SEC updates crypto guidance on token buybacks and staking

The U.S. Securities and Exchange Commission (SEC) staff has updated its guidance regarding crypto asset compliance, specifically concerning token buybacks and staking receipts. In an updated FAQ released on September 28, staff added a new requirement for token buybacks: for a buyback of a non-security crypto asset to avoid being classified as a promise of essential managerial efforts, the crypto system must be both functional and have ‘no central party.’

This update follows previous guidance issued on September 25. The SEC defines a central party as an individual, company, or group with operational, economic, or voting control over a crypto system. If a system is not yet functional, a buyback announcement intended to generate yield or returns for holders may be subject to investment-contract analysis.

The guidance also addresses staking-receipt tokens. A receipt may qualify as a digital tool if it represents ownership of an underlying digital commodity that is not an investment contract. To qualify, the issuer must preserve the deposited asset’s rights and benefits and cannot transfer, lend, or rehypothecate the assets.

While these updates reflect the views of SEC staff, they are not legally binding and do not amend existing law or determine if specific tokens are securities.