The U.S. Securities and Exchange Commission (SEC) recently issued a no-action letter to DoubleZero, a decentralized infrastructure startup, a move that heralds significant advancements for blockchain-based initiatives, according to SEC Commissioner Hester Peirce. This decision indicates a shift towards regulatory clarity that Peirce has long advocated for in the crypto sector.
The no-action letter essentially allows DoubleZero to operate without the worry of registration complaints related to the tokens it issues, which aim to facilitate a decentralized physical infrastructure network (DePIN). In her remarks, Peirce emphasized that this decision provides necessary leeway for innovative blockchain efforts while keeping the SEC from overstepping into areas outside its mandate.
“Instead of traditional corporate frameworks to manage operations, DePIN initiatives mobilize participants to contribute critical services such as storage, telecommunications, mapping, and energy through open peer-to-peer networks,” Peirce stated. She highlighted that these activities do not trigger the Howey Test, which determines the SEC’s jurisdiction over securities, as tokens in this model are earned as compensation for services rather than as investments with anticipated profits.
The SEC employs no-action letters as a means to signal which activities it will not pursue regulatory enforcement against. By providing this clarity to DoubleZero, the SEC inadvertently offers guidance and potential reassurance to the broader DePIN and crypto communities on their operational boundaries. However, Peirce cautioned that participants must strictly adhere to the guidelines set forth in the letter to retain these benefits.
Austin Federa, co-founder of DoubleZero, commented on the implications of this action for founders in the space. “The distinction between tokens and securities law is becoming increasingly evident. This means that many creators who previously spent extensive time and resources navigating this regulatory landscape can now concentrate on building innovative solutions,” he explained.
DoubleZero’s strategy involves incentivizing infrastructure providers, particularly large technology firms with surplus resources, by using tokens—specifically, their native 2Z token. Peirce pointed out that classifying these tokens as securities could hinder the development of networks comprised of distributed service providers, emphasizing the need for regulatory frameworks that support blockchain’s evolution rather than constraining it within existing financial market regulations.
The SEC’s recent actions received accolades from decentralized finance proponents. Amanda Tuminelli, executive director of the DeFi Education Fund, remarked in a blog by the DoubleZero Foundation, “No-Action Letters represent a practical approach to navigating the regulatory complexities facing crypto. The SEC’s issuance of these letters exemplifies that fruitful collaboration with regulators is achievable.”
This latest decision comes amidst a broader trend of proactive policies from the SEC under the leadership of Chairman Paul Atkins, who recently underscored the importance of establishing definitive regulatory guidelines for the digital asset sector as a primary focus of the agency’s efforts. Prior to Atkins’ tenure, Peirce had already been instrumental in shaping the SEC’s crypto task force and was working toward clearer policy statements to guide the evolving landscape of digital assets.
As the SEC takes steps to clarify its stance on the crypto industry, the no-action letter granted to DoubleZero serves as an important signal of progress, offering a glimpse into a regulatory environment that may increasingly embrace decentralized innovations.
