SEC Cracks Down on Crypto Regulation with Fresh Guidance

The US Securities and Exchange Commission (SEC) has issued fresh guidance on crypto regulation, specifically addressing staking tokens, buybacks, and the Howey test. The new set of FAQs aims to clear up long-running questions and provide clarity on when tokens may fall outside securities regulation.

The guidance notes that a staking receipt tied to a digital commodity can be considered a digital tool if it simply evidences ownership of the underlying asset. However, if the token creates rights such as transfer of ownership or control, it may qualify as a digital commodity instead.

The SEC also stated that continuing to secure and maintain a functional blockchain network does not constitute essential managerial efforts typically associated with an investment contract under Howey. Additionally, announcing a buyback of a non-security token for a functional crypto system would not amount to a promise of essential managerial efforts, unless the network is not yet functional and the issuer markets the buyback as a mechanism designed to generate yield or returns.