The Securities and Exchange Commission’s corporate-finance staff granted no-action relief for the programmatic minting of Canton Coin, saying the network’s native token is a “digital commodity” under the agency’s crypto-asset framework.
In its Nov. 3 response, the Division of Corporation Finance’s Office of Chief Counsel said it would not recommend enforcement action if Super Validators, Validators and application providers mint the token as described without registration under Section 5 of the Securities Act or Section 12(g) of the Exchange Act.
The letter answers an Oct. 30 request submitted on behalf of Digital Asset Holdings, creator of the Canton protocol. The relief depends on the representations in that request and reliance on counsel’s opinion. It has no stated expiration date, but the staff says different facts or conditions could lead to different conclusions. The response expresses an enforcement position, not a legal conclusion.
Canton is a privacy-focused blockchain for financial applications. According to Digital Asset’s request, Canton Coin pays fees for its shared transaction-coordination infrastructure, the Global Synchronizer. Tokens used for fees are burned, while infrastructure operators and application providers mint new tokens based on network activity. Digital Asset said the network was functional when the token launched and there was no initial coin offering, pre-mine or pre-launch token allocation.
The SEC staff highlighted two representations: the coin derives value from the network’s programmatic operation and supply and demand, rather than expected profits from others’ “essential managerial efforts”; and Canton has no “central party” under the agency’s definition.
What Other Networks Would Need to Show
The March interpretation defines digital commodities by that link to a functional crypto system and supply and demand. The category excludes assets with intrinsic economic rights such as passive yield or claims on an enterprise’s future income, profits or assets.
The staff’s FAQs, expanded Nov. 2, explain how shared governance fits that framework. Question 1.4 says participants in broad-based governance generally do not count as a group for the “central party” definition if they are unaffiliated and have no separate agreement or understanding to act together. Question 1.5 says operational discretion can be exercised solely through such governance without establishing central oversight, provided its participants are not themselves a central party. Question 1.6 distinguishes a usable, functional system from an autonomously operating, decentralized one; the degree of decentralization can vary with the facts.
Canton’s own onboarding documentation requires approval from the Canton Foundation’s Tokenomics Committee and a Super Validator sponsor for mainnet validators. Digital Asset’s request says protocol changes require at least two-thirds approval from Super Validator Node Operators, and neither the company nor the foundation can change protocol rules unilaterally.
The request also invokes FAQ 2.3’s view that maintenance, improvements and services to grow network effects after a system becomes functional do not constitute essential managerial efforts under the Howey investment-contract test.
The FAQs are nonbinding staff guidance. The March interpretation preserves a separate test for transactions: a token that is not itself a security can still be offered and sold as part of an investment contract subject to securities law.