SEC issues rare "no-action" letter for crypto token, in sign of a shift
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The U.S. Securities and Exchange Commission has not always had the lightest touch with the crypto industry, but a rare "no-action" letter issued Monday to a startup suggests times may be changing.
The big picture: There's been a lot of macro news about a changed attitude at the nation's largest financial regulator, but this is a noteworthy micro case, of one company collaborating successfully with agency staff.
Catch up quick: DoubleZero gives distributed systems (like blockchains) access to high-performance fiber-optic networks, in order to speed the movement of data and improve user experience.
- Those that can offer access to that kind of fiber are paid by the DoubleZero network in its 2Z token, proportional to the traffic that runs over their infrastructure.
Context: For a long time, the message from the SEC had been "come in and talk to us," but industry participants complained that doing so only invited enforcement actions — until now.
Driving the news: Monday's letter came from the Division of Corporate Finance, saying that based on the facts presented to them, they would not recommend the company's token arrangement for any enforcement action.
What they're saying: "This is more than a milestone for DoubleZero — it's proof that U.S. founders and innovators can work with regulators to achieve clarity, and still move fast," said Austin Federa, co-founder of DoubleZero in a statement.
Zoom out: According to Cornerstone Research, enforcement actions against crypto companies are on track to be the lowest this year since 2017.
- There have been nine so far this year. The high came in 2023 with 47 enforcement actions.
- "Organizing disparate people to work together to build physical infrastructure is an interesting use for the technology. Markets, not financial regulators, should determine the success of such projects," SEC commissioner Hester Peirce wrote in a statement supporting the decision.
The bottom line: This news is likely to make other startups interested in checking in with the agency.
