SEC staff guidance says that, on a functional crypto network, efforts to improve, maintain, secure and grow the network generally do not count as the essential managerial efforts associated with an investment contract under the Howey test. It also addresses token buybacks, liquid staking and trading platforms, offering more specific guidance on activities that have long raised questions for the industry.
Why it matters
The guidance says that funding development and growing network effects do not automatically make a token a securities offering. It also says that announcing a buyback of a non-security token on a functional network does not, by itself, constitute a promise of essential managerial efforts. That includes measures such as reducing supply and protocol-funded burns.
For liquid staking, the staff says qualifying staking receipt tokens can be digital tools and, in certain protocol-based arrangements, digital commodities. The guidance also addresses communications about decentralized networks and says that simply providing a secondary market does not automatically make a trading platform a promoter.
Market impact
More specific treatment of development, token economics, staking and trading may help projects and institutions assess what to build or use, while giving developers greater clarity about network maintenance and growth. The guidance is a staff view, not a new law or blanket approval of every crypto project, and some of it builds on earlier guidance.
The SEC guidance arrives alongside a CFTC staff update on tokenized permitted investments and blockchain recordkeeping. Together, the developments point to regulators addressing practical questions about how crypto technology fits into financial activity. Whether clearer rules coincide with stronger investment and adoption remains uncertain, but the guidance gives market participants more detail to evaluate.
Frequently asked questions
-
What does the SEC staff say about development on a functional crypto network?
Efforts to improve, maintain, secure and grow a functional network generally do not count as essential managerial efforts under the Howey test.
-
Does the guidance say that funding crypto development automatically makes a token a securities offering?
No. The staff says funding development and growing network effects do not automatically make a token a securities offering.
-
How does the guidance address token buybacks?
Announcing a buyback of a non-security token on a functional network does not, by itself, constitute a promise of essential managerial efforts. The guidance also discusses supply reduction and protocol-funded burns.
-
How may qualifying liquid-staking receipt tokens be treated?
The staff says qualifying staking receipt tokens can be digital tools and, in certain protocol-based arrangements, digital commodities.
-
Is the SEC staff guidance a new law or approval of every crypto project?
No. It represents staff views, not a new law or blanket approval of every crypto project, and some of it builds on earlier guidance.
Altcoin Daily
CryptoSlate
CoinTelegraph
Crypto News
TheBlock
WuBlockchain