Why Fungible Crypto Assets Are NOT Securities

For decades, the ‘Special Relationship’ between the US and UK has been one of shared economic DNA - grounded in markets, common law traditions and a mutual belief that innovation thrives when rules are clear and fair. And given the progress made in both jurisdictions on crypto in the last 12 months, it seemed natural when, at a US delegation visit to the UK in September, The Chancellor of the Exchequer Rachel Reeves, welcomed US Treasury Secretary Scott Bessent, to Downing Street to “reaffirm their deep and historic connection between the world’s leading financial hubs in the United Kingdom and United States.” And so was born the Transatlantic Taskforce for Markets of the Future. What is the Taskforce? The Taskforce is a joint initiative anchored by both countries’ finance ministries and supported by their financial market and digital asset regulators. Its remit is to reduce friction for cross-border capital formation and deepen coordination on digital-asset policy, including how best to supervise firms, support safe market infrastructure, and enable responsible innovation.  At a practical level, the Taskforce is anticipated to deliver options for short-to-medium-term collaboration on digital assets (while legislation and regulation continues to evolve) and to explore long-term opportunities in wholesale digital markets - everything from secondary trading plumbing to tokenized instruments and settlement models.  The chairs and conveners are the US Department of the Treasury and HM Treasury, with participation from relevant regulators focused on capital markets and digital assets. Depending on the topic, that likely includes securities, banking, and payments authorities as well as supervisory teams with active digital asset remits. Importantly, the Taskforce has been framed as a whole-of-markets effort, not a crypto-only silo - which is why capital markets access and wholesale innovation sit alongside digital-asset supervision.  Industry isn’t a formal “member,” but engagement with market participants is clearly anticipated. Recent commentary from senior US regulators and market leaders has leaned in favor of coordinated transatlantic approaches - including concepts like mutual recognition or “passporting-style” access in the long run - precisely because duplicative compliance undermines both competitiveness and safety.  Beyond the Press Statement - What is Achievable? The Taskforce is required to report within 180 days - and there are many helpful areas that it could support: Reducing regulatory fragmentation and increasing reciprocity. Right now, firms operating in both the US and UK often face two different regimes even where the principles are similar; for example, what constitutes custody, or how stablecoin reserves should be held. The Taskforce can help regulators create reciprocity agreements across the two regimes, which lowers compliance costs and uncertainty for everyone. Build mutual confidence and supervisory cooperation. Regulators are more likely to trust each other’s oversight if they understand one another’s frameworks and risk-management standards. That, in turn, could make cross-border approvals and recognition processes faster and smoother, particularly for well-run firms. Strengthen the resilience and competitiveness of both markets. Closer alignment reduces the temptation for firms to choose one jurisdiction over the other, while reinforcing shared standards for transparency, governance, and consumer protection. For investors and users, that should translate into better-functioning cross-border markets. Set the tone for global standards. The US and UK remain highly influential in international financial services supervision. If they can show that proportionate, innovation-friendly regulation is achievable, it gives other jurisdictions a credible model to follow, potentially leading to broader global coherence on digital asset oversight and perhaps even global trading markets. Prioritization from the Nest There are three topics that we’d like to see the Taskforce prioritize: Token classification for Real-World Asset tokenization Across the UK and US, it is crucial that a coherent definition is developed of which tokens are going to be regulated. There needs to be clear legal and regulatory standards for tokenized assets, including where the token (the digital representation), and the asset (which should be regulated according to its nature) are one and the same. Broad definitions of “digital assets” or “cryptoassets” risk breaking down this distinction.  The Taskforce should focus on developing this definition collaboratively, to create something pragmatic and implementable across both jurisdictions. 2. Intermediation vs infrastructure All proposals and rule makings around the world focus on who to regulate and in particular, which actors and activities constitute intermediaries. However, providing infrastructure, whether software, hardware or communications, is not acting as an intermediary. Validators and miners are not intermediaries and neither are API providers, block explorers or analytics firms. Nor is providing self-custody wallets or simply writing code (implementing it can be in very specific situations).  The regulatory frameworks across both jurisdictions would not only benefit from implementing protections to prevent infrastructure providers being regulated as intermediaries, but would also enjoy significant competitive advantage on the global stage as a result. 3. Stablecoins and reciprocity Stablecoins will sit at the heart of the future of the digital economy, underpinning everything from cross-border payments (for commercial or individual purposes) to on-chain settlement in financial markets. Both the US and the UK are now building comprehensive regimes, but neither has yet finalised its rules. That creates a real window for the Taskforce to guide how the two frameworks can work together rather than grow apart. The GENIUS Act already anticipates reciprocal pathways, and the FCA has a long track record of constructive international cooperation.  A Taskforce-led effort to map out practical forms of deference once both regimes are live could prevent duplicative oversight, reduce friction for issuers, and give users greater confidence in the quality and safety of stablecoin rails across both markets. If the groundwork is laid now, those mechanisms could be activated from day one, rather than tackled years after the fact. The promise of the Taskforce lies less in grand announcements and more in whether it can stitch together practical, workable bridges between two ambitious but quickly evolving regimes. Expecting full harmonization would be naïve, but expecting meaningful transparency and collaboration is not. If the US and UK can use this moment to build trust, reduce avoidable divergence, and set a tone of openness to responsible innovation, the Taskforce could become more than a diplomatic gesture. It could be the start of a quieter but more lasting shift toward genuinely interoperable digital-asset markets. Let’s hope the next 180 days lay those foundations.

If the 20th century was about building highways for cars, the 21st is about building highways for money. After a long period of building foundations for institutional-grade capability, blockchain has finally reached a point of technological and business viability. In August, Wyoming flipped the switch on one of the first government-run lanes on the blockchain From Cattle to Code Wyoming has long been known for open plains and open skies — but now it’s pioneering open finance. In August 2025, the state launched the Wyoming Stable Token (FRNT - formerly WYST) on Avalanche, marking the first U.S. state-issued stablecoin fully backed by short-term Treasury bills and managed under a transparent, legally defined framework. Each FRNT token represents a digital dollar substitute:1 token = 1 US dollar, backed by state-managed reserves. Unlike privately issued stablecoins, FRNT isn’t a speculative instrument. It’s a public utility: programmable, auditable, and backed by the full credibility of the State of Wyoming. The logic is simple but revolutionary: if states are responsible for monetary integrity within their borders, why shouldn’t they participate in digital money issuance too? Compliance by Design For regulators, the most important story here isn’t the coin, but rather the architecture. The Avalanche network was selected not because it is the loudest or most popular chain, but for its modular performance characteristics and mature tooling.  In July 2025, Wyoming showcased instant vendor payments in a state pilot using Hashfire, an Avalanche-based platform that ties authenticated contracts to programmable payouts in FRNT, cutting payment timelines from weeks to seconds. A month later, the Wyoming Stable Token Commission announced the FRNT mainnet launch, with Avalanche among the supported networks and subsequent distribution expanding to seven blockchains.  Hashfire provides the contracting and payment automation layer while FRNT provides a state-issued, over-collateralized digital dollar that can move on public chains with auditability. Rather than relying on bespoke, closed rails, Wyoming anchored the token to public infrastructure and paired it with a workflow layer that enforces approvals and creates a tamper-evident audit trail.  Avalanche is an ideal platform for government payments due to its practical advantages: finality in seconds, low settlement costs, and an energy-efficient proof-of-stake design. Furthermore, its multi-chain issuance capability prevents vendor lock-in and fosters greater interoperability, making it suitable for production-grade use. The technology doesn’t evade regulation; it operationalizes it through transparent ledgers, rule-driven disbursements, and public reporting. And that’s a blueprint more states should be watching. The Wyoming Model Since 2019, Wyoming has passed more than 30 blockchain-related laws. It created Special Purpose Depository Institutions (SPDIs) to give digital-asset companies access to banking services, established legal definitions for digital property, and built a clear framework for stable token issuance through the Wyoming Stable Token Act. The FRNT project specifically is being led day-to-day by the Wyoming Stable Token Commission (WSTC), which was established more than two years ago through the Wyoming Stable Token Act. The state government is backing the WSTC with a budget of $5.8M. FRNT is the natural culmination of that work — the bridge between state treasuries and digital finance. The token is fully redeemable, transparently backed, and non-fractional. Monthly audits are mandated, the State Treasurer oversees issuance, and every FRNT transaction settles on chain, meaning jurisdiction and compliance are crystal clear. This alignment of law, technology, and finance is rare in the blockchain world. It shows that public institutions can innovate within existing statutes, rather than outside them. Why It Matters for Policymakers Federal and state agencies have spent years grappling with one fundamental question: How do we bring digital assets under the umbrella of the existing financial system?  Wyoming’s approach offers a live blueprint. By leveraging Avalanche’s L1 architecture, the state created a sovereign, rule-abiding financial system within a broader network. A sandbox where state and federal compliance can coexist with innovation. In a post-CBDC debate world, FRNT is a political middle ground. It avoids the surveillance fears tied to central bank digital currencies while delivering the efficiency gains of programmable money. It’s the regulatory equivalent of having your cake and auditing it too. Federal regulators can view it as a “federalist pilot.” A controlled, transparent testbed that respects both state sovereignty and national compliance frameworks. FRNT could eventually integrate with FedNow or Treasury-led payment rails, creating a unified but flexible model for digital government money. The Broader Policy Context Across the United States, momentum is building toward this vision, but progress remains uneven. Texas is investigating blockchain applications for land registries and oil royalty management. California’s Department of Financial Protection and Innovation has convened a Digital Financial Assets working group to study consumer protections and licensing frameworks. Florida has piloted blockchain programs for vehicle titles and state payments. Illinois has explored distributed ledgers for Medicaid record-keeping and benefits tracking. There are important steps; but so far, they’re isolated experiments. What Wyoming has accomplished with FRNT and Avalanche is not just another pilot, it is operationalization. It is the transition from theory to production, built on sound policy and proven infrastructure. FRNT is policy that works, and code that proves it. As the federal conversation evolves, three priorities will define the next stage of U.S. blockchain regulation: standardization, transparency, and sovereignty.  Standardization will ensure interoperability between public and private systems. Transparency will guarantee that citizens and regulators can verify how digital assets move, without compromising individual privacy. And sovereignty will allow states, agencies, and regulated enterprises to retain control over their infrastructure and data. AvaCloud’s model of sovereign, customizable Layer-1 blockchains aligns naturally with all three. Conclusion The FRNT model demonstrates that public institutions can issue stablecoins without handing over control to private companies, and that transparency can be built into the code, not just the oversight process. Also, FRNT shows that states can lead in digital transformation without waiting for Washington to act. FRNT moves money faster, while also moving public finance into the future. Wyoming didn’t just launch a stablecoin: it launched a model for digital statecraft.

On July 18, 2025, President Trump signed into law the GENIUS Act, the first U.S. regulatory framework for payment stablecoins. The law establishes a dual federal–state regime for stablecoin issuers, requires strict reserve backing, provides for redemption rights and sets rules for foreign issuers operating in the United States.  It also introduces a new category of intermediary - the Digital Asset Service Provider (DASP) - and spells out obligations for these entities.  Importantly, certain activities are excluded from the definition of DASP, in recognition of the difference between providing infrastructure and acting as an intermediary.  We have discussed this overarching point at some length in our first submission to the SEC Crypto Task Force and expanded on the “nature of the activity” test in our second submission.  This distinction between infrastructure providers and regulated intermediaries is important for the GENIUS Act and beyond. How DASPs are defined Under the GENIUS Act, DASPs are defined as entities that: Exchange digital assets for money  Exchange digital assets for other digital assets Transfer digital assets to a third party Act as digital asset custodians Provide financial services related to digital asset issuance These categories line up with various acknowledged types of intermediaries, including from the 2019 Guidance issued by FinCEN on money services business activities in convertible virtual currencies.  The federal securities, commodities and banking laws all require equivalent activities to be done in a regulated entity. What DASPs are not Congress recognized that certain activities are not those of an intermediary and excluded them from the definition of DASP in the GENIUS Act.  In particular, the DASP definition excludes:  a distributed ledger protocol; developing, operating, or engaging in the business of developing distributed ledger protocols or self-custodial software interfaces; an immutable and self-custodial software interface; developing, operating, or engaging in the business of validating transactions or operating a distributed ledger; or participating in a liquidity pool or other similar mechanism for the provisioning of liquidity for peer-to-peer transactions. These exclusions are comparable to the distinctions drawn by FinCEN about money services business activities, as well of those of some international financial regulators with respect to their intermediaries.  They reflect an understanding that providing infrastructure - such as deploying hardware, developing software, or providing communications and data - is not the same as offering regulated activities. Both of our submissions to the SEC Crypto Task Force highlighted this same principle: infrastructure that enables transactions by individual actors should not be treated the same as intermediaries that solicit or execute them on other actors’ behalf, or custody the assets.  Our second submission argued for a “nature of the activity” test that focuses on what a firm does, not the technology it builds or deploys.   Why it matters – the growth of tokenization We have long advocated for a sensible, workable token classification that recognizes the nature of the asset as paramount, including through many comment letters to regulators and other authorities around the world.  With the ongoing rise of tokenization of “real world assets” such as regulated financial instruments, we expect to see more regulated intermediaries become involved on a global basis.  In addition to common US intermediaries like broker-dealers, exchanges, FCMs and banks, this will include European CASPs and MiFID intermediaries, those regulated by the Japan FSA, the Korean FSC, the Monetary Authority of Singapore, the Hong Kong SFC and the UK FCA as well as many other financial regulators around the world as and when their regulatory regimes come on stream. In all these jurisdictions, the distinction between offering regulated activities and providing  infrastructure will grow in importance as more assets are tokenized on blockchains and more transactions are conducted via smart contracts.  This dividing line is relevant regardless of whether the network or application is centrally controlled or distributed and permissionless.    Exclusions like those in the GENIUS Act are a key milestone for crypto policy by helping regulators distinguish between intermediaries that offer services to others and the providers of infrastructure.  The text gives market participants greater clarity, sets a precedent for future legislation and rulemaking, and gives support to common sense notion that technology infrastructure should not be regulated like financial middlemen.