The U.S. Securities and Exchange Commission (SEC) has made a significant update to its guidelines, now permitting token buybacks within cryptocurrency networks. This change, announced by the SEC’s Division of Corporation Finance, is seen as a crucial development for the crypto industry, particularly following a period of heightened regulatory scrutiny.
The SEC clarified that announcing a token buyback does not imply a commitment to ongoing managerial efforts, which is a key consideration under the Howey test that determines whether an investment qualifies as a security. This guidance indicates that as long as a cryptocurrency network is operational, a buyback announcement alone does not equate to a promise of profit, offering some relief to protocols previously uncertain about their legal standing.
Gabriel Shapiro, a securities lawyer, expressed optimism regarding the new guidance, noting that it suggests a more flexible approach to securities regulations in the crypto space. However, he cautioned that networks that are not yet operational could still face regulatory challenges if they promote buybacks as a means to generate returns for holders.
