The SEC's approach to crypto has changed dramatically since 2024. Under new leadership and bipartisan congressional pressure, the agency has moved from an enforcement-first strategy to a rulemaking approach. By early 2026, several major regulatory changes have taken effect that reshape how tokens, exchanges, and custodians operate in the United States.
If you trade, hold, or build in crypto, these changes affect you directly. The rules determine which tokens are legally available, how exchanges operate, and how your assets are protected. Here is a plain-language breakdown of every significant rule change.
The Shift from Enforcement to Rulemaking
Between 2022 and 2024, the SEC filed over 100 enforcement actions against crypto companies, often citing violations of securities laws that many in the industry argued were unclear. The approach drew criticism from both sides of the aisle, with lawmakers arguing that regulation by enforcement gave projects no clear path to compliance.
The pivot began in mid-2025 when the SEC announced a dedicated crypto rulemaking division. Enforcement actions dropped roughly 40 percent in the second half of 2025 compared to the same period in 2024. The agency stated it would focus enforcement resources on clear fraud cases rather than ambiguous classification disputes.
This does not mean the SEC has gone soft on bad actors. Ponzi schemes, rug pulls, and outright fraud still face aggressive prosecution. The change is that legitimate projects now have a regulatory pathway to follow rather than waiting to be sued. You can track enforcement actions on SEC.gov.
Token Classification Framework
The biggest regulatory development is a formal token classification framework. The SEC now distinguishes between three categories: security tokens, which must comply with full securities registration; utility tokens, which are exempt if they meet functional use criteria; and payment tokens, which fall under the GENIUS Act stablecoin framework.
For a token to qualify as a utility token exempt from securities registration, it must demonstrate genuine functional use within a network, be fully operational at the time of sale, and not be marketed primarily as an investment opportunity. The framework draws heavily on the Howey test but adds specific criteria relevant to blockchain technology.
This matters for you because it determines which tokens can be listed on US exchanges. Projects that previously delisted from US platforms due to regulatory uncertainty may now return if they qualify as utility tokens. For more on how individual tokens are affected, see our piece on XRP's legal status in 2026.
Exchange Registration Changes
The SEC created a new registration category for digital asset trading platforms, separate from the traditional broker-dealer and national securities exchange frameworks. This tailored approach recognizes that crypto exchanges function differently from stock exchanges and should not be forced into identical regulatory molds.
Registered digital asset platforms must meet requirements around customer asset segregation, cybersecurity standards, market manipulation surveillance, and disclosure of listing criteria. The requirements are significant but are designed to be achievable for well-capitalized crypto companies.
Coinbase, Kraken, and several other major exchanges have begun the registration process. The transition period extends through the end of 2026, giving platforms time to upgrade their compliance infrastructure. According to CoinTelegraph, at least 12 platforms had filed preliminary applications by January 2026. For the broader regulatory picture, check out our US crypto policy scorecard.
Custody Rule Updates
The rescission of Staff Accounting Bulletin 121 (SAB 121) in late 2025 removed a major barrier to bank participation in crypto custody. SAB 121 had required banks to record customer crypto assets as liabilities on their own balance sheets, making custody services prohibitively expensive from a capital perspective.
With SAB 121 gone, banks and trust companies can now custody crypto assets for clients without the punitive balance sheet treatment. Several major custody banks, including BNY Mellon and State Street, expanded their digital asset custody offerings within weeks of the bulletin's rescission.
For institutional investors and funds, this means more custody options, better insurance coverage, and lower fees. For you as a retail investor, the downstream effect is that more financial advisors and wealth managers can now include crypto in managed portfolios, expanding the addressable market. Learn more about institutional crypto adoption and its effects on the broader market.
What This Means for Your Portfolio
Clearer regulations tend to reduce the risk premium investors demand for holding crypto assets. As the rules become more predictable, institutional capital flows more freely, which has historically supported prices. The approval of Bitcoin ETFs in 2024 was the first example of this effect, and the broader rulemaking push in 2025 and 2026 is the second.
On the flip side, some tokens may lose access to US markets if they are classified as unregistered securities and fail to comply. Holding tokens with ambiguous regulatory status carries real risk. You should review any positions in smaller altcoins against the new classification framework.
Tax reporting requirements are also tightening. The SEC and IRS are coordinating to ensure that digital asset trading platforms report customer transactions in a format similar to stock brokerage 1099 forms. Starting in 2026, you should expect to receive detailed tax documents from any US-registered exchange. Reuters has covered the IRS coordination efforts extensively.
FAQ
Is Ethereum considered a security under the new rules?
The SEC has not formally classified Ethereum as a security under the new framework. The approval of spot Ethereum ETFs in 2024 and the classification of ETH staking as a network service rather than an investment contract suggest that ETH is trending toward commodity treatment. Final guidance is expected later in 2026.
Will the SEC go after DeFi protocols?
The SEC has indicated that decentralized protocols without identifiable operators present enforcement challenges. The new framework primarily targets centralized entities. However, DeFi front-end operators who earn fees may still face scrutiny if they facilitate trading in unregistered securities.
How does the new custody rule help retail investors?
The custody rule primarily benefits institutional and advisory channels. However, as more banks offer crypto custody, competition increases and fees decline across the ecosystem. Retail investors benefit indirectly through lower costs and broader access to crypto products within traditional financial accounts.
