SEC Issues Fresh Crypto Guidance on Staking Tokens, Buybacks, and the Howey Test

The watchdog's Division of Corporation Finance has published a new set of crypto FAQs. Here are the most important topics.

The failure of the CLARITY Act in the US Senate on September 15 hasn’t deterred the two largest local regulators from trying to clear the air on crypto regulation in the country, with the Securities and Exchange Commission now issuing fresh staff guidance addressing several long-running questions.

The new set of FAQs focuses heavily on when tokens may fall outside securities regulation and what types of issuer activity do or do not create new Howey-related concerns.

New Set of FAQs

One of the more notable sections addresses Staking Receipt Tokens, which represent ownership of crypto assets deposited for staking. The circumstances described by the watchdog indicate that a staking receipt tied to a digital commodity that is not subject to an investment contract can be considered a digital tool since it simply evidences ownership of the underlying asset.

In certain cases, such a token may instead qualify as a digital commodity when issued by a protocol-based liquid staking provider. The distinction depends heavily on what rights the receipt actually creates. The agency said a true “receipt” should not transfer ownership or control of the deposited asset to the issuer, nor allow that issuer to lend, pledge, rehypothecate, or otherwise use it.