SEC Issues Guidance on Crypto Securities Laws

The U.S. Securities and Exchange Commission (SEC) has released a new Q&A guide on how federal securities laws apply to crypto assets.

The document addresses various topics, including liquid staking tokens, token buybacks, protocol development activities, and marketing activities of crypto projects.

According to the SEC's Corporate Finance staff, staking receipt tokens can be considered a 'digital instrument' under certain conditions. However, if these tokens are tied to the programmatic activity of a functional cryptographic system and derive their value from supply and demand dynamics, they can be classified as a 'digital commodity.'

The guidance also clarifies that token buyback programs do not inherently constitute 'essential managerial efforts.' However, if a project team presents a buyback program as a mechanism generating returns or profits for token holders, it could indicate an investment contract under the Howey test.