SEC staff call Canton Coin a digital commodity, won't recommend enforcement
In brief
- SEC Corporation Finance staff view Canton Coin as a "digital commodity."
- Staff won't recommend enforcement over programmatic minting by Canton validators and app providers.
- The letter reflects a staff enforcement position, not a legal conclusion.
- DTCC launched a tokenization service partly on Canton a week before the relief.
What the staff letter says
SEC staff applied the agency's March interpretation of how securities laws apply to crypto, and 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's request letter was dated Oct. 30. Staff responded four days later.
The letter has limits, though (and they matter here). It reflects only staff's position on enforcement, not a legal conclusion, and it rests on the facts Canton presented.
According to a statement from Canton, Canton Coin launched without an initial coin offering or premine, and tokens were initially earned only by running network infrastructure and applications. Canton also said the letter is the first relief of its kind since the SEC's March interpretive release (which found most crypto assets aren't securities) and the first since the agency's August Regulation Crypto Assets proposal.
Wall Street is already on Canton
The relief came a week after the Depository Trust & Clearing Corp. launched a tokenization service that runs on Canton and DTCC's 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, Decrypt reported.
Digital Asset, which created the Canton Network, raised $355 million earlier this year from Wall Street firms and a sovereign wealth fund, per the same report.
"Financial institutions need confidence in both the technology they use and the economic model that supports it."
That's how Yuval Rooz, Digital Asset's CEO, framed the letter.
Regulators filling the gap
The decision fits a broader shift. The Clarity Act stalled in the Senate in September, and the SEC and CFTC have taken the lead on crypto rules since then. SEC Chair Paul Atkins said in July the agency was ready to act if Congress didn't, and the SEC recently proposed rules on how advisers and funds hold crypto.
For now, Canton has a staff letter rather than a Commission ruling.
Frequently asked questions
What did the SEC say about Canton Coin?
The SEC's Division of Corporation Finance said in a letter dated Tuesday that it views Canton Coin as a "digital commodity" under the agency's March interpretation. Staff also said they won't recommend enforcement if Canton's validators and application providers mint the token programmatically without registering it.
Is the Canton Coin letter a legal ruling by the SEC?
No. The letter reflects only staff's position on enforcement, not a legal conclusion, and it rests on the facts Canton presented. It's a staff letter from the Division of Corporation Finance, not a ruling by the Commission.
Why did SEC staff treat Canton Coin as a digital commodity?
Staff pointed to two representations from Canton's lawyers. The token derives its value from the network's programmatic operation and from supply and demand rather than the managerial efforts of others, and the network has no "central party."
