SEC Adds Crypto Asset FAQs: Broad Governance Participants Generally Not Centralized Entities

Nov. 3: According to the U.S. Securities and Exchange Commission (SEC) website, the SEC's Division of Corporation Finance updated its crypto asset frequently asked questions (FAQ) on Nov. 2, adding three answers related to crypto asset classification. It said that participants in the broad governance system of a functional crypto system, if they are unaffiliated with one another and there is no agreement, arrangement or understanding to act in concert, generally would not be viewed as "centralized entities," and the conclusion is the same where the governance system belongs to an organization, association or foundation. The FAQ also said that "supervisory participation" by a centralized entity means it has the authority to control access to the crypto system at the protocol, validator or user level, for example unilaterally granting or restricting access, or deciding or changing the voting process for software upgrades; "functional" and "decentralized" are two different concepts. These FAQs represent only the views of SEC staff and have no legal force.