On May 3, 2026, SEC Chair Gary Gensler testified before the Senate Banking Committee that the existing U.S. legal framework can no longer adapt to rapid cryptocurrency industry development. Gensler acknowledged that the 1946 Howey Test standard is insufficient to categorize digital assets as the market—now exceeding $4.5 trillion—introduces new technologies like decentralized autonomous organizations and liquid staking derivatives that traditional litigation cannot address.
Gensler proposed a new regulatory framework defining a “Digital Investment Asset” class and a tripartite oversight model where the SEC handles investment-intent tokens, the CFTC manages utility-intent commodities, and a new self-regulatory organization oversees smart contract audits. This marks a significant shift from the SEC’s previous “regulation by enforcement” approach and signals potential support for a Safe Harbor provision in the upcoming 2026 Crypto Reform Act.
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