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SEC tightens guidance for crypto token buybacks after $638M spending
The SEC added a “no central party” condition, and said nonfunctional systems could make buyback announcements count as promises of managerial efforts.
The US Securities and Exchange Commission tightened its guidance on how crypto token buybacks are treated, just three days after publishing earlier staff views. CryptoSlate reports the staff said on Sept. 25 that an issuer could announce a buyback without it being treated as a promise to manage token value, as long as the crypto system was already functional.
On Sept. 28, the agency added a second condition, saying the system must also have “no central party.” Under the updated guidance, a buyback announcement for a non-security crypto asset would not, by itself, amount to a promise of essential managerial efforts when the system is functional and has no central party.
The staff also outlined a different outcome if the system is not yet functional. In that case, CryptoSlate reports a buyback announcement could count as such a promise if the issuer frames the purchases as a way to generate yield or returns for holders.
The SEC’s update comes as token buybacks have grown in importance across crypto. CryptoSlate says crypto projects spent a record $638 million on token buybacks, according to the reporting in the article.