Covered Security Definition

Definition ∞ A covered security definition specifies which financial instruments or digital assets fall under particular regulatory oversight, typically by a securities regulator. This classification determines the legal obligations for issuance, trading, and reporting associated with that asset. In the crypto sphere, distinguishing between a security and a commodity is a central regulatory challenge. This definition dictates how an asset is treated under existing securities laws.
Context ∞ The lack of a universally accepted covered security definition for digital assets remains a significant point of contention for market participants and regulators globally. Jurisdictions often apply differing interpretations, leading to regulatory uncertainty and fragmentation. A critical future development involves international bodies working towards harmonized definitions to provide clarity and consistency for the digital asset market.