SEC Clarifies Buyback Rules for Functional Crypto Assets

The US Securities and Exchange Commission (SEC) has clarified its stance on buyback securities claims for non-security crypto assets. According to the SEC's Division of Corporation Finance, an issuer's announcement of a buyback would not represent a promise of essential managerial efforts if the underlying crypto system is functional.

However, this changes when the system is still nonfunctional. In such cases, a buyback announcement could be considered a promise if it's presented as generating yield or returns for token holders.

The guidance also states that promises to secure, maintain, improve, or enhance the system generally do not satisfy the managerial-efforts element of the test once the crypto system is functional.

The FAQs emphasize that functionality depends on the thresholds defined or described by the issuer, rather than a universal market standard.