SEC and CFTC Clarify Crypto Rules for Token Buybacks and Blockchain Records

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have updated their crypto frequently asked questions, providing clarity on token buybacks, network upgrades, and blockchain records.

The SEC clarified that announcing a buyback plan for a token on an already operating network does not make the token an investment contract in itself. However, analysis may differ when a network has not started and an issuer promotes buybacks as a source of returns for holders.

The updated guidance also states that services securing, maintaining, improving, or expanding an operating crypto system are not necessarily managerial efforts under the Howey test. Marketing a network's existing uses generally does not create an expectation of profit, and statements about future functions are treated similarly when they do not promote profit potential.

The CFTC said regulated firms may use blockchain systems for recordkeeping if they can still provide the records when the blockchain or its block explorer is unavailable. Futures commission merchants and clearinghouses may also invest client funds in tokenized versions of assets already permitted under existing rules, provided investment and custody requirements are met.