In a major development for the cryptocurrency industry, the US Securities and Exchange Commission has exempted the DoubleZero 2Z token, which is distributed as a functional reward to participants in the decentralized infrastructure network, from securities classification.
This historic decision was announced via an industry-first no-action letter from the SEC’s Division of Corporate Finance.
It was the message Issued on September 29 and stated that the agency would not recommend enforcement action against DoubleZero for programmatic distribution of its 2Z token, provided that distributions follow the structure set out in the company’s legal filing.
More importantly, it confirmed that 2Zs do not need to be registered as securities under the Securities Act or the Exchange Act.
The move is viewed by many in the cryptocurrency community as a rare moment of clarity from the SEC, as it highlights how the SEC, once criticized for its enforcement-first approach, has changed its stance on cryptocurrencies and how it can treat tokens that are designed for utility rather than investment speculation.
For years, cryptocurrency startups have grappled with uncertainty over whether their tokens might trigger securities laws, and today’s decision sets a precedent that could impact how the Commission evaluates other functional tokens.
Industry analysts say the decision sends a strong signal that the SEC is beginning to differentiate between investment contracts and tokens that serve a purpose within decentralized protocols.
Blockchain-based infrastructure projects, especially those in the emerging DePIN sector that rely on token incentives to coordinate physical resources such as bandwidth, storage or connectivity, are also expected to benefit from additional regulatory clarity and may now feel more confident in moving forward with the launch of their products.
Why did the SEC exempt DoubleZro token 2Z?
Double Zero, A Decentralized physical infrastructure projectargued that its 2Z token was never intended to be an investment vehicle, but instead serves as a reward for the network.
According to the company’s legal filing, 2Z is distributed in two ways: first, to network providers who provide high-speed connectivity, and second, to resource providers who perform the necessary calculations to determine payment amounts.
DoubleZero emphasized that these automated transfers are necessary for the operation of the protocol and do not constitute offers of securities.
The SEC’s no-action letter appears to agree with this interpretation, especially since the SEC approved the application before the DoubleZero network went live.
One reason the 2Z token falls outside the scope of securities law is that it does not represent a stake in the company, and is not marketed with promises of profit.
Commissioner Hester Peirce described DePin tokens are considered “functional incentives” that support the growth of decentralized service networks, and warned that classifying these tokens as securities would stifle innovation in infrastructure development and discourage participants from contributing resources to decentralized ecosystems.
“When the value of the token comes from the labor of other network participants, Howey simply does not apply,” Mari Tumonen, DoubleZero’s general counsel, said in a recent report. Blog post Announcement of no action letter.
The Securities and Exchange Commission (SEC) is focusing on cryptocurrencies
With pro-crypto leadership at its helm, the Securities and Exchange Commission (SEC) is accelerating efforts to modernize its approach to cryptocurrency markets.
Chairman Paul Atkins has taken a noticeably more open stance towards digital assets than his predecessor.
In a recent television interview, Atkins said that the agency is actively working with the CFTC to create a more specific regulatory structure for crypto assets.
An innovation exemption is also expected to be introduced by the end of the year, which will allow cryptocurrency projects to operate in a limited capacity without immediately being subject to full securities compliance.
Earlier this month, the committee Updated Public listing standards for commodity-based trusts, enabling spot crypto ETFs to bypass long approval timelines.
It subsequently pulled delinquency notices on more than a dozen cryptocurrency ETF deposits, including those linked to Solana, XRP, Litecoin, and Cardano.
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