In brief
- The SEC‘s Division of Corporation Finance said it views Canton Coin as a “digital commodity” and won’t recommend enforcement over its programmatic minting.
- Staff cited Cantons representations that the token derives value from network operation and that the network has no central party.
- The relief follows DTCCs launch of a tokenization service on Canton, which Morgan Stanley says its among the first banks to use.
The blockchain behind Wall Streets newest tokenization service just got a regulatory nod for its native token.
The SEC‘s Division of Corporation Finance said in a letter dated Tuesday that it views Canton Coin, the native token of the Canton Network, as a “digital commodity” under the agency’s March interpretation of how securities laws apply to crypto.
Agency staff also said they won‘t recommend enforcement action if Canton’s validators and application providers mint the token programmatically without registering it.
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The relief comes a week after the Depository Trust & Clearing Corp. launched a tokenization service that runs on Canton and DTCCs own private network, letting firms convert DTC-held stocks and Treasuries into tokens. Morgan Stanley said Tuesday that it was among the first banks to use the service.
SEC staff pointed to two representations from Canton‘s lawyers. The first is that the token derives its value from the network’s programmatic operation and from supply and demand, rather than from the managerial efforts of others.
The second is that the network has no “central party.” Canton Coin launched without an initial coin offering or premine, and tokens were initially earned only by running network infrastructure and applications, according to a statement from Canton. Cantons request letter was dated Oct. 30, four days before staff responded.
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The letter has limits, though, as it reflects only staffs position on enforcement, not a legal conclusion, and rests on the facts Canton presented, the SEC noted.
“Financial institutions need confidence in both the technology they use and the economic model that supports it,” said Yuval Rooz, CEO of Digital Asset, which created the Canton Network.
Canton said the letter is the first relief of its kind since the SEC published its March interpretive release, which found that most crypto assets aren‘t securities. It’s also the first since the agencys August Regulation Crypto Assets proposal.
The decision fits a broader shift since the Clarity Act stalled in the Senate in September, with the SEC and CFTC taking the lead on crypto rules. SEC Chair Paul Atkins said in July the agency was ready to act if Congress didnt, and the SEC recently proposed rules on how advisers and funds hold crypto.
Digital Asset raised $355 million earlier this year from Wall Street firms and a sovereign wealth fund.
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