SEC Grants Rare No-Action Letter to Solana's DePIN Project Token FUSE

The SEC has issued its second "no-action letter" for a decentralized physical infrastructure network (DePIN) crypto project in recent months, providing its native token with "regulatory cover" against enforcement actions.

Key Takeaways

The SEC has granted a no-action letter to Fuse, a Solana DePIN project, allowing it to issue its token FUSE without facing immediate enforcement action.
FUSE is intended for network utility rather than speculation, rewarding those who contribute to the network.
This no-action letter indicates a potentially more crypto-friendly approach by the SEC under its new leadership.
Crypto projects view no-action letters as a vital source of regulatory clarity, providing certain assurances against enforcement for violations of securities laws.

SEC issues ‘rare’ no-action letter for Solana DePIN project token FUSE

The SEC's Support for the FUSE Token

The SEC's no-action letter was directed to the Fuse project, which issues the FUSE token as a reward for users who maintain the network. This token is not sold publicly. Fuse submitted its request for SEC clarity on November 19, expressing the desire for confirmation that the SEC would not pursue enforcement actions while continuing to offer and sell FUSE tokens.

In its letter, Fuse emphasized that FUSE is intended for practical use within the network rather than speculative trading, emphasizing that it can only be redeemed at an average market price through third-party services. Jonathan Ingram, deputy chief counsel at the Division of Corporation Finance, indicated on Monday that the SEC would not recommend enforcement actions based on the information presented.

SEC’s no-action letter to Fuse Crypto. Source: SEC

This recent issuance comes just months after a similar "highly coveted" no-action letter was granted to Double Zero, reflecting the SEC's newfound, more favorable stance towards cryptocurrency.

New Leadership, New Approach

The SEC recently experienced a leadership change, with Paul Atkins becoming the 34th chairman in April. Since then, the agency has been viewed as taking a more balanced and crypto-friendly stance. This change includes Hester Peirce, who leads the agency’s crypto task force.

The Importance of No-Action Letters

On social media platform X, Rebecca Rettig, a legal representative for Solana MEV infrastructure platform Jito Labs, highlighted the significance of no-action letters (NAL) for crypto projects. She explained that these letters offer "regulatory clarity" to teams planning token issuances. Essentially, an NAL provides assurance that they won't face immediate enforcement for securities law violations, acting as a form of "regulatory cover."

Perspectives from Industry Experts

The issuance of a no-action letter does not necessarily create new precedents. Bill Hughes, a lawyer at Consensys, commented on X that this was a straightforward case, noting that there was likely no lawyer in crypto who would consider FUSE a security under current law.

A Shift in SEC Relations with Crypto Founders

Many US crypto founders and businesses previously reported feeling adversarial relations with the SEC under former chair Gary Gensler. The recent engagement with Fuse suggests a significant shift in the agency's approach.

In the same month that Double Zero received its no-action letter, the SEC issued another one directed at crypto custodians that do not meet bank qualifications. Although these custodians must adhere to strict conditions, such letters clarify acceptable frameworks for these firms to operate with cryptocurrencies, a long-awaited change for the industry.

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