SEC Adds Decentralization Condition to Crypto Buyback Guidance

The US Securities and Exchange Commission’s staff has added an important qualification to its new guidance on crypto token buybacks: the network must be functional and have no central party for the answer described in its FAQ to apply. The September 28 revision narrows a sentence that could otherwise have been read as giving functioning networks a broad exemption simply because their software already works.

The change appears in the Division of Corporation Finance’s crypto asset FAQ, first issued on September 25. It concerns whether announcing a buyback amounts to a promise to undertake the managerial work on which token buyers depend. For projects marketing burns, treasury purchases or supply reductions, those extra words deserve more attention than a blanket headline declaring buybacks cleared.

Working software is only part of the question

The revised answer distinguishes a functioning system without a central party from a system that has not reached functionality. In the latter case, promoting a buyback as a source of yield or return could amount to the kind of managerial promise considered in an investment-contract analysis. The document does not say that every purchase of tokens by a treasury is a securities transaction. Equally, it does not approve every program described as decentralized.