SEC staff: Functional encryption network maintenance upgrades generally do not constitute critical management efforts under the Howey test

PANews reported on September 26 that according to the crypto-asset FAQs released by the Division of Corporate Finance of the U.S. Securities and Exchange Commission (SEC) on September 25, once a cryptographic system reaches a "functional" state, providing services such as security maintenance, improvement, feature enhancement, or promoting network effects, including funding or sponsoring development projects, generally does not constitute a "critical management effort" as called by the Howey test, and the relevant service commitments themselves generally do not meet the corresponding requirements of the Howey test. The FAQ also stated that if the pledge receipt token only proves the holder's ownership of the underlying digital commodity and does not change the relevant rights, obligations or benefits, it can be regarded as a "digital instrument"; when issued by a protocol-based liquidity staking provider, it may also be regarded as a "digital commodity".

PANews reported on September 26 that according to the crypto-asset FAQs released by the Division of Corporate Finance of the U.S. Securities and Exchange Commission (SEC) on September 25, once a cryptographic system reaches a "functional" state, providing services such as security maintenance, improvement, feature enhancement, or promoting network effects, including funding or sponsoring development projects, generally does not constitute a "critical management effort" as called by the Howey test, and the relevant service commitments themselves generally do not meet the corresponding requirements of the Howey test. The FAQ also stated that if the pledge receipt token only proves the holder's ownership of the underlying digital commodity and does not change the relevant rights, obligations or benefits, it can be regarded as a "digital instrument"; when issued by a protocol-based liquidity staking provider, it may also be regarded as a "digital commodity". In addition, a functional network's buyback program for non-security cryptoassets does not generally constitute a critical management effort; however, it may constitute a related commitment if the network is not yet functional and the buyback is promoted as generating revenue for the holder. The SEC emphasized that this FAQ only represents the views of the staff of the Corporate Finance Department, has no legal effect, and has not been approved or rejected by the Commission.