SEC Updates Cryptocurrency Asset FAQ, Broad Governance Participants Do Not Constitute Centralized Entities

The U.S. Securities and Exchange Commission (SEC) updated its frequently asked questions (FAQ) on cryptocurrency assets on November 2, adding three new answers related to the classification of cryptocurrency assets. The SEC pointed out that participants in a broadly governed functional cryptocurrency system, if they are not connected to each other and do not have agreements, arrangements, or understandings for coordinated action, are generally not considered "centralized entities." The same conclusion applies when the governance system is affiliated with an organization, association, or foundation. Additionally, the FAQ explains the "supervisory participation" of centralized entities, meaning they have the authority to control access to the cryptocurrency system, including unilateral access or restrictions, deciding or changing the voting process for software upgrades, etc. The SEC emphasized that "functional" and "decentralized" are two distinct concepts. This FAQ only represents the views of SEC staff and does not have legal effect.

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