Glossary of digital asset law

A

AML (Anti-Money Laundering)

The body of law requiring financial businesses to guard against the movement of criminal proceeds. A digital asset business that qualifies as a money services business is subject to the Bank Secrecy Act and must maintain a written anti-money-laundering program, verify customer identity, monitor transactions, and report suspicious activity to the Financial Crimes Enforcement Network.

Asset Tracing

The process of following the movement of assets through a series of transactions in order to locate them. Because most blockchains record transactions on a public ledger, digital assets can often be traced from address to address, frequently to a regulated exchange where they may be frozen or recovered. Tracing is a central technique in digital asset fraud recovery; see the Crypto Fraud & Asset Recovery foundation section of this website.

B

Bank Secrecy Act (BSA)

The principal U.S. anti-money-laundering statute (31 U.S.C. § 5311 et seq.). It requires money services businesses — including many digital asset businesses — to register with the Financial Crimes Enforcement Network, maintain anti-money-laundering programs, keep records, and file currency-transaction and suspicious-activity reports.

BitLicense

The dedicated virtual currency business license administered by the New York State Department of Financial Services, codified at 23 NYCRR Part 200 and in effect since 2015. A business conducting virtual currency activity involving New York or a New York resident generally must hold a BitLicense or a New York limited-purpose trust charter.

Blockchain

A distributed digital ledger maintained across many computers, on which transactions are recorded in linked, cryptographically secured blocks. Because copies of the ledger are held by many participants and entries are difficult to alter once recorded, a blockchain can maintain a shared transaction history without a central administrator. It is the underlying technology of most digital assets.

C

CFTC (Commodity Futures Trading Commission)

The federal agency that regulates U.S. derivatives markets under the Commodity Exchange Act. In the digital asset context, the CFTC regulates derivatives on digital asset commodities and holds anti-fraud and anti-manipulation authority over the underlying spot markets, because digital asset commodities are commodities traded in interstate commerce.

CLARITY Act

The Digital Asset Market Clarity Act (H.R. 3633), a market-structure bill that would establish a federal framework for digital assets not covered by the GENIUS Act and draw a clearer statutory line between SEC and CFTC authority. The bill passed the House of Representatives in July 2025 and, as of early 2026, remains under consideration in the Senate. Because it is not law, it does not yet govern; it is noted here as the most significant pending change to the regulatory architecture.

Commodity

A category of asset and the basis of CFTC jurisdiction. The Commodity Exchange Act defines “commodity” very broadly (7 U.S.C. § 1a(9)), and federal courts have confirmed that virtual currencies fall within the definition. A digital asset that is not a security is generally treated as a commodity; Bitcoin and Ether are widely treated as commodities.

Cryptocurrency

A digital asset that uses cryptography and a blockchain or similar distributed ledger to record ownership and transfers, and that is designed to function without a central issuer or administrator. “Cryptocurrency” is often used loosely to refer to digital assets generally, though many digital assets — tokens representing other rights, stablecoins, and non-fungible tokens — are not currencies in any conventional sense.

D

DAO (Decentralized Autonomous Organization)

An organization coordinated through smart contracts and, typically, governance tokens that let holders vote on its decisions, rather than through a conventional corporate hierarchy. DAOs raise unsettled legal questions, including how they are classified as legal entities and whether and when their participants bear personal liability for the organization’s obligations.

DeFi (Decentralized Finance)

A set of financial services — lending, borrowing, trading, and others — provided through smart contracts on a blockchain rather than through banks or brokers. Because DeFi protocols often operate without an identifiable intermediary, they raise difficult questions about who, if anyone, bears regulatory obligations and legal responsibility for their operation.

Digital Asset

A broad term for an asset that is issued or transferred using a blockchain or similar distributed ledger, including cryptocurrencies, tokens, stablecoins, and non-fungible tokens. U.S. law does not regulate digital assets as a single category; the rules that apply depend on whether a given asset is a security, a commodity, or something else. The regulatory architecture is set out in the Digital Asset Regulation foundation section of this website.

E

Exit Scam (Rug Pull)

A fraud in which the promoters of a digital asset project raise funds from investors and then abandon the project and disappear with the proceeds — often by withdrawing the liquidity supporting a newly issued token, leaving holders unable to sell. Depending on the asset and the conduct, an exit scam can support securities-fraud, commodities-fraud, and common-law fraud claims; see the Crypto Exit Scam topic resource.

F

FinCEN (Financial Crimes Enforcement Network)

A bureau of the U.S. Treasury Department that administers the Bank Secrecy Act. FinCEN guidance issued in 2013 and consolidated in 2019 established that a business accepting and transmitting convertible virtual currency is generally a money transmitter subject to anti-money-laundering obligations.

Forfeiture

A legal process by which the government takes ownership of property connected to crime, either through a criminal case against a defendant or through a civil action against the property itself. Forfeited digital assets may, in appropriate cases, become a route through which defrauded victims recover losses; see the Crypto Fraud & Asset Recovery foundation section of this website.

Form 1099-DA

The Internal Revenue Service information return on which custodial digital asset brokers report customer dispositions of digital assets. Required following Treasury and IRS regulations that finalized the digital asset broker-reporting rules, it is phased in beginning with transactions in 2025.

G

GENIUS Act

The Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025, signed into law on July 18, 2025 — the first comprehensive federal statute governing a category of digital asset. It creates a federal framework for payment stablecoins, permitting them to be issued only by qualified issuers and requiring full reserve backing, monthly reserve disclosures, and Bank Secrecy Act compliance. The framework is discussed in the Digital Asset Regulation foundation.

H

Howey Test

The test for whether an arrangement is an “investment contract,” and therefore a security, drawn from SEC v. W.J. Howey Co., 328 U.S. 293 (1946). An investment contract exists where there is an investment of money in a common enterprise with a reasonable expectation of profit derived from the efforts of others. Whether a digital asset is sold as a security turns on applying this test to the facts of the offering and sale.

I

Investment Contract

One of the categories of instrument included in the statutory definition of “security” (Securities Act § 2(a)(1), 15 U.S.C. § 77b(a)(1)). Whether a digital asset transaction is an investment contract is determined by the Howey test. A digital asset is not a security merely because it is a digital asset — the question is whether it is offered and sold in a transaction satisfying that test.

M

Mixer

A service that pools digital assets from many users and redistributes them in order to obscure the connection between the source and the destination of funds. Also called a tumbler, a mixer complicates blockchain tracing and is frequently encountered in fraud and money-laundering matters; assets routed through a mixer are harder, though not always impossible, to follow.

Money Transmitter

A type of money services business that accepts and transmits funds — or, in this context, value that substitutes for currency — on behalf of others. Under FinCEN guidance, a business that accepts and transmits convertible virtual currency is generally a money transmitter, and must register federally with FinCEN and, in most states, obtain a state money transmitter license.

N

NFT (Non-Fungible Token)

A token recorded on a blockchain that represents a unique item rather than an interchangeable unit of value, commonly used for digital art, collectibles, and records of ownership. The legal treatment of an NFT depends on what it represents and how it is sold; an NFT marketed as an investment can raise the same securities questions as any other digital asset.

Notice 2014-21

The Internal Revenue Service notice, first issued in 2014 and applied consistently since, establishing that digital assets are treated as property for federal tax purposes rather than as currency. Its consequence is that disposing of a digital asset — selling it, exchanging it, or spending it — is a taxable event on which gain or loss is recognized.

O

Oracle

A service that supplies external data — most often asset prices — to a blockchain so that smart contracts can act on real-world information. Because decentralized-finance protocols depend on oracle data to price transactions, the integrity of an oracle is important to the integrity of the protocol that relies on it.

Oracle Manipulation

The practice of distorting the data an oracle feeds to a blockchain — frequently by manipulating the price on a thinly traded market the oracle reads — in order to induce a decentralized-finance protocol to misprice a transaction. Depending on the assets and conduct, it can support claims and enforcement under securities and commodities anti-fraud and anti-manipulation law; see the Oracle Manipulation topic resource.

P

Pig Butchering

A long-form investment fraud scheme in which a stranger builds a relationship with the victim over weeks or months before introducing a fraudulent cryptocurrency investment, shows the victim fabricated gains on a counterfeit platform, and then disappears with the deposited funds. The scheme combines patient social engineering with cryptocurrency payment rails; see the Pig Butchering topic resource.

Private Key

The secret cryptographic value that authorizes transfers of digital assets from a particular blockchain address. Whoever controls the private key controls the assets: loss of the key generally means loss of access, and theft of the key generally means theft of the assets.

Pump-and-Dump Scheme

A form of market manipulation in which participants coordinate to inflate the price of an asset through misleading promotion and trading, then sell into the demand they created, leaving later buyers with losses. Applied to digital assets, this conduct can be reached under securities and commodities anti-fraud and anti-manipulation law; see the Crypto Pump-and-Dump Schemes topic resource.

S

SEC (Securities and Exchange Commission)

The federal agency that administers the U.S. securities laws. In the digital asset context, the SEC regulates digital assets that are offered or sold as securities, and the registration, disclosure, and anti-fraud provisions of the securities laws apply to those assets and to the firms that intermediate them.

Security

An instrument subject to the federal securities laws, defined by statute (Securities Act § 2(a)(1)) to include, among other things, stocks, bonds, and “investment contracts.” Whether a digital asset is a security generally turns on whether it is sold as an investment contract under the Howey test; classification determines which agency and which rules apply.

Smart Contract

A program stored on a blockchain that executes automatically when specified conditions are met. Smart contracts underpin tokens, decentralized-finance protocols, and DAOs; because they run as written, errors or vulnerabilities in the code can have direct and irreversible financial consequences.

Spoofing

Bidding or offering with the intent to cancel the bid or offer before it executes, in order to create a false impression of supply or demand. Spoofing is prohibited in U.S. derivatives markets by Section 4c(a)(5)(C) of the Commodity Exchange Act and can be pursued in securities markets under the Securities Exchange Act; it occurs in digital asset markets as in other markets.

Stablecoin

A digital asset designed to hold a stable value, typically by reference to a national currency such as the U.S. dollar. Payment stablecoins are the subject of the GENIUS Act of 2025, which permits them to be issued only by qualified issuers and requires full reserve backing and regular reserve disclosures.

T

Token

A unit of value or rights issued and recorded on a blockchain, usually by means of a smart contract. “Token” is a general term — a token may function as a currency, represent a stake in a project, carry governance or access rights, or represent a unique item — and its legal treatment depends on what it represents and how it is offered and sold.

W

Wallet

Software or hardware that stores the private keys used to control digital assets and to authorize transactions. A custodial wallet is one whose keys are held by a third party such as an exchange; a non-custodial wallet is one whose keys are held by the user alone. The distinction matters for both legal control of the assets and the regulatory status of the provider.

Wash Trading

Trading that has the appearance of a genuine transaction but involves no real change in beneficial ownership, or that is pre-arranged, typically used to create a misleading impression of trading volume or activity. It is prohibited in U.S. derivatives markets under Section 4c(a)(1) of the Commodity Exchange Act and CFTC regulations, and is a recognized form of digital asset market manipulation.

Wells Notice

A formal notice from SEC or CFTC enforcement staff informing the recipient that staff intends to recommend that the agency authorize an enforcement action. It gives the recipient an opportunity to respond in writing before a decision is made. Receiving one is a serious development that warrants prompt counsel.

Whistleblower Program

A program through which a person who reports violations of law may be eligible for a monetary award and protection against retaliation. The SEC and CFTC whistleblower programs (Section 21F of the Securities Exchange Act and Section 23 of the Commodity Exchange Act) can apply to digital asset misconduct that violates the securities or commodities laws; see the Whistleblower Programs topic resource.