SEC Division of Corporation Finance FAQ says maintenance of functional crypto networks generally does not constitute essential managerial efforts under the Howey test
BIBIBI
AT A GLANCE
SEC Staff stated that maintaining and upgrading functional crypto networks generally does not constitute the essential managerial efforts contemplated by the Howey test.
Article
SEC Employee: Functional encryption network maintenance and upgrades generally do not constitute the key managerial efforts referred to in the Howey test
PANews September 26 reported that, according to the U.S. Securities and Exchange Commission (SEC) Division of Corporation Finance September 25’s crypto asset FAQ, once a crypto system reaches a “functional” state, services provided to maintain security, make improvements, enhance functionality, or promote network effects—including funding or sponsoring development projects—generally do not constitute the “key managerial efforts” referred to in the Howey test, and commitments to provide such services generally do not themselves satisfy the corresponding element of the Howey test.FAQ It also said that if a staking receipt token merely evidences the holder’s ownership of the underlying digital commodity, without changing the relevant rights, obligations, or returns, it may be considered a “digital instrument”; when issued by a protocol-based liquid staking provider, it may also be considered a “digital commodity.” In addition, buyback programs for non-security crypto assets on functional networks generally do not constitute key managerial efforts; however, if the network is not yet functional and the buyback is promoted as intended to...
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🔗https://www.panewslab.com/zh/articles/01a0db30-4339-7675-a9c1-68dee3c25313
Key points
01
PANews reported that the U.S. Securities and Exchange Commission's Division of Corporation Finance on September 25 released FAQs on crypto assets.
02
FAQ states that once a crypto system reaches a “functional” state, services such as security maintenance, improvements, feature enhancements, fostering network effects, and funding or sponsoring development projects generally do not constitute the “essential managerial efforts” referred to in the Howey test.
03
FAQ states that if a staking receipt token merely evidences the holder’s ownership of the underlying digital commodity, without changing the relevant rights, obligations, or returns, it may be regarded as a “digital instrument”.
04
FAQ It is stated that the related staking receipt tokens issued by protocol-based liquid staking providers may also be regarded as “digital commodities.”
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A functional network’s repurchase program for non-security crypto assets generally does not constitute an essential managerial effort.
AI-assisted interpretation
The following is analysis, separate from reported facts. Verify important claims independently.
This information introduces SEC staff explanations regarding certain crypto-asset arrangements: if a network is already functional, routine maintenance, upgrades, and service enhancements would generally not independently be considered essential managerial efforts under the Howey test. Certain staking receipt tokens that do not alter holders' rights, obligations, or returns may also be classified as digital tools or digital commodities.
Why it matters to readers
This may affect market participants’ understanding of the regulatory characterization of functional-network maintenance upgrades, liquid staking receipt tokens, and certain buyback programs.
The Howey test is used to determine whether a particular arrangement may constitute an investment contract; “key managerial efforts” is one of the factors assessing the project team's managerial role.
Risks and unknowns
The evidence comes from PANews' account of FAQ, which does not provide the U.S. Securities and Exchange Commission's FAQ original text.
The original text concerning the conditions of the repurchase plan is truncated in the evidence, and its full scope of applicability cannot be confirmed.
FAQ Terms such as “generally” and “may” are used; the specific conclusion still depends on the relevant facts and arrangements.
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Related concepts
Howey test
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