Crypto
Explainer: What makes a crypto asset a security in the US?
What did the Ripple judge say?
US District Judge Analisa Torres in New York found some digital token sales by Ripple did not violate the law as alleged by US Securities and Exchange Commission. The SEC sued Ripple for conducting an unregistered offering of $1.3 billion in XRP between 2013 and 2020. Torres ruled that Ripple’s sales on public exchanges to retail investors were not offers of securities under the law because purchasers did not have a reasonable expectation of profit tied to Ripple’s efforts.
Those sales were “blind bid/ask transactions,” she said, in which buyers “could not have known if their payments of money went to Ripple, or any other seller of XRP.”
It was the biggest win for a cryptocurrency company in a case brought by the SEC. The regulator got a partial victory because Torres also ruled that Ripple violated securities laws when it sold XRP directly to sophisticated investors such as hedge funds.
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What has the SEC been alleging?
The regulator has brought more than 100 enforcement actions against crypto companies, claiming digital assets are securities. The biggest case was brought this year. The SEC said Coinbase, the largest US cryptocurrency platform, allowed users to trade at least 13 crypto assets that should have been registered as securities, including tokens such as Solana, Cardano and Polygon. Coinbase denied the allegation.
Industry players have insisted that most cryptocurrencies – which operate on a database shared across a network of computers, known as a blockchain – do not fit the US legal definition of securities. They say the SEC has been vague and inconsistent and have called for new regulations or laws.
What is a ‘security’ under US law?
To SEC’s contends crypto assets are securities, citing a US Supreme Court case from 1946 dealing with investors in Florida orange groves owned by the W. J. Howey Co.
The court ruled that “an investment of money in a common enterprise with profits to come solely from the efforts of others,” is a kind of security called an investment contract.
The SEC had jurisdiction to seek to prevent Howey from selling to out-of-state investors fractional land interests with a contract to provide profit from the harvest, the court said.
Securities, unlike assets such as commodities, are strictly regulated and require detailed disclosures to inform investors of potential risks.
What have other judges said?
Many of the SEC’s crypto-related cases have ended in settlements, with companies paying fines and agreeing to follow US law or exiting the US market.
Before the Ripple decision, judges in the few cases decided in court agreed with the SEC that specific crypto assets were securities.
Those rulings said developers’ statements tying the value of their digital assets to efforts to grow or maintain the associated blockchain systems showed investor profits depended on the “efforts of others.”
Courts have also decided that investors in those assets participated in a “common enterprise” because the funds they spent were pooled by the token issuer and used to develop relevant systems.
What about Bitcoin?
Bitcoin is not considered a security because its anonymous and open-source origins mean investor profits are not dependent on the efforts of developers or managers, said Carol Goforth, a law professor at the University of Arkansas.
Some blockchain projects have tried to fund their operations in two stages, by offering securities under SEC regulations and later giving or selling those investors cryptocurrency after building a functional blockchain.
Goforth said the developers hoped that approach would remove the “common enterprise” element, but she added the SEC has never clarified what it would take to convert a security to a non-security.
WASHINGTON, D.C. — Bernie Moreno’s victory in the Ohio Senate race was a big win for the cryptocurrency industry, which spent more than $40 million supporting his candidacy. Now in office, Moreno said he would support legislation the industry is seeking that would govern how it is regulated.
What You Need To Know
- Sen. Bernie Moreno said he would support new legislation to govern how the cryptocurrency industry is regulated
- The crypto industry spent tens of millions of dollars to support Moreno in the Ohio Senate race
- Moreno’s support of laws sought by crypto interests is a stark contrast from his Democrat predecessor, former Sen. Sherrod Brown
Moreno has long been involved with the crypto industry. He has a background in blockchain, the same technology used to for cryptocurrency. He previously founded Champ Titles, a digital car titling company that was among the first to use blockchain for digital titles.
The cryptocurrency industry also helped fuel his Senate win. Super PAC Defend American Jobs spent $40.1 million on the race, more than any other outside group. The super PAC is affiliated with Fairshake, another super PAC that is funded by Coinbase, Ripple and other crypto companies.
Moreno’s support of laws sought by crypto interests is a stark contrast from his Democrat predecessor, former Sen. Sherrod Brown.
As Chairman of the Senate Banking Committee, Brown blocked advancing a bill to loosen the regulation of some crypto assets, known as the Financial Innovation and Technology for the 21st Century Act, or FIT 21. The bill would reclassify many kinds of crypto as commodities rather than securities. Rules for commodities, examples of which include oil, wheat or electricity, are generally looser than those for financial securities like stocks or bonds. The bill passed the House last Congress, but remained stalled in the Senate Banking Committee.
Moreno now sits on the Banking Committee, as well as the Senate Committees for Homeland Security and Governmental Affairs; Commerce, Science and Transportation; Budget; and Banking, Housing and Urban Affairs.
“I got the committee assignments I wanted,” Moreno said. “Senator Thune was kind enough to get me on Banking.”
Moreno disagreed with the stance Brown had taken against legislation like FIT 21, countering that the rapidly growing cryptocurrency industry needs better clarification on regulations.
“Crypto is not looking to be deregulated. Crypto is looking to be treated fairly, to have transparent, consistent regulations that treat everybody equally and fairly. That’s what we want,” he said. “Look, at the end of they day, I understand how the technology works and I understand the industry. My opponent had no idea.”
With a new Congress, the House would have to re-introduce and pass another cryptocurrency regulation bill. FIT 21 previously received bipartisan support, with nearly all Republicans and about a third of Democrats voting for it.
Similar legislation would likely move more quickly this Congress, in which Republicans control the House, Senate and White House.
Crypto
Cryptocurrency options in 401(k) plans: Here's what to know to make the most of your workplace retirement plan
The rally in bitcoin and other cryptocurrency prices has generated excitement among some investors, but investment advisors are largely still skeptical that those volatile assets belong in a 401(k) plan or other qualified retirement savings plans.
Crypto was one of the fastest-growing categories of exchange-traded funds in 2024. The most popular of these funds, the iShares Bitcoin Trust ETF (IBIT), has ballooned to over $50 billion in total assets.
Although crypto is a small part of the 401(k) plan market, it could grow substantially in 2025.
President-elect Donald Trump has suggested he will create a strategic reserve of bitcoin for the U.S. and has nominated Paul Atkins, a cryptocurrency advocate, to chair the Securities and Exchange Commission. The SEC’s approval of spot bitcoin and ethereum exchange-traded funds in 2024 was a key change for the industry.
The law covering 401(k) plans requires plan sponsors to act as fiduciaries, or in investors’ best interest, by considering the risk of loss and potential gains of investments. The Labor Department has cautioned fiduciaries to exercise “extreme care” before adding crypto options to a 401(k) plan’s core investments.
Labor Department officials, however, haven’t required fiduciaries to select and monitor all investment options, like those offered through self-directed brokerage windows, according to the Government Accountability Office. Nearly 40% of plans now offer brokerage windows in their 401(k) accounts, according to a 2023 survey by the Plan Sponsor Council of America.
Pros and cons of crypto in a 401(k) plan
Fernando Gutierrez-Juarez | Picture Alliance | Getty Images
Views are mixed about how much crypto to add to retirement savings or if it’s wise to allocate any at all.
Some financial advisors say crypto can work for a 401(k) plan because its movements are unconnected to the stock market and it functions even if a fiat currency is devalued.
“Crypto should be a part of a 401(k) plan because it’s a non-correlated alternative asset class,” said Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, D.C.
“With that said, investors need to ensure that they take their risk tolerance and time horizon into account which will define the target allocation,” said Johnson, who is also a member of the CNBC Financial Advisor Council. “The more volatile an asset class is, the less you need of it in the portfolio because you presumably get more bang for your buck.”
Johnson recommends cryptocurrencies range from 2% to 8% of an investor’s portfolio.
Other experts point to volatility and risk as reasons to be conservative.
“People saving for retirement should probably be even more conservative, because adding crypto to a 401(k) plan would significantly increase the risk that your retirement nest egg could suffer a large loss at the wrong time,” said Amy Arnott, a chartered financial analyst and portfolio strategist with Morningstar Research Services.
Morningstar found that since September 2015, bitcoin has been nearly five times as volatile as U.S. stocks, and ether nearly 10 times as volatile. That type of volatility adds a large risk to a portfolio even with a small amount invested.
401(k) contribution limits for 2025
Regardless of what assets are in a 401(k) plan, there are limits to how much you can contribute. For 2025, an employee can contribute up to $23,500 in a 401(k) and other employer-sponsored plans — that’s $500 more than in 2024.
People age 50 or older can make a “catch-up contribution” of up to $7,500. And those age 60 to 63 years old can supersize that, with a catch-up contribution of up to $11,250 for 2025.
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Crypto
Prospects for Improved Relations Between the Cryptocurrency Industry and Banks Under the Trump Administration
With just over two weeks left until Donald Trump takes office, there are prospects that the relationship between the cryptocurrency industry and the banking sector, which has been at odds, could change positively.
According to The Block, a cryptocurrency-focused media outlet, TD Cowen predicts that under the Trump administration, banks may see an improvement in their relationship with the cryptocurrency industry.
Jaret Seiberg and the Washington Research Group stated in a report, “Banks have the responsibility to comply with Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) regulations and manage risks such as liquidity and concentration,” adding, “If the Trump administration takes power, it is inevitable that the relationship between traditional finance and the cryptocurrency industry will change positively.”
However, they also mentioned that some banks may still take a cautious stance. They said, “Some banks may still see risks in increasing relationships with cryptocurrencies,” and “this could be targeted by new banks.” Additionally, stablecoins (assets linked to the value of fiat currency) were highlighted as the cryptocurrency sector that banks would be most interested in, as banks hold cash, making them advantageous for issuing stablecoins.
In the U.S., there has been ongoing conflict between the cryptocurrency industry and the traditional financial sector, particularly banks. There have been conspiracy theories suggesting that banks have implicitly enforced cryptocurrency-related sanctions, known as Operation Chokepoint 2.0. Some cryptocurrency figures have claimed that banks have tried to restrict access to traditional financial services for the cryptocurrency industry.
Brian Armstrong, the founder of Coinbase, commented on Operation Chokepoint 2.0, saying, “It actually happened. Unethical and un-American actions occurred under the Biden administration,” and “We are currently gathering evidence from victims through the Freedom of Information Act (FOIA).”
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