U.S. Securities Commission Updates Securities Regulations for Certain Cryptocurrency Assets

The U.S. Securities and Exchange Commission (SEC) has clarified how securities laws apply to certain cryptocurrency assets and transactions in its latest update. This move could be significant for projects involved in token buybacks, decentralized networks, and staking reward tokens.

According to Mihan Blockchain, the agency emphasized that the new explanations are not binding and do not change existing law, but under the SEC's current interpretation of the Howey test, certain cryptocurrency-related activities do not necessarily mean the offering of an investment contract and thus do not classify them as securities. This update comes just days after a similar action by the Commodity Futures Trading Commission (CFTC) and the failure of the Senate to advance the Clarity Bill.

SEC Clarifies Its Position on Certain Cryptocurrency Activities

In its new FAQ version, the SEC stated that if a cryptocurrency system is functional and there is no centralized party managing it, a token buyback program for customers does not necessarily imply the provision of "promises or commitments to undertake fundamental management actions"; a key element in assessing investment contracts under federal securities laws.

The agency also explained that if a cryptocurrency system is active and provides services related to security, custody, development, or enhancement of network performance or strengthening network effects, these activities do not necessarily meet the Howey test criteria.

As covered in another report, the SEC has also stated that staking reward tokens do not qualify as securities in all cases.

However, the SEC clarified that these responses merely reflect the position of the agency's staff and "do not have any legal force or legal effect, do not change existing laws, and do not create new obligations for any person."

The SEC update occurred just days after a similar guide was released by the CFTC. Both agencies have announced their positions on the cryptocurrency industry while the U.S. Senate recently failed to advance a bill intended to clarify the operational framework of the SEC and CFTC in the digital asset market.

Paul Atkins, SEC Chair, and Michael Selig, CFTC Chair, had previously indicated that in the absence of new legislation from Congress, both agencies intend to advance the regulation of the cryptocurrency market through guidance and regulatory actions.

Departure of a Prominent SEC Member This Week

Amid these developments, Hester Peirce, an SEC commissioner who has served for about eight years, announced that she will resign from her position on October 2. Peirce, known in the cryptocurrency industry for advocating friendlier policies towards digital assets with the nickname "Crypto Mom," is set to become a professor at Regent University School of Law in Virginia starting in November.

Following Peirce's departure, the leadership of the SEC will be in the hands of Atkins and Mark Uyeda. The commission typically has five members and a bipartisan structure, but currently, two seats belonging to Democratic members are also vacant. Trump has not yet introduced potential candidates to replace Peirce and the other two vacant seats.

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