Lowenstein Crypto advises leading digital asset and cryptocurrency projects, exchanges, and trading firms. Our practice covers regulatory advice, transactions and structuring advice, investigations, and adversarial matters including commercial disputes, bankruptcy, and related litigation. As these markets continue their rapid growth and market participants continue to evolve and mature their businesses, we are providing this weekly digest as a resource that highlights and summarizes a selection of key recent legal regulatory developments.
SEC Staff Confirms Canton Coin Is a “Digital Commodity” Under No-Action Letter
On Nov. 3, the Securities and Exchange Commission’s (SEC) Division of Corporation Finance staff issued a no-action letter confirming its view that Canton Coin is a “digital commodity,” as described in the March 2026 interpretation, which the Commodity Futures Trading Commission joined. The March interpretation had already stated that it did not classify digital commodities (along with digital collectibles and digital tools) as securities in and of themselves, but rather as a crypto asset that is intrinsically linked to and which derives its value from the programmatic operation of a functional crypto system, as well as supply and demand dynamics. The interpretation also reasoned that a functional crypto system has no “central party” (a person, entity, or group having operational, economic, or voting control of the system), so purchasers would not reasonably expect profits from others’ managerial efforts. However, the staff’s view rests expressly on the representations in the Oct. 30 request letter, submitted on behalf of Digital Asset Holdings LLC, that these criteria are met for Canton Coin. The staff also will not recommend enforcement action if Canton Coin is minted programmatically by network participants without registration, but it cautions that different facts could change its conclusions. See the no-action letter here, and see the incoming request letter here.
SEC Staff Issues Additional Guidance on Crypto Asset Governance and Decentralization
On Nov. 2, the SEC Division of Corporation Finance updated its frequently asked questions (FAQ) concerning the application of federal securities laws to certain crypto assets and related transactions, adding three responses addressing governance, control, and decentralization in crypto systems. The staff clarified that participants in a functional crypto system’s broad-based governance structure generally will not be considered a group constituting a “central party” if they are unaffiliated and have no separate agreement, arrangement, or understanding to act in concert, although the determination depends on the facts and circumstances. The staff further explained that a central party oversees participation in a crypto system when it has authority to control access at the protocol, validator, or user level, including through unilateral authority to restrict access, determine governance processes, or modify system rules. Finally, the staff distinguished between “functional” and “decentralized” crypto systems, explaining that functionality concerns whether a crypto asset can be used according to its intended programmatic utility, while decentralization concerns whether the system operates autonomously, without a person or group exercising operational, economic, or voting control. The FAQ supplements the SEC’s March 2026 interpretive release concerning crypto asset classification and represents nonbinding staff views rather than commission rules or regulations. See the updated FAQ here.
New Jersey Drops $5 Million Staking Securities Action Against Coinbase
On Oct. 30, Keith A. Alt, Acting Chief of the New Jersey Bureau of Securities (Bureau), rescinded the Summary Penalty and Cease and Desist Order the Bureau entered on June 6, 2023, against Coinbase Global Inc. and Coinbase Inc. (Coinbase). The 2023 order had imposed $5 million in civil monetary penalties and directed Coinbase to cease and desist from offering any security, including the “Coinbase Staking Securities,” to or from New Jersey unless registered with the Bureau, covered, or exempt under the New Jersey Uniform Securities Law. The rescission is without prejudice and without an adjudication on the merits, so the notice does not resolve whether Coinbase’s staking program involved the offer of securities under New Jersey law. The notice also expressly preserves the Acting Bureau Chief’s ability to bring future enforcement action against Coinbase for securities law violations, and it gives no further reason for the rescission. See the order here.
French National Assembly Approves Amendment Requiring Reporting of Certain Self-Custodied Crypto Holdings
On Nov. 3, France’s National Assembly adopted an amendment to the proposed 2027 Finance Bill that would establish a reporting requirement for certain self-custodied cryptocurrency holdings. Introduced by lawmaker Charles de Courson, the amendment would require persons and legal entities subject to Article 1649 bis C of the French General Tax Code to report cryptocurrency wallets they hold directly, rather than through a crypto asset service provider, where the total value of crypto assets held in those wallets equals or exceeds €100,000 as of Dec. 31 of the relevant reporting year. The amendment would also extend existing penalties for failure to comply with tax reporting obligations to the new requirement, with its explanatory statement indicating that noncompliance could result in a penalty of up to €10,000. The proposal is intended to address concerns regarding the underreporting of cryptocurrency holdings and potential tax evasion. Although adopted by the National Assembly, the amendment must be retained in the final 2027 Finance Bill and complete the remaining legislative process before becoming law. See the amendment here.
ECB Selects Network Service Providers for Digital Euro Infrastructure
On Oct. 30, the European Central Bank (ECB) announced that it had selected two groups of network service providers to support preparations for a digital euro pilot and the potential future issuance of a digital euro. The first group consists of Nexi Payments and Deutsche Telekom Business Solutions, and the second group consists of Telefónica de España, Telefónica Global Solutions, and Indra Soluciones Tecnologías de la Información. Under agreements with the ECB, the providers will supply connectivity services linking participating payment service providers and national central banks to the digital euro service platform and facilitating communications among its components. The agreement with Nexi and Deutsche Telekom entered into force on Sept. 28 and will initially support the digital euro pilot, while the agreement with the Telefónica-Indra group is scheduled to begin in May 2027. Both groups are expected to be ready to provide connectivity services for a potential digital euro issuance beginning in 2029, subject to future decisions by the ECB Governing Council. The announcement marks a further step in developing the technical infrastructure for a potential digital euro but does not constitute a decision to issue the currency. See the announcement here.
