SEC issues staff guidance on crypto after CLARITY Act vote fails
The SEC updated its crypto FAQs days after the Senate failed to pass a market structure bill, following similar guidance from the CFTC. Commissioner Hester Peirce also said she will resign.
Key points
- The SEC updated its March FAQs on how securities laws apply to certain crypto assets and transactions.
- The guidance says buybacks may not be investment contracts if a crypto system is functional and has no central party.
- The CFTC issued similar token issuer guidance the previous week.
- The Senate failed to pass the CLARITY Act market structure bill days earlier.
- Commissioner Hester Peirce will resign on Oct. 2 after eight years at the agency.
The US Securities and Exchange Commission has issued staff guidance on crypto, updating its frequently asked questions on how federal securities laws may apply to digital assets. The move follows a similar step by the Commodity Futures Trading Commission and comes days after the Senate failed to pass a crypto market structure bill, CoinTelegraph reports.
In a Friday update to FAQs first issued in March, the SEC addressed how its rules apply to certain types of crypto assets and transactions involving them. The agency said the interpretation is non-binding and has no legal force or effect. It does not alter applicable law or create new obligations for any person, according to the SEC.
The FAQs concern how the SEC weighs digital asset products under the Howey test for investment contracts. The agency said token issuers could run buyback programmes for customers where a crypto system is functional and has no central party. Such buybacks would not necessarily count as a representation or promise to undertake essential managerial efforts, meaning they would not necessarily be an investment contract under federal securities laws.
SEC updates crypto FAQs
The SEC offered similar guidance for crypto networks. It said a system that is functional, along with services to secure, maintain, improve or enhance that system or its functionality, or to facilitate network effects, would not necessarily satisfy the Howey test. Staking receipt tokens would likewise not always be classified as securities, according to the agency.
The SEC updates followed a similar move by the CFTC, which offered guidance to token issuers. Both agencies released their staff answers days after the Senate failed to pass a crypto market structure bill. Many had expected that legislation to clarify the roles the two financial regulators would have over digital assets. SEC Chair Paul Atkins and CFTC Chair Michael Selig issued statements signalling the agencies would address crypto regulation in the absence of laws passed by Congress.
Separately, Commissioner Hester Peirce announced on Friday that she plans to resign on Oct. 2 after eight years at the SEC. Known in the industry as Crypto Mom for her advocacy of policies favourable to digital assets, she is expected to join the law school of Regent University in Virginia as an associate professor in November.
CFTC issues similar guidance
With Peirce's departure, leadership of the financial agency will come down to Atkins and Commissioner Mark Uyeda. Both are Republican commissioners on a bipartisan panel that normally consists of five members. As of Monday, US President Donald Trump had not announced any potential replacements for Peirce or the two remaining Democratic SEC seats.