Even before President Donald Trump and his code-friendly regulators arrived, the Securities and Exchange Commission had a crypto advocate, Commissioner Hester Perth. Hester Peirce argues this week that the decision to grant Double Zero a so-called meaningless letter represents the kind of space she has long wanted to provide blockchain tracing.
The SEC has formally agreed to the startup’s request that the agency will not pursue a complaint for registration of tokens issued for the specific purposes of DoubleZero’s Decentralized Physical Infrastructure Network (DEPIN). Commissioner Peirce suggested that this open door for Depin’s efforts should not abolish the SEC.
“As opposed to relying on a centralized corporate structure to coordinate activities, the DEPIN project will participate in participants to provide real-world capabilities such as storage, communications bandwidth, mapping, and energy through open and distributed peer-to-peer networks,” she said in a statement. This activity does not trigger the Supreme Court’s Howey test – a test that determines what lies within the jurisdiction of the SEC – because such projects “allocate tokens as compensation for work or services carried out, not as an investment that expects benefits from other people’s entrepreneurs or management efforts.”
The SEC uses no action letters to clarify activities that they are not intending to pursue in enforcement actions, so a letter to a single company can inform the entire space of the agency’s current attitude. However, to enjoy the benefits, the activity must remain strictly within the boundaries outlined in the SEC letter.
“The line between tokens and securities laws is clear,” said Austin Federa, co-founder of Double Zero, in a statement to Coindsk. “The founders, who once spent countless hours (and legal dollars) on this question, now can focus on the building.”
DoubleZero has sought to encourage infrastructure providers for network connectivity, such as large technology companies that control surplus fiber networks, to compensate with tokens. In this case it is the native 2Z of the protocol.
“Treating such tokens as securities would curb the growth of the network of distributed providers of services,” Perth said. “If all activities are enforced into existing financial market regulatory frameworks, blockchain technology will not reach its full potential.”
The agency’s actions were praised by proponents of decentralized finance (DEFI). “Non-action letters are one of the most practical tools for navigating the uncertainty of cryptography regulations, and the issuance of non-action letters in the SEC indicates the possible constructive involvement with regulatory authorities.
The SEC is pursuing a proactive course of pro-cryptic policy action under Chair Paul Atkins. Earlier this week, he said at the agency’s Washington headquarters roundtable that establishing clear rules for the digital assets sector is SEC’s “job 1.” Before Atkins arrived, Perth had led the agency’s cryptographic task force, already working on a policy statement to clarify regulators’ expectations for the industry.
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