tl;dr
The SEC's no-action letter to DoubleZero signals relaxed crypto regulation, citing DePINs' innovative infrastructure models and distancing them from traditional securities. Officials argue these tokens function as incentives, not investments, sparking debates over regulatory boundaries.
**SEC Signals Leniency Toward DePIN Tokens, Citing Innovation and Regulatory Boundaries**
The U.S. Securities and Exchange Commission (SEC) has taken a notable step in its evolving approach to cryptocurrency regulation, signaling it will not pursue enforcement action against tokens tied to blockchain-based Decentralized Physical Infrastructure Networks (DePINs). This decision, outlined in a no-action letter to the DePIN project DoubleZero, reflects broader regulatory shifts under the Trump administration, which has emphasized easing rules to attract crypto innovation.
In the letter, SEC Division of Corporation Finance Chief Counsel Michael Seaman stated he would “not recommend enforcement action” to the agency regarding DoubleZero’s planned 2Z token launch. Seaman argued that the project’s programmatic token transfers do not require registration under U.S. securities laws, and the 2Z token is not classified as equity securities. This clarification provides legal clarity for DePIN projects, which aim to leverage blockchain technology to access underutilized physical infrastructure, such as private fiber networks.
SEC Commissioner Hester Peirce echoed this sentiment, asserting that DePIN projects differ fundamentally from traditional capital-raising activities. “The economic reality of DePINs does not align with the securities markets Congress tasked the SEC to regulate,” she said. Peirce emphasized that the agency’s role is to oversee securities, not all economic activity, and that treating DePIN tokens as securities could stifle innovation.
**Functional Incentives, Not Investments**
Peirce highlighted that DePIN tokens serve as “functional incentives” to encourage infrastructure development, rather than as investments with profit expectations tied to others’ efforts. She argued that classifying these tokens as securities would hinder the growth of decentralized service networks. “These projects allocate tokens as compensation for work performed, not as investments,” she explained, noting that such tokens do not meet the criteria of the Howey Test, which determines whether an asset qualifies as an investment contract.
DoubleZero’s co-founder, Austin Federa, called the SEC’s stance a milestone, stating it demonstrates that U.S. innovators can collaborate with regulators to achieve clarity while accelerating development. General Counsel Mari Tomunen added that the no-action letter “underscores a path to launch a token” when its value stems from network participants’ contributions.
**Regulatory Rollback and Market Implications**
The SEC’s move aligns with the Trump administration’s broader push to reduce regulatory burdens on crypto firms, aiming to position the U.S. as a hub for blockchain innovation. However, the decision has not sparked immediate market enthusiasm. Tokens linked to DePINs saw a 2% decline in value over the past day, according to CoinGecko, suggesting investors remain cautious despite the regulatory clarity.
Peirce’s remarks also underscore a philosophical debate within the crypto space: whether existing financial frameworks can accommodate decentralized technologies. She warned that forcing blockchain projects into traditional securities regulations could limit their potential, stating, “Blockchain technology can’t reach its full potential if regulators force all activities into existing financial market regulatory frameworks.”
As DePINs and other crypto infrastructure projects navigate this evolving landscape, the SEC’s cautious approach may set a precedent for future regulatory interactions. For now, the agency’s stance appears to balance oversight with a commitment to fostering innovation—though the market’s mixed reaction highlights the challenges of defining the boundaries of crypto regulation.