The SEC’s Division of Corporation Finance said it views Canton Coin (CC) as a digital commodity and would not recommend enforcement action against its automatic generation under certain conditions.
The letter, published on November 3 and reported by The Block, marked an important regulatory development for CC, the native token of Canton Network. In its assessment, the division said the token’s value depends on the network’s programmatic operations and supply-and-demand dynamics, rather than an expectation of profits from the managerial efforts of others. The absence of a central party in the network was also among the reasons cited.
Which activities will not face enforcement action?
The letter covers the automatic generation of tokens under the network’s rules by Super Validators, validators, and application providers. These participants must comply with the methods and conditions described in the application and rely on the advice of legal counsel.
Under these conditions, the division will not recommend that the Commission take enforcement action over the issuance for failure to register under Section 5 of the Securities Act or Section 12(g) of the Exchange Act.
The no-action letter reflects SEC staff’s position based on the facts presented; it does not make a definitive legal determination on whether CC is a security.
a16z offers notable comments on tokens for other networks, too
Miles Jennings, a partner at a16z, welcomed the SEC staff’s approach. Jennings argued that this position could signal a broader regulatory path for tokens used by blockchain networks. He also noted that the letter could fuel discussion not only about Canton, but also about how similar networks will be evaluated.
Canton Network, developed by Digital Asset, is a blockchain infrastructure designed to enable secure, privacy-preserving, interoperable transactions between institutions and networks. CC serves as the network’s utility token.
In June, Digital Asset raised $355 million, led by a16z crypto, to grow the Canton ecosystem and accelerate institutional adoption. Unlike the network’s institutional growth initiatives, the latest letter concerns the regulatory framework for token generation itself.
Not investment advice.