SEC clears DePIN tokens as ‘fundamentally’ outside jurisdiction
News Summary
The U.S. Securities and Exchange Commission (SEC) has signaled it will not take enforcement action against tokens tied to blockchain-based Decentralized Physical Infrastructure Networks (DePIN). SEC Division of Corporation Finance chief counsel Michael Seaman confirmed in a no-action letter that he would not recommend enforcement action for the planned token launch of the DePIN project DoubleZero. SEC Commissioner Hester Peirce added that the “economic reality of DePIN projects differs fundamentally from the capital-raising transactions Congress charged this Commission with regulating.” This move is the latest example of regulatory easing under the Trump administration, which has pledged to attract companies and projects to the U.S. Austin Federa, co-founder of DoubleZero, stated this proves U.S. founders and innovators can work with regulators to achieve clarity and move fast. SEC’s Peirce further explained that DePIN tokens are “functional incentives designed to encourage infrastructure buildout” and are not shares in a company or promises of profits from others' efforts, thus not falling under securities laws.
Background
Decentralized Physical Infrastructure Networks (DePIN) are projects that leverage blockchain technology to incentivize users with tokens to contribute to and maintain physical infrastructure, such as wireless networks, data storage, or energy grids. These networks aim to provide services through distributed participants rather than centralized entities. The U.S. Securities and Exchange Commission (SEC) is the primary regulator of securities markets in the United States, responsible for enforcing federal securities laws, protecting investors, and maintaining fair and orderly markets. The well-known Howey Test defines an investment contract as a security based on four criteria: an investment of money, in a common enterprise, with the expectation of profit, to be derived solely from the efforts of the promoter or a third party. Following his re-election in 2024, the Trump administration has signaled a more crypto-friendly regulatory approach, aiming to attract blockchain innovation and companies to the U.S., a departure from previous aggressive enforcement stances by the SEC on certain crypto assets.
In-Depth AI Insights
What are the broader strategic implications of the Trump administration's crypto regulatory easing, specifically through SEC actions like this, beyond merely fostering innovation? - This ruling reinforces the U.S.'s position as a hub for blockchain innovation, attracting capital and projects, potentially prompting other jurisdictions to follow suit and fostering global regulatory competition. - It may create a form of regulatory arbitrage for specific blockchain projects, allowing them to circumvent stricter securities regulations by fitting the DePIN classification, thereby offering faster market access without compromising core investor protection principles. - The move is an extension of the Trump administration's