The SEC's Division of Corporate Finance has issued new guidance clarifying that token buyback programs on functional crypto networks do not automatically convert these assets into securities. This stance provides greater regulatory clarity for projects seeking to manage their offerings without violating current U.S. regulations.
The Howey test and the new paradigm of functional networks
The SEC's recent publication establishes a fundamental distinction for the crypto ecosystem. According to the agency's new FAQs, if a network is already fully operational and functional, announcing a token buyback program does not necessarily constitute a promise of essential management efforts, one of the pillars of the Howey Test.
The red line for projects in development
The scenario changes for networks that are not yet fully operational. In these cases, promoting a buyback as a mechanism to generate passive returns for holders can be considered an investment contract and be subject to federal securities laws.
Industry reactions and global context
Legal experts have highlighted that this guide represents a pragmatic step towards regulatory clarification in the United States, contrasting with comprehensive frameworks such as the MiCA Regulation in Europe, which offers a formal and unified legislative structure for crypto assets.
The SEC's clarification provides some relief to developers of mature networks, although since these are non-binding guidelines, the industry should remain cautious and prioritize regulatory compliance in its operational strategies.
Investing in cryptoassets is not fully regulated, may not be suitable for retail investors due to high volatility and there is a risk of losing all invested amounts.
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