U.S. Cryptocurrency Regulation in 2026: A New Regulatory Framework Takes Shape
By Zaher Fallahi, Attorney at Law, CPA
Licensed in California and Washington, D.C.
Los Angeles and Orange County Offices
The United States is entering an important new phase in regulating cryptocurrency and other digital assets.
For much of the industry’s history, businesses, investors, developers, exchanges, and their professional advisers have operated under statutes and regulations largely written before blockchain technology existed. This has produced difficult and sometimes overlapping questions involving securities, commodities, banking, taxation, anti-money-laundering requirements, economic sanctions, and international financial transactions.
Developments in 2026 indicate that the federal government is moving toward a more specifically defined, but still evolving, digital-asset regulatory structure.
Most significantly, on August 18, 2026, the Securities and Exchange Commission (“SEC”) proposed Regulation Crypto Assets, which would establish a specialized securities offering framework for certain investment contracts involving crypto assets. The proposal follows the SEC’s March 17, 2026 interpretation addressing application of the federal securities laws to certain crypto assets and transactions. The Commodity Futures Trading Commission (“CFTC”) joined that earlier interpretation by providing related guidance concerning administration of the Commodity Exchange Act.
At the same time, the Department of the Treasury and Office of the Comptroller of the Currency (“OCC”) are implementing the federal payment-stablecoin framework established by the GENIUS Act, while the CFTC continues considering the future structure of digital-asset regulation within its jurisdiction.
These developments do not eliminate regulatory complexity. In many respects, they make careful classification of digital-asset transactions more important than ever.
A Crypto Asset and an Investment Contract Are Not Necessarily the Same Thing
One of the most important concepts in the SEC’s developing approach is the distinction between a crypto asset itself and an investment contract involving that crypto asset.
In March 2026, the SEC issued an interpretation addressing how federal securities laws apply to certain types of crypto assets and transactions involving them. Regulation Crypto Assets builds upon that interpretation.
Under the proposed framework, the legal analysis does not necessarily end by asking whether a particular token or crypto asset is itself a security. A transaction involving an otherwise non-security crypto asset may nevertheless involve an investment contract subject to federal securities law.
This distinction is significant.
The label placed on an asset, whether “token,” “coin,” “utility token,” or simply “digital asset”, does not by itself determine the legal consequences. The economic substance of the transaction, representations made to purchasers, and the nature of the managerial efforts upon which purchasers may rely can be critically important.
For businesses and their advisers, therefore, the question may increasingly become:
What is the asset, how is it being offered or sold, what representations or promises are being made, and does the surrounding transaction constitute an investment contract?
Two Proposed Exemptions for Crypto Capital Formation
Regulation Crypto Assets would create two new exemptions from Securities Act registration for qualifying covered investment contracts.
Startup Exemption, Up to $5 Million
The first proposed exemption would permit offerings of up to $5 million during a four-year period.
The exemption is designed to provide a pathway for relatively small or early-stage crypto projects to raise capital without undergoing conventional Securities Act registration, while still providing investors with prescribed disclosures and retaining federal anti-fraud and anti-manipulation protections.
The four-year period is noteworthy because it recognizes that a crypto project may require time to develop its network, application, or ecosystem while its promoters or developers continue performing managerial activities associated with the investment contract.
Accordingly, the startup exemption should not be understood as an exemption from regulation. It would instead provide an alternative regulatory pathway with its own eligibility, disclosure, and compliance requirements.
Fundraising Exemption — Up to $75 Million
The second proposed exemption would permit qualifying offerings of up to $75 million during each 12-month period.
Issuers using this larger exemption would face additional requirements, including financial statement disclosure and continuing reporting obligations. Both exemptions would require principles-based narrative disclosures, and issuers would remain subject to the securities laws’ anti-fraud and anti-manipulation provisions.
The practical point is important:
An exemption from securities registration is not an exemption from the securities laws.
Disclosure Becomes Central to Crypto Capital Formation
The SEC proposal also reflects a significant regulatory development: disclosures would be tailored to crypto-related investment contracts rather than simply imposing a conventional public-company disclosure model.
For issuers, this may require meaningful disclosure concerning the crypto asset, the offering, the issuer’s managerial activities, the associated network or application, and material risks.
For investors, these disclosures could be particularly important because the economic value of a crypto asset may depend on factors that differ substantially from traditional equity or debt investments, including technological development, network participation, governance arrangements, cybersecurity, token economics, liquidity, and the continuing activities of developers or promoters.
The SEC describes the proposed framework as requiring principles-based disclosures while retaining the federal securities laws’ anti-fraud and antimanipulation protections.
For founders, developers, attorneys, and accountants, this means that representations and documentation created at the beginning of a crypto project could have regulatory significance years later.
A Potential Path Out of Investment-Contract Status
Perhaps the most consequential conceptual feature of Regulation Crypto Assets is its proposed conditional safe harbor concerning the term “investment contract.”
Under the proposal, once an issuer has completed or permanently ceased the essential managerial efforts it represented or promised to perform, a qualifying issuer could potentially rely upon the safe harbor. If all required conditions are satisfied, the crypto asset would be deemed no longer subject to an investment contract for purposes of the relevant definitions of “security” under the Securities Act and Exchange Act.
This addresses a longstanding issue in cryptocurrency regulation.
Suppose purchasers initially acquire a crypto asset under circumstances in which they depend upon a developer’s promised managerial efforts. At some later point, those efforts may be completed or permanently cease, and the network or application may function without those continuing promises.
Must the securities-law relationship continue indefinitely?
The proposed safe harbor attempts to provide a regulatory mechanism for addressing that question.
Conceptually, the proposal therefore contemplates something resembling a regulatory life cycle:
Capital Formation → Development and Managerial Efforts → Continuing Disclosure → Cessation of the Relevant Managerial Efforts → Potential Separation of the Crypto Asset from the Investment Contract
If adopted, that concept could prove as important as the proposed fundraising exemptions themselves.
Federal Preemption and State Securities Regulation
Digital assets also present an unusual jurisdictional problem because blockchain transactions do not naturally conform to state boundaries.
An offering accessible throughout the United States could otherwise implicate securities registration or qualification requirements in numerous jurisdictions.
Regulation Crypto Assets therefore proposes federal preemption of state securities-law registration and qualification requirements for securities offered or sold pursuant to their exemptions and for certain secondary-market transactions.
This could substantially simplify qualifying nationwide offerings.
Federal preemption, however, should not be confused with immunity from federal or state law. Antifraud, enforcement, licensing, taxation, and other legal requirements may continue to apply depending upon the transaction and parties involved.
An Important Caution: Regulation Crypto Assets Is Only a Proposal
Businesses and investors should pay particular attention to the present status of these rules.
Regulation Crypto Assets is a proposed SEC regulation. It is not presently a final rule.
The SEC issued the proposal on August 18, 2026, under File No. S7-2026-27, Releases Nos. 33-11434 and 34-106150. The SEC currently lists October 20, 2026, as the deadline for public comments.
Accordingly, taxpayers, businesses, and investors should not assume that the proposed exemptions or safe harbor are presently available.
The proposal could be modified before adoption, and congressional legislation could also affect the ultimate regulatory framework.
SEC — Regulation Crypto Assets (Proposed Rule)
The SEC and CFTC Are Only Parts of the Regulatory Picture
The CFTC remains another important federal participant in digital-asset regulation.
The SEC’s March 2026 interpretive release itself included CFTC guidance concerning administration of the Commodity Exchange Act.
More recently, the CFTC’s newly established Innovation Advisory Committee held its inaugural meeting on August 20, 2026. The agenda devoted a session specifically to “Crypto’s Regulatory Evolution: From Uncertainty to Clarity” and identified, among other subjects, the historical absence of a comprehensive federal crypto market-structure framework and the patchwork of state licensing requirements.
CFTC also identifies crypto assets and blockchain technologies as one of its principal current innovation areas.
Thus, practitioners and businesses should avoid treating “crypto regulation” as synonymous with SEC regulation. Depending upon the asset and transaction, commodities and derivatives laws can be equally important.
CFTC — Innovation and Digital Assets
Congress May Ultimately Determine the SEC-CFTC Boundary
Congress has also been considering comprehensive digital-asset market-structure legislation.
The Digital Asset Market Clarity Act of 2025 (H.R. 3633) represents an effort to establish a more comprehensive statutory framework for digital-asset markets and the respective regulatory roles of federal agencies. The House considered H.R. 3633 in 2025, and SEC Chairman Paul Atkins emphasized in connection with Regulation Crypto Assets that congressional market-structure legislation remains important notwithstanding the Commission’s regulatory initiatives.
This is important because agency rulemaking and congressional legislation serve different functions.
An SEC rule can establish requirements within the Commission’s statutory authority, but Congress can more fundamentally define and allocate jurisdiction among federal regulators.
Consequently, Regulation Crypto Assets should be viewed as an important part of a broader regulatory transition, not necessarily its final destination.
Stablecoins Now Have a Separate Federal Regulatory Framework
Payment stablecoins present a different regulatory category.
The GENIUS Act, enacted July 18, 2025, established a federal regulatory framework for payment-stablecoin activities. Among other provisions, it generally restricts issuance of payment stablecoins in the United States to permitted payment stablecoin issuers and establishes regulatory and licensing requirements for qualifying domestic and foreign issuers.
Treasury is now implementing portions of that framework.
On August 17, 2026, Treasury issued a Notice of Proposed Rulemaking concerning implementation of Section 3 of the GENIUS Act and the issuance, offering, and sale of payment stablecoins in the United States.
This is particularly significant for international businesses because questions such as where a stablecoin is issued, where it is offered or sold, and whether a foreign issuer qualifies to participate in the U.S. market can have substantial regulatory consequences.
U.S. Treasury — GENIUS Act Proposed Rulemaking
The OCC and Stablecoin Regulation
The OCC is separately implementing portions of the GENIUS Act applicable to entities within its jurisdiction.
Its February 2026 proposal addresses payment-stablecoin issuance and related activities, including reserve assets, redemption, risk management, audits, reporting, supervision, custody, applications and registrations, foreign issuers, and other prudential requirements.
The regulatory framework has continued developing. The OCC has proposed reporting requirements for permitted and foreign payment-stablecoin issuers, while Treasury, FinCEN, OFAC, and the OCC have also been addressing anti-money-laundering and sanctions compliance under the GENIUS Act.
In August 2026, Comptroller Jonathan Gould stated that the OCC expects to issue its final GENIUS Act rule by November 2026.
These developments reinforce an important point:
Stablecoins cannot be analyzed exclusively under securities or commodities law.
Banking regulation, reserves, licensing, custody, anti-money-laundering requirements, and economic sanctions can be equally significant.
OCC — GENIUS Act Regulatory Proposal
Crypto Compliance Is Increasingly Multi-Agency Compliance
The expression “crypto regulation” is therefore becoming too broad to describe the actual legal environment.
Depending upon the facts, a single digital-asset transaction or business may potentially involve the SEC for securities matters; the CFTC for commodities and derivatives; Treasury and FinCEN for Bank Secrecy Act and anti-money-laundering matters; OFAC for U.S. economic sanctions; the OCC and state regulators for banking and stablecoin activities; the IRS and state taxing authorities for taxation and information reporting; and foreign regulators when transactions cross international borders.
The correct legal analysis therefore begins with the particular asset, transaction, parties, and economic substance, not merely with the word “crypto.”
Tax Treatment Is a Separate Legal Analysis
For taxpayers, another distinction is essential:
Securities-law classification and federal tax classification are separate legal inquiries.
A conclusion that a particular crypto asset is not itself a security does not mean that transactions involving the asset are tax-free.
Likewise, compliance with SEC or CFTC requirements does not satisfy a taxpayer’s obligations under the Internal Revenue Code.
Depending upon the facts, sales, exchanges, compensation, business receipts, staking-related receipts, transfers involving entities, and other digital-asset transactions can produce federal and state tax consequences independent of their treatment under securities or commodities law.
For U.S. taxpayers with international connections, the analysis can become substantially more complicated. Foreign entities, accounts, exchanges, custodial arrangements, and other offshore activities may potentially implicate separate U.S. international tax and information-reporting requirements.
Accordingly, regulatory and tax analyses should be coordinated, but they should not be confused.
International Crypto Transactions Require Particular Care
Blockchain technology is inherently capable of crossing national borders.
A taxpayer may reside in California while transacting with a foreign counterparty, participating in a foreign digital-asset project, using an overseas financial institution or platform, or receiving funds originating outside the United States.
Such circumstances may raise questions extending beyond income taxation:
Who owns the asset? Where did the funds originate? Who controls the wallet or account? Is a foreign entity involved? Does a U.S. person have ownership, signature, or other authority? Are international information-reporting requirements implicated? Are U.S. economic sanctions applicable to a country, counterparty, institution, or transaction? What documentation establishes the source and history of the funds?
These questions can become particularly important when substantial digital assets or proceeds are ultimately transferred into the U.S. financial system.
Documentation Is Becoming More Important, Not Less
Greater regulatory clarity does not necessarily mean less compliance.
In fact, clearer regulations can create greater documentation responsibilities.
As regulators establish specific exemptions, safe harbors, licensing systems, and disclosure requirements, businesses seeking their benefits may have to establish that each applicable condition has been satisfied.
For crypto businesses and investors, contemporaneous documentation may therefore become increasingly important. Relevant records may include organizational documents, offering materials, representations to purchasers, token allocations, governance arrangements, wallet records, related-party transactions, custody arrangements, financial statements, source-of-funds documentation, tax-basis records, and evidence concerning managerial activities.
The SEC’s proposed investment-contract safe harbor provides a particularly good example. If the legal consequences depend upon whether promised essential managerial efforts to have been completed or permanently ceased, documentation concerning what was promised, what was performed, and when those efforts ended may become critical.
Regulatory Restructuring Rather Than Deregulation
The developments of 2026 should not necessarily be characterized simply as “deregulation.”
A more accurate description may be regulatory restructuring.
The SEC is proposing specialized capital-formation pathways for certain crypto-related investment contracts while preserving disclosure, anti-fraud, and anti-manipulation protections.
Treasury, the OCC, FinCEN, and OFAC are developing a separate regulatory architecture for payment stablecoins.
The CFTC continues developing its approach to digital assets and blockchain technologies within its jurisdiction.
And Congress continues to consider the longer-term allocation of regulatory authority.
The question is therefore becoming more precise:
What type of digital assets or transaction is involved, and which regulatory regime—or combination of regulatory regimes, applies?
That is a considerably more useful inquiry than simply asking whether cryptocurrency is “regulated.”
Practical Considerations for Businesses and Investors
A founder contemplating a token issuance should consider more than whether the token itself could be characterized as a security. The analysis may include the manner in which capital is raised, representations made to purchasers, continuing managerial obligations, applicable disclosure requirements, possible CFTC jurisdiction, tax consequences, custody arrangements, AML obligations, sanctions exposure, and the involvement of foreign persons or entities.
Investors with substantial cryptocurrency holdings should likewise maintain sufficient records to establish acquisition history, tax basis, transfers among wallets and exchanges, ownership, source of funds, and relevant domestic and foreign transactions.
In digital-asset matters, the technological record, financial record, tax record, and legal record should tell the same story.
Conclusion
The United States appears to be moving from a period dominated by uncertainty over the application of traditional financial laws to cryptocurrency toward a more specifically defined digital-asset regulatory structure.
The SEC’s proposed Regulation Crypto Assets represents an important part of that transition. It would establish specialized capital-raising exemptions and, perhaps more significantly, a potential pathway through which a crypto asset may cease to be subject to an investment contract when the prescribed conditions are satisfied.
The GENIUS Act and its implementation by Treasury, the OCC, FinCEN, and OFAC are simultaneously creating a distinct regulatory system for payment stablecoins.
The CFTC remains an important participant in digital-asset regulation, while Congress may ultimately establish more permanent jurisdictional boundaries for the U.S. digital-asset markets.
For taxpayers, investors, founders, and businesses, the principal lesson is increasingly clear:
There is no single “crypto” analysis.
A transaction may require coordinated consideration of securities law, commodities law, banking regulation, federal and state taxation, international information reporting, anti-money-laundering requirements, economic sanctions, and cross-border financial transactions.
As this regulatory framework develops, careful classification, contemporaneous documentation, and coordinated legal and tax analysis will become increasingly important.
About the Author
Zaher Fallahi, Attorney at Law, CPA, is licensed as an attorney and CPA in California and Washington, D.C. His practice includes cryptocurrency and digital-asset taxation, IRS and state tax controversies, international tax compliance, foreign financial accounts and assets, and legal and tax matters involving cross-border financial transactions.
Mr. Fallahi maintains offices in Los Angeles and Orange County, California, serving clients in complex domestic and international tax and financial matters.
Disclaimer
This article is provided solely for general educational and informational purposes and does not constitute legal, tax, accounting, investment, or financial advice. It does not create an attorney-client relationship. Digital-asset laws and regulations are rapidly evolving. Certain matters discussed above concern proposed regulations that have not been adopted as final rules and may be modified or withdrawn. The application of securities, commodities, banking, tax, anti-money-laundering, sanctions, and other laws depends upon the particular facts and circumstances. Readers should consult qualified legal and tax professionals regarding their individual circumstances.
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