SEC Crypto FAQ Explains Staff Views but Has No Legal Force

The Securities and Exchange Commission’s crypto FAQ explains how staff view existing securities law, while stating that the answers do not change the law or create new obligations for firms.

The SEC’s Division of Corporation Finance first issued the FAQ on Sept. 25 and updated it Sept. 28. The document says the Commission has neither approved nor disapproved its contents and that the answers reflect staff views without legal force or effect.

The FAQ builds on the SEC’s March interpretive release on federal securities laws and certain crypto transactions, including airdrops, protocol mining, protocol staking and wrapped assets. It also addresses token buybacks.

For a non-security crypto asset in a functional crypto system with no central party, staff say an issuer’s buyback announcement would not represent a promise to undertake essential managerial efforts. For a non-security crypto asset, if the system is not functional, staff say the announcement could count as such a promise if presented as creating yield or a return for token holders.

The FAQ is separate from the SEC’s August proposal for Regulation Crypto Assets. That proposal includes two registration exemptions for certain investment contract offerings: up to $5 million over four years and up to $75 million in each 12-month period. It also includes a conditional safe harbor. These provisions remain proposed rules.