{"id":65704,"date":"2025-07-24T19:56:54","date_gmt":"2025-07-24T10:56:54","guid":{"rendered":"https:\/\/monolith.law\/en\/?p=65704"},"modified":"2026-01-23T13:34:31","modified_gmt":"2026-01-23T04:34:31","slug":"crypto-assets-securities","status":"publish","type":"post","link":"https:\/\/monolith.law\/en\/it\/crypto-assets-securities","title":{"rendered":"[2025 Edition] Legal Interpretation of Crypto Assets: When They May Be Treated as Securities and Key Considerations for Operators"},"content":{"rendered":"\n<p>As crypto assets continue to diversify in type, use, and transaction method, legal interpretations are evolving. A particularly important issue for businesses is whether a given crypto asset may be treated as a <em>security<\/em>.<\/p>\n\n\n\n<p>This article outlines key developments in the interpretation of crypto assets\u2014especially in relation to their classification as securities\u2014focusing on practical points for operators in the digital-asset space.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_53 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Traditional_Perspectives_and_Emerging_Trends_in_Crypto_Assets\" title=\"Traditional Perspectives and Emerging Trends in Crypto Assets\">Traditional Perspectives and Emerging Trends in Crypto Assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#The_Debate_on_Ethereum%E2%80%99s_Consensus_Algorithm_Change_and_Securities\" title=\"The Debate on Ethereum&#8217;s Consensus Algorithm Change and Securities\">The Debate on Ethereum&#8217;s Consensus Algorithm Change and Securities<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#What_Is_a_Consensus_Algorithm\" title=\"What Is a Consensus Algorithm?\">What Is a Consensus Algorithm?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Changes_Made_to_Ethereum%E2%80%99s_Consensus_Algorithm\" title=\"Changes Made to Ethereum\u2019s Consensus Algorithm\">Changes Made to Ethereum\u2019s Consensus Algorithm<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#The_Latest_Views_from_US_Authorities_on_Crypto_Assets\" title=\"The Latest Views from U.S. Authorities on Crypto Assets\">The Latest Views from U.S. Authorities on Crypto Assets<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#The_Introduction_of_Ethereum_Spot_ETFs\" title=\"The Introduction of Ethereum Spot ETFs\">The Introduction of Ethereum Spot ETFs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Determining_Whether_a_Crypto_Asset_Is_a_Security_The_Howey_Test\" title=\"Determining Whether a Crypto Asset Is a Security: The Howey Test\">Determining Whether a Crypto Asset Is a Security: The Howey Test<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Regulation_and_Recent_Trends_of_Crypto_Assets_in_Japan\" title=\"Regulation and Recent Trends of Crypto Assets in Japan\">Regulation and Recent Trends of Crypto Assets in Japan<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Regulations_on_the_Issuing_of_Securities_in_Japan\" title=\"Regulations on the Issuing of Securities in Japan\">Regulations on the Issuing of Securities in Japan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Regulations_on_Transactions_Under_Japanese_Law\" title=\"Regulations on Transactions Under Japanese Law\">Regulations on Transactions Under Japanese Law<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Recent_Trends_in_Legal_Revisions_in_Japan\" title=\"Recent Trends in Legal Revisions in Japan\">Recent Trends in Legal Revisions in Japan<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Conclusion_Consult_a_Lawyer_Regarding_Crypto_assets_Regulations\" title=\"Conclusion: Consult a Lawyer Regarding Crypto assets Regulations\">Conclusion: Consult a Lawyer Regarding Crypto assets Regulations<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/monolith.law\/en\/it\/crypto-assets-securities\/#Guidance_on_Measures_by_Our_Firm\" title=\"Guidance on Measures by Our Firm\">Guidance on Measures by Our Firm<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Traditional_Perspectives_and_Emerging_Trends_in_Crypto_Assets\"><\/span>Traditional Perspectives and Emerging Trends in Crypto Assets<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Traditionally, crypto assets such as Bitcoin and Ethereum, which function primarily as mediums of exchange, have tended to be viewed as \u201ccommodities\u201d rather than securities.<\/p>\n\n\n\n<p>In recent years, however, crypto assets with additional functions have emerged. Some are designed not only as mediums of exchange but also to confer service-usage rights, governance or voting rights in a project, or entitlement to profit distributions. As crypto assets become more multifunctional and more explicitly investment-oriented, a uniform \u201ccommodity\u201d classification becomes harder to maintain.The Debate on Ethereum\u2019s Change in its Consensus Algorithm and Securities<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Debate_on_Ethereum%E2%80%99s_Consensus_Algorithm_Change_and_Securities\"><\/span>The Debate on Ethereum&#8217;s Consensus Algorithm Change and Securities<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/monolith.law\/wp-content\/uploads\/2023\/11\/Shutterstock_687488425.jpg\" alt=\"The impact of Ethereum's consensus algorithm change on the interpretation of securities (crypto assets)\" class=\"wp-image-63111\" \/><\/figure>\n\n\n\n<p>One development that has drawn particular attention is Ethereum\u2019s shift in consensus algorithm from Proof of Work (PoW) to Proof of Stake (PoS). This change has prompted discussion about whether it could increase the likelihood of Ethereum being treated as a security.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_a_Consensus_Algorithm\"><\/span>What Is a Consensus Algorithm?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A <em>consensus algorithm<\/em> is the mechanism by which a blockchain network\u2019s participants (nodes) agree on which transactions are valid and which new blocks are added to the chain.<\/p>\n\n\n\n<p>To understand consensus algorithms, it helps to understand the basic structure of crypto assets. Many crypto-asset systems rely on a blockchain in which transactions are validated and recorded under rules designed to maintain the transaction\u2019s security and integrity. The consensus algorithm is the method used to achieve network-wide agreement on those rules and outcomes.<\/p>\n\n\n\n<p>Related article: <a href=\"https:\/\/monolith.law\/en\/it\/blockchain-technology\" target=\"_blank\" rel=\"noreferrer noopener\">What Makes Blockchain a Revolutionary Technology?<\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Changes_Made_to_Ethereum%E2%80%99s_Consensus_Algorithm\"><\/span>Changes Made to Ethereum\u2019s Consensus Algorithm<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Historically, Ethereum used PoW, the same general approach adopted by Bitcoin.<\/p>\n\n\n\n<p>In September 2022, Ethereum transitioned from a PoW to a PoS consensus mechanism.<\/p>\n\n\n\n<ul>\n<li>PoW (Proof of Work): A method that reaches consensus through competition for computational resources.<\/li>\n\n\n\n<li>PoS (Proof of Stake): A method that grants block-production rights based on the amount of crypto assets held.<\/li>\n<\/ul>\n\n\n\n<p>Ethereum\u2019s goal in moving to a PoS consensus mechanism was to address the high energy consumption commonly associated with a PoW consensus mechanism.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Latest_Views_from_US_Authorities_on_Crypto_Assets\"><\/span>The Latest Views from U.S. Authorities on Crypto Assets<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Introduction_of_Ethereum_Spot_ETFs\"><\/span>The Introduction of Ethereum Spot ETFs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In September 2022, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler indicated that crypto assets using a PoS consensus mechanism could be viewed as securities under U.S. law. Although he did not name specific assets, the timing\u2014immediately following Ethereum\u2019s transition to a PoS consensus mechanism\u2014drew significant market attention.<\/p>\n\n\n\n<p>Reference: <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-09-15\/gensler-raises-concerns-over-staking-model-used-on-ethereum\" data-type=\"link\" data-id=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-09-15\/gensler-raises-concerns-over-staking-model-used-on-ethereum\">Bloomberg: SEC Chair Gensler Raises Concerns Over &#8216;Staking&#8217; Model on Ethereum <\/a><\/p>\n\n\n\n<p>In May 2024, the SEC approved the listing of Spot Ethereum ETF, a development suggesting that regulatory authorities may not fully consider Ethereum as a security at all, which may influence future interpretations.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Determining_Whether_a_Crypto_Asset_Is_a_Security_The_Howey_Test\"><\/span>Determining Whether a Crypto Asset Is a Security: The Howey Test<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the United States, the Howey Test is commonly used to evaluate whether crypto assets can be considered as securities or not. In general terms, it focuses on the following elements:<\/p>\n\n\n\n<ol>\n<li>Whether an investment has been made,<\/li>\n\n\n\n<li>Whether is was done within a common enterprise,<\/li>\n\n\n\n<li>Whether there is a reasonable expectation of profits,<\/li>\n\n\n\n<li>Whether that profit was derived from the efforts of others.<\/li>\n<\/ol>\n\n\n\n<p>The Howey Test is not an absolute standard and also takes into account specific facts and circumstances to determine whether or not a crypto asset can be considered as a security.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulation_and_Recent_Trends_of_Crypto_Assets_in_Japan\"><\/span>Regulation and Recent Trends of Crypto Assets in Japan<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/monolith.law\/wp-content\/uploads\/2023\/11\/Shutterstock_1043001367.jpg\" alt=\"Regulations in Japan when Ethereum is deemed a security\" class=\"wp-image-63109\" \/><\/figure>\n\n\n\n<p>In Japan, crypto assets are regulated under the Payment Services Act. However, if a particular crypto asset is deemed to be considered as a security, it may also become subject to the Financial Instruments and Exchange Act (FIEA).<\/p>\n\n\n\n<p>Related article: <a href=\"https:\/\/monolith.law\/en\/it\/cryptoassets-regulation\" target=\"_blank\" rel=\"noreferrer noopener\">Legal Regulations for Crypto Assets in Japan <\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulations_on_the_Issuing_of_Securities_in_Japan\"><\/span>Regulations on the Issuing of Securities in Japan<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If a crypto asset is treated as a security, the following regulations governing the issuing of securities may apply:<\/p>\n\n\n\n<ul>\n<li>Disclosure of a securities registration statement (Article 5 of the FIEA)<\/li>\n\n\n\n<li>Delivery of a prospectus to relevant parties (Article 15(2) of the FIEA)<\/li>\n\n\n\n<li>Filing of securities reports (Article 24 of the FIEA)<\/li>\n\n\n\n<li>Filing of quarterly reports (Article 24-4-7 of the FIEA and Article 4-2-10(3) of the Financial Instruments and Exchange Enforcement Order)<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulations_on_Transactions_Under_Japanese_Law\"><\/span>Regulations on Transactions Under Japanese Law<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If a crypto asset is treated as a security, the following regulations governing securities transactions may also apply:<\/p>\n\n\n\n<ul>\n<li>Insider trading restrictions (Articles 166 and 167 of the FIEA)<\/li>\n\n\n\n<li>Prohibitions on market manipulation (Article 159 of the FIEA)<\/li>\n\n\n\n<li>Restrictions relating to the dissemination of rumors (Article 158 of the FIEA)<\/li>\n\n\n\n<li>Prohibitions on fictitious transactions (Article 159 of the FIEA)<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Recent_Trends_in_Legal_Revisions_in_Japan\"><\/span>Recent Trends in Legal Revisions in Japan<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>With respect to taxation involving crypto assets, the 2022 tax reform revised valuation methods for certain crypto assets held by corporations. For individuals, gains from transferring crypto assets are generally treated as \u201c\u96d1\u6240\u5f97\u201d (Miscellaneous Income) under \u201c\u7dcf\u5408\u8ab2\u7a0e\u201d (Comprehensive Taxation), but tax reform discussions continue, including proposals such as a \u201c\u7533\u544a\u5206\u96e2\u8ab2\u7a0e\u201d (Separate Taxation with Tax Return) framework.<\/p>\n\n\n\n<p>Reference: <a href=\"https:\/\/www.nta.go.jp\/publication\/pamph\/pdf\/virtual_currency_faq_03.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">National Tax Agency | Tax Treatment of Crypto assets and Other Virtual Assets (Information) (December 26, 2025)<\/a><\/p>\n\n\n\n<p>With respect to amendments to the FIEA, Japan\u2019s Financial Services Agency (FSA) has been considering classifying crypto assets as \u201cfinancial products\u201d and introducing insider trading regulations. In April 2025, the FSA submitted a related draft amendment.<\/p>\n\n\n\n<p>Reference: <a href=\"https:\/\/www.fsa.go.jp\/news\/r6\/sonota\/20250410_2\/01.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Financial Services Agency | Review of the Regulatory Framework Related to Crypto assets (April 10, 2025)<\/a><\/p>\n\n\n\n<p>Japan has also tightened operational rules for crypto-asset exchange operators. In June 2023, it implemented the Travel Rule, introducing notification obligations for certain transfers, and it has strengthened requirements for segregated management of customer assets.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion_Consult_a_Lawyer_Regarding_Crypto_assets_Regulations\"><\/span>Conclusion: Consult a Lawyer Regarding Crypto assets Regulations<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Determining whether crypto assets are treated as securities under the law, remains difficult in current circumstances. That said, crypto assets with multiple functions\u2014particularly those with investment-like features\u2014may be more likely to be evaluated as securities depending on their structure and offering.<\/p>\n\n\n\n<p>Operators should monitor legal developments and regulatory trends in Japan and abroad and build compliance frameworks that can respond promptly if the crypto assets they handle are deemed to fall within securities regulations. Because the regulatory environment is expected to continue evolving, consulting counsel with relevant expertise can be an effective way to manage uncertainty and reduce risk.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Guidance_on_Measures_by_Our_Firm\"><\/span>Guidance on Measures by Our Firm<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Monolith Law Office is a law firm specializing in IT- and internet-related legal matters, including legal support for crypto-asset and blockchain businesses. We advise businesses that have launched\u2014or are preparing to launch\u2014crypto-asset-related services on legal risk and compliance matters under Japanese law, and we support practical structuring and compliance planning to help clients address regulatory requirements without unnecessarily disrupting operations.<\/p>\n\n\n\n<p>Areas of practice at Monolith Law Office: <a href=\"https:\/\/monolith.law\/en\/crypto-asset-and-blockchain\" target=\"_blank\" rel=\"noreferrer noopener\">Crypto assets &amp; Blockchain<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As crypto assets continue to diversify in type, use, and transaction method, legal interpretations are evolving. A particularly important issue for businesses is whether a given crypto asset may be tr [&hellip;]<\/p>\n","protected":false},"author":32,"featured_media":66009,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[20,19],"acf":[],"_links":{"self":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts\/65704"}],"collection":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/users\/32"}],"replies":[{"embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/comments?post=65704"}],"version-history":[{"count":4,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts\/65704\/revisions"}],"predecessor-version":[{"id":71375,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts\/65704\/revisions\/71375"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/media\/66009"}],"wp:attachment":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/media?parent=65704"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/categories?post=65704"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/tags?post=65704"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}