SEC staff update crypto FAQs with new answers on central parties, governance and decentralization

What happened

Staff at the SEC's Division of Corporation Finance updated their crypto asset FAQs on 2 Nov 2026, first issued on 25 Sep 2026. The updated page carries Questions 1.4, 1.5 and 1.6. An earlier archived copy, last updated on 28 Sep 2026, did not.

The FAQs are not a rule. The staff say they "have no legal force or effect" and that the Commission has neither approved nor disapproved their content.

What changed

The new answers address terms used in Section III of the SEC's Interpretive Release of 17 Mar 2026, on classifying crypto assets.

• Question 1.4. Whether participants in a functional crypto system's broad-based governance system are a "group of persons or entities" under the "central party" definition "is a facts and circumstances determination". The staff say participants generally will not be such a group if they are not affiliated and have no agreement, arrangement or understanding, "whether formal or informal", to act in concert, "including through delegation", separate from their participation in the governance system itself. Even a group would have to have operational, economic or voting control to meet the definition.
• Question 1.5. For purposes of the discussion of digital commodities, the staff say a central party oversees participation when it has the authority to control access to the crypto system at any level: protocol, validator or user. It generally does not where every material aspect of operation runs automatically on rules-based code without discretion by any person, or where any discretion is exercised solely through a broad-based governance system whose participants are not a central party.
• Question 1.6. The staff say "functional" and "decentralized" are distinct concepts. A functional crypto system to which a digital commodity is native has characteristics of decentralization, "although the degree of decentralization can vary depending on the facts and circumstances".

Footnote 2 defines a broad-based governance system as a transparent, rules-based system that permits and results in a wide and diverse group of stakeholders of multiple types independently contributing and forming consensus or reaching binding agreement. Footnote 3 limits the Question 1.4 view to the description of digital commodities in Section III, with "no relevance or application" to Securities Act or Exchange Act definitions or provisions on groups, including the definition of "exchange".

Who is affected

Question 1.4 concerns participants in such governance systems. It gives the same answer where such a governance system is part of an organization, association or foundation and participation is based on holding the native crypto asset. Footnote 4 says such a body itself could be a central party where it has operational, economic or voting control over another crypto system.

What happens next

The page states no deadline, effective date or comment process.