SEC Updates Crypto Asset FAQ: Broad Governance Participants Typically Do Not Constitute a 'Central Party'

BlockBeats news, November 3 - The SEC's Division of Corporation Finance updated its "Frequently Asked Questions on the Application of Federal Securities Laws to Certain Crypto Assets and Transactions," with the latest update dated November 2. This FAQ represents staff views and is not a rule, regulation, or statement of the SEC, and carries no legal force.

The new content primarily clarifies the determination of "central party." Staff stated that participants in a broad governance system of a functional crypto system generally do not constitute a "group of persons or entities" under the definition if they are not affiliated with one another and have no separate agreements to act in concert. "Oversight participation" by a central party refers to having control over access at the protocol layer, validator layer, or user layer, such as unilaterally granting or restricting access, determining or changing upgrade and voting processes, controlling who may participate in consensus, or modifying rule code, rolling back transactions, or revoking access. The FAQ also noted that "functional" and "decentralized" are distinct concepts; the functional crypto system in which a digital commodity natively resides possesses decentralized characteristics, but the degree of decentralization varies based on facts and circumstances.