A document that declares itself to have no legal effect is being used to draw the boundaries around an entire set of rules.
The Division of Corporation Finance of the U.S. Securities and Exchange Commission has issued an FAQ on the regulation of crypto assets—this time with nine questions and nine answers. At the very beginning, the document first disclaims that it is not official rules and has no legal force.📄
What the industry watches, though, is this.
This version is more specific than the last. It lays out how “functional” networks are assessed, whether interest-bearing note-like tokens count, under what circumstances token repurchases and marketing promotions do not constitute evidence of an investment contract, and even whether a trading platform could be considered on the issuer’s side.
The main thread is simple: once a system is already up and running and the controlling party becomes less and less clear, then who keeps doing the maintenance, upgrades, and recruiting—that is what counts as the key manager in the Howey test.
There’s also one criterion worth remembering.
Whether a project is “functional” or whether it is “decentralized” does not depend on what the market thinks. It depends on how the issuer defined it in the first place and how it described it to people. The rules don’t try to guess what the project looks like now; they only review what it wrote back then.
This shifts the risk from a technical issue to a copywriting issue.
An unbinding set of Q&A, but it governs how others write about themselves in the future.
The Division of Corporation Finance of the U.S. Securities and Exchange Commission has issued an FAQ on the regulation of crypto assets—this time with nine questions and nine answers. At the very beginning, the document first disclaims that it is not official rules and has no legal force.📄
What the industry watches, though, is this.
This version is more specific than the last. It lays out how “functional” networks are assessed, whether interest-bearing note-like tokens count, under what circumstances token repurchases and marketing promotions do not constitute evidence of an investment contract, and even whether a trading platform could be considered on the issuer’s side.
The main thread is simple: once a system is already up and running and the controlling party becomes less and less clear, then who keeps doing the maintenance, upgrades, and recruiting—that is what counts as the key manager in the Howey test.
There’s also one criterion worth remembering.
Whether a project is “functional” or whether it is “decentralized” does not depend on what the market thinks. It depends on how the issuer defined it in the first place and how it described it to people. The rules don’t try to guess what the project looks like now; they only review what it wrote back then.
This shifts the risk from a technical issue to a copywriting issue.
An unbinding set of Q&A, but it governs how others write about themselves in the future.
