{"id":24981,"date":"2026-11-02T21:17:32","date_gmt":"2026-11-02T21:17:32","guid":{"rendered":"https:\/\/cryptoted.net\/index.php\/2026\/11\/02\/sec-crypto-faq-clarifies-governance-in-3-new-entries\/"},"modified":"2026-11-02T21:17:32","modified_gmt":"2026-11-02T21:17:32","slug":"sec-crypto-faq-clarifies-governance-in-3-new-entries","status":"publish","type":"post","link":"https:\/\/cryptoted.net\/index.php\/2026\/11\/02\/sec-crypto-faq-clarifies-governance-in-3-new-entries\/","title":{"rendered":"SEC crypto FAQ clarifies governance in 3 new entries"},"content":{"rendered":"<p> <br \/>\n<br \/><img decoding=\"async\" src=\"https:\/\/media.crypto.news\/2025\/06\/crypto-news-The-SECs-new-stance-could-change-everything-for-DeFi-option03.webp\" \/><\/p>\n<div>\n<p class=\"is-style-lead\">The U.S. Securities and Exchange Commission has updated its crypto asset FAQ with three entries explaining how shared governance, control over network access, and decentralization fit into its token classification framework.<\/p>\n<div id=\"cn-block-summary-block_2b3e48e71eec993b9519b90462122d43\" class=\"cn-block-summary\">\n<p>\n        <span class=\"tabs__item is-selected\">Summary<\/span>\n    <\/p>\n<div class=\"cn-block-summary__content\">\n<ul class=\"wp-block-list\">\n<li>Three new answers address governance participation, control over network access, and the meaning of functionality.<\/li>\n<li>Governance through an organization or foundation does not automatically make participants a controlling group.<\/li>\n<li>Staff guidance distinguishes a usable crypto system from one operating autonomously without centralized control.<\/li>\n<li>The FAQ carries no legal force, drawing attention to the distinction between guidance and legislation.<\/li>\n<\/ul><\/div>\n<\/div>\n<p><!-- .cn-block-summary --><\/p>\n<p>The SEC\u2019s Division of Corporation Finance added questions 1.4 through 1.6 to its <a href=\"https:\/\/www.sec.gov\/about\/divisions-offices\/division-corporation-finance\/faqs-crypto-assets\" target=\"_blank\">crypto FAQ<\/a> on Nov. 2. The answers expand on the agency\u2019s March interpretation of federal securities laws, addressing when governance participants constitute a central party and what powers amount to control over participation.<\/p>\n<p>Miles Jennings welcomed the update in a post, saying it clarifies how systems can maintain decentralized governance while using legal entities such as DUNAs. Journalist Eleanor Terrett described the additions as an effort to answer some decentralization questions the CLARITY Act would address in law.<\/p>\n<figure class=\"wp-block-embed is-type-rich is-provider-x wp-block-embed-x\">\n<div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">New <a href=\"https:\/\/x.com\/SECGov?ref_src=twsrc%5Etfw\">@SECGov<\/a> crypto token taxonomy FAQ just dropped. Looks like an effort to clarify some of the decentralization questions the Clarity Act would address in law. \u2b07\ufe0f <a href=\"https:\/\/t.co\/YVREYxFflU\">https:\/\/t.co\/YVREYxFflU<\/a><\/p>\n<p>\u2014 Eleanor Terrett (@EleanorTerrett) <a href=\"https:\/\/x.com\/EleanorTerrett\/status\/2117341573398839449?ref_src=twsrc%5Etfw\">November 2, 2026<\/a><\/p><\/blockquote>\n<\/div>\n<\/figure>\n<h2 class=\"wp-block-heading\">SEC says shared governance does not automatically mean control<\/h2>\n<p>Question 1.4 examines whether people participating in a system\u2019s governance should be treated as a group under the interpretation\u2019s definition of a central party.<\/p>\n<p>According to the staff, participants generally will not be considered such a group if they are unaffiliated and have no separate agreement or understanding to act together outside their participation in governance. Formal arrangements, informal coordination and delegation all fall within that assessment.<\/p>\n<p>    <!-- .cn-block-related-link --><\/p>\n<p>The same approach applies when governance sits within an organization, association or foundation, and participation depends on holding the system\u2019s native token. Even where participants qualify as a group, the staff says they must possess operational, economic or voting control to meet the central-party definition.<\/p>\n<p>Jennings characterized this as support for using legal entities such as DUNAs without necessarily sacrificing decentralization. The FAQ itself does not name DUNAs or approve any particular organization.<\/p>\n<p>In a footnote, the division describes qualifying governance as transparent and rules-based, with diverse stakeholders independently contributing to decisions. Proposals, deliberations, voting, and implementation must be publicly accessible, while decision-making authority cannot be concentrated through affiliated participants or delegation.<\/p>\n<h2 class=\"wp-block-heading\">Unilateral access powers can establish central oversight<\/h2>\n<p>Question 1.5 explains what it means for a central party to oversee participation, covering authority at the protocol, validator, and user levels.<\/p>\n<p>The staff identifies several examples: granting or limiting access, changing voting procedures, deciding who validates transactions, modifying code, reversing transactions or revoking access. Each example concerns powers a central party can exercise unilaterally.<\/p>\n<p>By contrast, the answer describes circumstances where material operations run automatically through rules-based code without anyone exercising discretion.<\/p>\n<p>Where discretion remains, it can be exercised solely through the system\u2019s governance process, provided the participants themselves do not constitute a central party.<\/p>\n<p>A separate footnote qualifies the treatment of legal organizations. An association or foundation could still control another crypto system, including by setting operating parameters for applications deployed on the underlying network.<\/p>\n<h2 class=\"wp-block-heading\">Functionality and decentralization answer different questions<\/h2>\n<p>In question 1.6, the division distinguishes whether a network\u2019s token works as intended from whether anyone controls the network.<\/p>\n<p>A system is functional when its native asset can be used in accordance with its programmed utility, the answer explains. Decentralization concerns autonomous operation without a person, entity or coordinated group holding operational, economic or voting control.<\/p>\n<p>The staff says functional systems associated with digital commodities have characteristics of decentralization, although the degree depends on their circumstances.<\/p>\n<p>The underlying framework, which crypto.news <a href=\"https:\/\/crypto.news\/sec-and-cftc-say-most-crypto-assets-are-not-securities-in-new-joint-interpretation\/\" target=\"_blank\">previously reported in March<\/a>, separates digital commodities, collectibles, tools, stablecoins and digital securities. It distinguishes a token\u2019s classification from whether transactions involving it form an investment contract.<\/p>\n<h2 class=\"wp-block-heading\">CLARITY discussion turns to guidance\u2019s legal limits<\/h2>\n<p>Reacting to Terrett\u2019s post, Avi Lev emphasized that an FAQ is not law and questioned whether the update reduces or adds pressure on lawmakers to pass CLARITY. He argued that a future SEC could rewrite the guidance.<\/p>\n<p>The FAQ expressly represents staff views, carries no legal force, and creates no new obligations. The Commission has neither approved nor disapproved its contents.<\/p>\n<p>In its March <a href=\"https:\/\/www.sec.gov\/newsroom\/press-releases\/2026-30-sec-clarifies-application-federal-securities-laws-crypto-assets\" target=\"_blank\">announcement<\/a>, the SEC described the underlying interpretation as complementing congressional work on a statutory market structure framework. Chair Paul Atkins called it an \u201cimportant bridge\u201d while Congress advanced legislation.<\/p>\n<p>The division further limits question 1.4 to digital-commodity classification under Section III of that interpretation. Its answer does not apply to other securities-law provisions addressing groups, including the Exchange Act definition of an exchange.<\/p>\n<p>    <!-- .cn-block-related-link --><\/p><\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/crypto.news\/sec-crypto-faq-decentralized-governance-token-taxonomy\/\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The U.S. Securities and Exchange Commission has updated its crypto asset FAQ with three entries explaining how shared governance, control over network access, and decentralization fit into its token classification framework. Summary Three new answers address governance participation, control over network access, and the meaning of functionality. Governance through an organization or foundation does not [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":24982,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","footnotes":""},"categories":[23],"tags":[],"kronos_expire_date":[],"class_list":["post-24981","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto"],"_links":{"self":[{"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/posts\/24981","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/comments?post=24981"}],"version-history":[{"count":0,"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/posts\/24981\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/media\/24982"}],"wp:attachment":[{"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/media?parent=24981"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/categories?post=24981"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/tags?post=24981"},{"taxonomy":"kronos_expire_date","embeddable":true,"href":"https:\/\/cryptoted.net\/index.php\/wp-json\/wp\/v2\/kronos_expire_date?post=24981"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}