SEC Approves 2Z Token with Unique No-Action Letter

SEC Approves 2Z Token with Unique No-Action Letter — Is DePIN Now Regulated?

The U.S. Securities and Exchange Commission (SEC) has granted a No-Action Letter to DoubleZero, indicating that the programmatic transfers of its 2Z token will not be classified as securities transactions. Dated September 29, this letter represents the SEC's first public acknowledgment that a token associated with Decentralized Physical Infrastructure Networks (DePIN) can be distributed without the need for securities registration.

Key Takeaways

The SEC issued a No-Action Letter to DoubleZero, affirming that its 2Z token transfers are not securities transactions.
The ruling emphasizes that 2Z does not need to be registered as class equity securities.
Commissioner Hester Peirce highlighted the importance of DePIN and its difference from traditional fundraising.
This decision may signal increased regulatory clarity for the cryptocurrency industry.

In a response from Michael P. Seaman, the SEC's chief counsel for the Division of Corporation Finance, the agency confirmed it would not pursue enforcement actions against DoubleZero if it conducts the 2Z transfers as described by the company’s legal counsel. They stated that the 2Z token does not have to be registered under Section 12(g) of the Exchange Act.

Chairman of the SEC, Gary Gensler, clarified the agency’s focus on specific tokens under securities laws, distancing themselves from the idea that they regulate all digital assets.

SEC Approves 2Z Token with Unique No-Action Letter — Is DePIN Now Regulated?

This milestone marks a significant development for token regulation in the U.S. The No-Action Letter confirms that the 2Z token does not require registration as equity securities, enabling broader participation in the network without concerns of securities violations.

SEC Supports DoubleZero Token Launch, Hester Peirce Champions DePIN Model

The No-Action Letter to DoubleZero signifies an essential turning point for regulation of tokens in the U.S. Although this decision is grounded in DoubleZero’s specific disclosures, the SEC cautioned that varying details could yield different outcomes.

For DoubleZero, this decision affirms its months-long discussions with regulators and allows contributors and users to engage with the network without the fear of violating securities laws.

The set-up of the 2Z token, which is intended for value transfer and incentivizing network security instead of representing ownership, was pivotal to the SEC’s conclusion. In the aftermath of the announcement, Commissioner Hester Peirce issued a statement noting that DoubleZero’s model aligns with Decentralized Physical Infrastructure Networks (DePIN), emphasizing that these projects are distinct from traditional fundraising by award tokens for services rather than investments seeking profit from others.

According to Peirce, the realities of DePIN projects do not fulfill the criteria outlined by the Howey Test, which defines what constitutes securities under U.S. law. Mislabeling these tokens as securities, she cautioned, could hinder the advancement of networks that depend on distributed service providers.

Peirce further remarked that blockchain technology should not be constrained to frameworks designed for financial markets, emphasizing the role of markets rather than regulators in determining the success of such infrastructure projects. She believes that the DoubleZero letter exemplifies how regulators can work constructively with innovators while ensuring compliance with established laws.

A Game-Changer for the Crypto Industry and The Future of 2Z

Industry experts view the SEC’s No-Action Letter as a pivotal signal for launching tokens in the U.S., where regulatory ambiguity has often stymied development. DoubleZero stated that this approval permits it to expedite its plans for developing decentralized network infrastructure, with Solana also stating that DoubleZero will design a specialized fiber network to enhance Solana’s speed beyond current internet limitations.

BRRR DAO believes this ruling opens doors for cryptocurrency companies to access conventional financial resources like bank loans and institutional financing, echoing the precedent set by XRP in 2020. Unlike XRP, however, DoubleZero achieved regulatory approval prior to its launch, suggesting that regulators are beginning to distinguish between speculative tokens and those with legitimate utility.

As of October 2, 2Z is scheduled to launch on Binance Alpha and Binance Futures, with trading commencing at 12:00 AM UTC and 12:30 AM UTC, respectively. Binance will also offer a limited airdrop for eligible participants as DoubleZero integrates staking into its rollout. Together, this regulatory approval and the upcoming exchange listings signify a new chapter for the Solana ecosystem.