SEC and CFTC sign memorandum to end the battle over cryptocurrency regulation dominance

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) officially signed a Memorandum of Understanding on Wednesday, agreeing to establish closer coordination mechanisms in financial market regulation. Both agencies explicitly stated that, with the rise of cryptocurrencies, on-chain automation, and digital infrastructure, traditional jurisdiction boundaries have continued to blur, making this a “critical moment” to take coordinated action.

Core Commitment of the Memorandum: From Turf Wars to Collaborative Cooperation

(Source: Mike Selig X)

Long-standing regulatory jurisdiction disputes between the SEC and CFTC revolve around the seemingly simple yet practically complex question: “Is this asset a security or a commodity?” The emergence of cryptocurrencies has made this issue even more complicated—the same token can be classified as different asset types depending on the context, leading to inconsistent or even conflicting compliance requirements for industry participants.

The core commitments of this memorandum include two levels. First, both agencies will strive to provide regulatory clarity based on the “technology-neutral principle,” ensuring that regulation does not differ due to technological form. Second, they will share information and data on issues involving “joint regulatory interests” to better fulfill their respective regulatory responsibilities, rather than acting independently or opposing each other.

Minimal Effective Dose: A Fundamental Shift in Regulatory Philosophy

The most notable aspect of this memorandum is the clear declaration by both agencies to adopt a “Minimum Effective Dose” (MED) regulatory strategy. Borrowed from pharmacology—referring to the lowest dose of a drug that produces the desired therapeutic effect—in the regulatory context, it means both agencies commit to regulating with the least market intervention necessary to achieve regulatory goals.

This philosophical shift stems from a sober recognition of the international competitiveness of U.S. financial innovation. Both agencies state they are committed to fostering innovation while maintaining market integrity and remaining competitive in global markets. Beneficiaries include:

• Trading Platforms and Clearinghouses: Existing cross-platform operations will gain clearer compliance boundaries.
• Data Repositories: Regulatory jurisdiction over on-chain data will be more clearly defined.
• Collective Investment Tools: Funds and ETF-like crypto products will face more unified regulatory standards.
• Dealers and Intermediaries: Entities operating across securities and derivatives frameworks will no longer need to navigate conflicting compliance requirements.

Practical Significance for the Cryptocurrency Industry

The signing of this memorandum occurs against the backdrop of both agencies having already adopted a series of pro-cryptocurrency policies: establishing dedicated crypto working groups and advisory committees to support the ongoing development of cryptocurrencies, AI, and other emerging technologies in the U.S., aligning with the Trump administration’s goal of making the U.S. the “Global Crypto Capital.”

The memorandum specifically mentions that both agencies are committed to providing a “suitable regulatory framework” for crypto assets, indicating that industry participants can expect clearer policy guidance on the classification of cryptocurrencies in the future, reducing the need to make major business decisions in legal gray areas. This aligns closely with the legislative direction of the currently pending Senate “CLARITY Act.”

Frequently Asked Questions

Q: What exactly does the “turf war” between the SEC and CFTC refer to?
For a long time, the SEC has jurisdiction over “securities,” while the CFTC oversees “commodities” (including commodity futures and derivatives). Since crypto assets do not fully fit into either traditional category, both agencies claim jurisdiction over certain tokens or crypto-related activities, leading to duplicated registration requirements, inconsistent compliance standards, and legal uncertainty. This significantly hampers innovation and the U.S.'s global competitiveness.

Q: What practical impact does the “Minimum Effective Dose” regulatory strategy have on crypto companies?
In practice, this means the SEC and CFTC pledge to prioritize “necessity” over “ability” when creating rules, avoiding imposing restrictions beyond what is needed to achieve regulatory objectives. For crypto companies, this theoretically translates to fewer redundant compliance burdens, faster regulatory approval processes, and clearer business boundaries, allowing them to operate confidently within the U.S. legal framework.

Q: Does this memorandum render the “CLARITY Act” unnecessary?
No, the memorandum and the CLARITY Act serve different roles. The memorandum is an administrative coordination document between two regulatory agencies, outlining how they will cooperate but not legally changing existing laws. If passed, the CLARITY Act would explicitly define the regulation of crypto assets through legislation, providing stronger legal certainty and permanence. The memorandum can be seen as a transitional arrangement to fill regulatory gaps during the legislative process.