related activities; FDIC-supervised institutions no longer need prior FDIC approval to engage in permissible crypto-related activities.7  The FDIC stated that crypto-related activities "include, but are not limited to, acting as crypto asset custodians; maintaining stablecoin reserves; issuing crypto and other digital assets; acting as market makers or exchange or redemption agents; participating in blockchain- and distributed ledger-based settlement or payment systems, including performing node functions; as well as related activities such as finder activities and lending.”

Acting Chair of the FDIC Travis Hill recently highlighted the agency's new, more open-minded approach toward digital assets and blockchain innovation, emphasizing that the prior notification requirement had effectively restricted many banks from engaging in crypto-related activities. The FDIC’s new guidance aims to simplify processes for banks to launch crypto-related products, treating these activities similarly to other permissible banking activities, with expectations that institutions manage associated risks and maintain dialogue with supervisory teams.

However, it remains unclear how much weight should be placed on the FDIC’s initial statement on permissible activities, as the agency has not provided explicit analysis under Section 24 of the Federal Deposit Insurance Act, which limits state bank activities as principal to those permissible for national banks. The OCC also rescinded its participation in certain earlier interagency releases addressing crypto asset risks, while the FDIC has indicated an intention to revisit this prior guidance. Furthermore, the Acting Chair indicated in his remarks that additional guidance from the FDIC is anticipated, particularly around the use of public, permissionless blockchains, stablecoin regulatory frameworks, tokenized real-world assets, and liquidity risk management associated with these emerging technologies.

4. UCC Minute: Leveraging Recent Changes in Commercial Law for Digital Assets

As the regulatory environment shifts, corresponding changes in commercial law — including the Uniform Commercial Code (UCC) — have lowered the risks and created new opportunities for transacting in digital assets. UCC Article 12, which has been enacted by 25 states (including Delaware, California, and Illinois as well as the District of Columbia) and introduced in several more, facilitates the use of digital assets by fixing the commercial law plumbing to provide greater legal certainty for transactions involving digital assets.⁸

When considering how to react to regulatory changes, it is important to also review the following steps to take full advantage of the recent updates to the UCC and other aspects of commercial law:

1. Check the governing law of your agreements, the jurisdictions where your counterparties are based, and where they operate to maximize the likelihood that the new UCC rules will apply to your transactions.
2. Establish control environments under UCC Article 8 (through a securities intermediary) or Article 12 (directly) to perfect your security interests in margin and other collateral and to enable you to make purchases free and clear of liens or other encumbrances.
3. Evaluate the potential benefits of tokenizing securities, accounts receivable, and payment intangibles to take advantage of the new rules introduced in connection with UCC Article 12, including the rules for controllable electronic records.
4. Revisit custody arrangements and your bankruptcy analysis to ensure they are aligned with current law and take full advantage of all legal opportunities.

Sidley lawyers have been deeply involved in the drafting process for the UCC amendments and are happy to help you work through your legal strategy as the law around digital assets evolves.

5. Hashing it out: A Byte on Tokenized Real-World Assets

As regulators embrace the use of blockchain technology, many companies across different industries are likely to engage in novel activities involving crypto assets. One use case generating early interest is tokenized real-world assets (RWAs). To that end, we are providing a brief primer on tokenized RWAs.⁹

The term “tokenized RWAs” refers to the digital representation of physical or intangible assets utilizing a token recorded on a blockchain. A wide range of RWAs can be tokenized, including real estate, commodities, art, and intellectual property — but also financial assets, such as currency or securities. Tokenizing assets using blockchain technology enables efficiencies in recording, trading, transferring, and management of assets. Tokenized assets may also be pledged as collateral and programmed into smart contracts.¹⁰

Importantly, tokenizing a RWA does not change the nature of the asset itself. Securities are securities, whether represented on a paper certificate, a centralized registry, or a blockchain network. However, tokenized RWAs are different from “native” crypto assets, which do not represent other assets and exist only within the context of the relevant blockchain network.

While tokenization does not change the nature of an asset, the use of blockchain technology as a digital format may nevertheless raise questions for market participants as they consider regulatory, legal, and operational requirements.

Sidley Knowledge Management Lawyer Daniel Engoren contributed to this Sidley Update.

¹ The next roundtable, Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading, is scheduled for this Friday, April 11.

² 328 U.S. 293 (1946).

³ 494 U.S. 56 (1990).

⁴ The statements to be reviewed include Framework for “Investment Contract” Analysis of Digital Assets (Apr. 3, 2019), Staff Statement on WY Division of Banking’s “NAL on Custody of Digital Assets and Qualified Custodian Status” (Nov. 9, 2020), Division of Examinations’ Continued Focus on Digital Asset Securities (Feb. 26, 2021), Staff Statement on Funds Registered Under the Investment Company Act Investing in the Bitcoin Futures Market (May 11, 2021), and Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets (Dec. 8, 2022), in addition to two statements on Covid-19.

⁵ See CFTC Release No. 9059-25 (Mar. 28, 2025); CFTC Release No. 9060-25 (Mar. 28, 2025).

⁶ See OCC Bulletin 2025-2 (Mar. 9, 2025).

⁷ See FDIC FIL-7-2025 (Mar. 28, 2025).

⁸ See 2022 Amendments to the UCC, Uniform Law Commission (as of April 6, 2025).

⁹ See also Testimony of Lilya Tessler before the U.S. House Financial Services Committee’s Subcommittee on Digital Assets, Financial Technology and Inclusion, Next Generation Infrastructure, How Tokenization of Real-World Assets Will Facilitate Efficient Markets (Jun. 5, 2024).

¹⁰ See also Kenny S. Terrero, “Atomic Settlement: Enabling Securities Transactions in Warp Speed,” The Journal of Federal Agency Action (Nov. – Dec. 2024).