SEC The Division of Corporation Finance updates crypto assets FAQ, stating that broad governance participants who are unaffiliated and do not act in concert generally do not constitute a “centralized entity.”
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U.S.SEC new crypto asset FAQ: Broad governance participants generally do not constitute a centralized entity
PANews November 3 reported, according to the website of the U.S. Securities and Exchange Commission (SEC), the SEC Division of Corporation Finance November 2 updated its crypto asset frequently asked questions (FAQ), adding 3 answers related to crypto asset classification. It stated that participants in a broad governance system of a functional crypto system generally would not be regarded as a “centralized entity” if they are unaffiliated with one another and have no agreement, arrangement, or understanding to act in concert. The same conclusion applies where the governance system is affiliated with an organization, association, or foundation.FAQ also stated that a centralized entity’s “supervisory involvement” means that it has the authority to control access to a crypto system at the protocol, validator, or user level, for example by unilaterally granting or restricting access or determining or changing the voting process for software upgrades; “functionality” and “decentralization” are distinct concepts. The foregoing FAQ represents only the views of SEC staff and has no legal force.
PANews reported that SEC the Division of Corporation Finance November 2 updated its crypto asset frequently asked questions, adding 3 answers related to crypto asset classification.
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FAQ It stated that participants in a broad governance system of a functional crypto system generally would not be regarded as a “centralized entity” if they are unaffiliated with one another and have no agreement, arrangement, or understanding to act in concert.
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The same conclusion applies where the governance system is affiliated with an organization, association, or foundation.
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FAQ It describes a centralized entity’s “supervisory involvement” as having the authority to control access to a crypto system at the protocol, validator, or user level.
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Examples of such control include unilaterally granting or restricting access, and determining or changing the voting process for software upgrades.
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FAQ It stated that “functionality” and “decentralization” are distinct concepts.
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The foregoing FAQ represents only the views of SEC staff and has no legal force.
AI-assisted interpretation
The following is analysis, separate from reported facts. Verify important claims independently.
This FAQ explains SEC how staff understand the governance structures of certain crypto systems. A large number of people participating in governance does not automatically mean that a centralized entity exists; key conditions include whether participants are affiliated with one another, act in concert, and whether anyone can control system access or the upgrade process. At the same time, a system’s ability to operate normally does not mean that it is decentralized.
Why it matters to readers
These answers provide staff-level guidance for determining whether a crypto system has a “centralized entity,” but because they have no legal force, they cannot be treated as binding rules or final legal conclusions.
Beginners should focus on distinguishing concepts: the number of people participating in governance, whether a unified controller exists, and whether the system is functional. The cannot simply be equated.
Risks and unknowns
The current evidence is PANews’ restatement of SEC website content and does not provide the FAQ full original text.
FAQ The specific scope of application and its impact on individual crypto projects cannot be confirmed from the available evidence.
FAQ represents only the views of SEC staff and has no legal force.
The “November 3 news” in the headline and the “November 2 update” described in the body refer to the report and the update, respectively, but the evidence does not specify the year.
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centralized entity
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