Definition ∞ The proximity argument, in a regulatory context concerning digital assets, refers to the legal reasoning that classifies a new financial product or service based on its closeness or similarity to existing regulated instruments. Regulators use this argument to assert jurisdiction over novel cryptoassets by demonstrating their functional equivalence to traditional securities, commodities, or payment systems. It helps extend established legal frameworks to new technological innovations. This argument aims to ensure consistent oversight across financial markets.
Context ∞ The proximity argument is a frequently cited tool by securities and commodities regulators globally when determining the regulatory status of various digital assets. Key debates involve how closely a cryptoasset must resemble a traditional instrument to fall under existing laws, often leading to legal challenges. Future clarity in digital asset regulation will likely depend on more precise legislative definitions that either affirm or refine the applicability of this argument.
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