In a major development for the cryptocurrency industry, the US Securities and Exchange Commission has exempted DoubleZero’s 2Z token, which is distributed as a functional reward to participants in its decentralized infrastructure network, from securities classification. This landmark decision was announced via an industry-first no-action letter from the SEC’s Division of Corporation Finance. The letter was issued on September 29 and stated that the agency would not recommend enforcement action against DoubleZero for the programmatic distribution of its 2Z token, provided the distributions follow the structure laid out in the firm’s legal submission. More importantly, it confirmed that 2Z does not need to be registered as a security under either the Securities Act or the Exchange Act. The move is being viewed by many in the crypto community as a rare moment of clarity from the SEC, as it goes to highlight how the SEC, which was once criticised for its enforcement-first approach, has u-turned its stance around cryptocurrencies and how it may approach tokens that are built for utility rather than investment speculation. For years, crypto startups have wrestled with the uncertainty of whether their tokens might trigger securities laws, and today’s decision sets a precedent that could influence how the Commission assesses other functional tokens. Industry analysts say the decision sends a strong signal that the SEC is beginning to differentiate between investment contracts and tokens that serve a purpose within decentralized protocols. Blockchain-based infrastructure projects, especially those in the emerging DePIN sector that rely on token incentives to coordinate physical resources like bandwidth, storage, or connectivity, are also expected to benefit from the added regulatory clarity and may now feel more confident moving forward with their product launches. Why did the SEC exempt DoubleZro’s 2Z token? DoubleZero, a decentralized physical infrastructure project , had argued that its 2Z token was never intended as an investment vehicle, but instead serves as a network reward. According to the firm’s legal submission, 2Z is distributed in two ways: first, to network providers who supply high-speed connectivity, and second, to resource providers who perform the calculations needed to determine payment amounts. These programmatic transfers, DoubleZero contended, are critical to the protocol’s operation and do not constitute securities offerings. The SEC’s no-action letter appears to agree with this interpretation, especially as the commission has granted the request before DoubleZero’s network has even gone live. One of the reasons the 2Z token fell outside the purview of securities law is that it does not represent a stake in the company, nor is it marketed with promises of profit. Commissioner Hester Peirce has described DePin tokens as “functional incentives” that support the growth of decentralized service networks and has warned that labeling such tokens as securities would stifle innovation in infrastructure development and discourage participants from contributing resources to decentralized ecosystems. “When the value of the token comes from other network participants’ work, Howey simply does not apply,” DoubleZero general counsel Mari Tomunen said in a recent blog post announcing the no-action letter. SEC’s focus on crypto With pro-crypto leadership at its helm, the SEC has been accelerating efforts to modernise its approach to crypto markets. Presiding Chairman Paul Atkins has taken a notably more open stance toward digital assets compared to his predecessor. In a recent television interview, Atkins said the agency was actively working with the Commodity Futures Trading Commission to create a more defined regulatory structure for crypto assets. An innovation exemption is also expected to be introduced by the end of the year, which would allow crypto projects to operate in a limited capacity without immediately being subjected to full securities compliance. Earlier this month, the Commission updated its generic listing standards for commodity-based trusts, enabling spot crypto ETFs to bypass lengthy approval timelines. Subsequently, it withdrew delay notices on more than a dozen crypto ETF filings, including those tied to Solana, XRP, Litecoin, and Cardano. The post SEC clears DoubleZero’s DePin token 2Z from securities rules via no-action letter appeared first on Invezz
