SEC Staff Clarifies Criteria for Classifying Token Governance Participants as Central Parties

On November 3, according to the crypto asset Q&A released by the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC), participants who are unaffiliated and do not engage in concerted action arrangements beyond participating in broad governance systems are generally not considered part of a centralized group for digital commodity classification, subject to the specific facts and circumstances. Even if participants form a group, they must still possess operational, economic, or voting control to meet the definition of a central party.

The staff also noted that the power to unilaterally determine system access, upgrade voting procedures, validator eligibility, or code modifications may constitute control over participation in the system. The Q&A reflects only the views of the staff, carries no legal effect, and has not been approved or disapproved by the SEC Commission.