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"The crypto ecosystem relies on stablecoins as a cheap and plentiful form of dollar liquidity. If all stablecoins were classed as securities, dollar liquidity for onshore crypto exchanges and platforms would dry up as stablecoin issuers either went offshore or out of business. It is very hard to see what would replace it, at least in the short term: U.S. dollars (and other fiat currencies) are not liquid on crypto exchanges, because to move them around requires banks, and non-USD stablecoins have gained little traction thus far. So trading crypto onshore would become much more expensive and considerably riskier. The dollar liquidity drought could also severely impact DeFi, because that relies on stablecoins (or derivatives of stablecoins) as collateral. So the SEC's action could bring down the onshore crypto ecosystem. "

"There are long-running boring debates about whether certain sorts of cryptocurrencies are "securities" subject to the SEC's jurisdiction. The SEC tends to think that almost everything in crypto is a security; most crypto companies think that almost nothing is a security. (Very few crypto companies register their token or product offerings with the SEC, and the SEC sometimes sues them for doing unregistered securities offerings.) The general rule - called the "Howey test" - is that a security is "the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others." A lot of crypto projects look a lot like that, but you can debate the specifics."