SEC and CFTC Clarify Cryptocurrency Regulatory Guidelines

The US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have updated their frequently asked questions (FAQs) regarding cryptocurrencies.

The SEC's update, released on September 25, clarifies that token repurchases, network upgrades, and marketing statements do not automatically render a cryptocurrency a security.

According to the FAQ, simply announcing a repurchase plan for an already running blockchain will not turn related tokens into investment contracts. However, if the network is still in development and the issuer promotes the repurchase as a return on investment for holders, it may be considered differently.

The SEC also reaffirmed that services provided to enhance or improve a system, such as maintenance or upgrades, are not considered management efforts under the Howey test. Marketing statements about existing uses of a network or future functionalities do not generate profit expectations if they do not promote potential profits.

The CFTC's update allows futures companies and clearinghouses to invest customer funds in tokenized versions of previously allowed assets, provided they meet investment and custodial requirements. The CFTC also stated that regulated entities can use blockchain for record-keeping, but must be able to provide records even when the blockchain or its browser is unavailable.

The updates come as the Clarity Act stalled in the Senate, with regulatory bodies continuing to develop a cryptocurrency regulatory framework under existing laws.