SEC Grants No-Action Letter to DoubleZero for 2Z Token Distribution

TLDR

• The SEC issued a historic no-action letter to DoubleZero regarding its 2Z token distribution.
• The letter confirms that the SEC will not pursue enforcement action if DoubleZero follows the described practices.
• The SEC clarified that the 2Z token will not be considered a class of equity securities under the Exchange Act.
• Commissioner Hester Peirce emphasized the importance of supporting blockchain innovation within existing regulatory frameworks.
• DoubleZero’s co-founder, Austin Federa, praised the SEC’s decision as a significant milestone for the U.S. digital asset industry.

The U.S. Securities and Exchange Commission (SEC) issued a historic no-action letter to DoubleZero regarding its 2Z token distribution. The letter, issued late Monday, clarified that the SEC will not pursue enforcement if the token is transferred programmatically. The SEC specified that the 2Z token will not be considered a class of equity securities under the Exchange Act.

DoubleZero, a decentralized fiber network, operates by leveraging underutilized private fiber links contributed by independent parties. The company aims to offer blockchain node operators faster and more direct routing than the public internet. DoubleZero’s 2Z token serves as an incentive for network participants and infrastructure buildout.

SEC Clarifies Position on 2Z Token Distribution

The SEC’s Division of Corporation Finance reviewed the 2Z token distribution model. In its letter, the SEC stated it would not recommend enforcement action as long as DoubleZero follows the outlined practices. However, the SEC noted that different facts could lead to a different outcome.

The letter focused on representations made by DoubleZero’s legal counsel. The SEC emphasized that its position on the 2Z token is based on these specific facts. It also clarified that the decision did not represent a legal determination on the issues raised by DoubleZero.

Hester Peirce Comments on Innovation and Regulatory Clarity

SEC Commissioner Hester Peirce offered remarks on the significance of the no-action letter. She noted that the decision presents an opportunity to reflect on how the SEC can encourage innovation within its regulatory framework. “Blockchain technology cannot reach its full potential if we force all activities into existing financial market regulatory frameworks,” Peirce said.

Peirce further explained that decentralized physical infrastructure networks, like DoubleZero, organize participants to provide real-world capabilities. According to Peirce, these tokens function as incentives for infrastructure rather than investment contracts under the Howey Test. She stated that the market, not financial regulators, should determine the success of such projects.

DoubleZero Hails SEC Decision as Milestone for U.S. Digital Asset Industry

Following the no-action letter, DoubleZero’s co-founder Austin Federa expressed appreciation for the SEC’s clarity. He described the decision as a significant milestone for the U.S. digital asset industry. “This decision shows that U.S. innovators can work with regulators and still move quickly,” said Federa.

DoubleZero sees the SEC’s acknowledgment of the 2Z token’s utility as a win for compliant innovation. The company believes the decision creates room for future growth in the crypto space, particularly within the U.S. DoubleZero also highlighted that the SEC’s move aligns with its broader Project Crypto initiative, aimed at fostering cooperation between regulators and the crypto industry.

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