The U.S. Securities and Exchange Commission has issued a new staff FAQ addressing the regulatory treatment of staking receipt tokens and token buybacks. According to the guidance, a staking receipt token that represents ownership of crypto assets already deposited for staking may be treated as a digital instrument rather than a security, provided it is tied to a digital commodity that is not itself an investment contract. In that case, the token serves only as evidence of ownership of the underlying asset.
The FAQ also discusses functional crypto networks and the Howey test. The SEC said that ongoing efforts to maintain, improve, or enhance a network, including funding development or encouraging network effects, generally do not amount to the kind of “essential managerial efforts” considered under Howey. On token buybacks, the agency said that announcing a repurchase of non-security tokens generally would not create a new investment contract if the network is already functional and the buyback is not promoted as a mechanism designed to generate profits for holders.
Techub, citing CryptoPotato, said the clarification is one of the latest issued by the SEC and the Commodity Futures Trading Commission after the CLARITY Act failed to pass the Senate.
The U.S. Securities and Exchange Commission has released a new staff FAQ that gives guidance on the regulatory status of activities including staking receipt tokens and token buybacks.
How the SEC describes staking receipt tokens
The document says a staking receipt token that represents ownership of crypto assets already deposited for staking may be treated as a digital instrument if it is linked to a digital commodity that is not an investment contract. In that case, the token serves only as proof of ownership of the underlying asset.
Functional networks and the Howey test
The SEC said that for a functional crypto network, continued work to maintain, improve, or enhance the network, including funding development or encouraging network effects, generally does not amount to the “essential managerial efforts” considered under the Howey test.
What the FAQ says about token buybacks
The guidance also states that announcing a buyback of a non-security token generally would not amount to a new investment contract undertaking if the network is already functional and the buyback is not marketed as a mechanism intended to generate profits for holders.
Context for the guidance
Techub, citing CryptoPotato, said the clarification is one of the latest issued by the SEC and the Commodity Futures Trading Commission after the CLARITY Act failed to pass the Senate.
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