The U.S. Securities and Exchange Commission’s Division of Corporation Finance updated its crypto asset frequently asked questions on Nov. 2, adding three new responses tied to crypto asset classification. In the update, SEC staff said participants in a broad governance system for a functional crypto network generally would not be viewed as a “centralized entity” if they are not affiliated with one another and do not have any agreement, arrangement, or understanding to act together. The same conclusion applies when the governance system belongs to an organization, association, or foundation. The FAQ also explains that “supervisory involvement” by a centralized entity refers to the power to control access to the crypto system at the protocol, validator, or user level, including unilateral admission or access restrictions and the ability to determine or change voting procedures for software upgrades. The staff also said “functional” and “decentralized” are distinct concepts. The FAQ reflects SEC staff views only and does not carry legal force.
The U.S. Securities and Exchange Commission’s Division of Corporation Finance updated its crypto asset frequently asked questions on Nov. 2, adding three new responses related to crypto asset classification.
In the FAQ, SEC staff said participants in a broad governance system for a functional crypto system generally do not constitute a “centralized entity” if they are not affiliated with one another and have no agreement, arrangement, or understanding to act in concert. The same conclusion applies when the governance system is part of an organization, association, or foundation.
The update also says that “supervisory involvement” by a “centralized entity” means having the authority to control access to the crypto system at the protocol, validator, or user level. That includes unilateral admission or access restrictions, as well as the power to determine or change voting procedures for software upgrades.
SEC staff also said “functional” and “decentralized” are two different concepts.
The FAQ represents the views of SEC staff only and does not have legal effect.
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