The blockchain powering Wall Street's newest tokenization service has received a regulatory nod for its native token. The U.S. Securities and Exchange Commission's Division of Corporation Finance said it views Canton Coin, the native token of the Canton Network, as a "digital commodity" and will not recommend enforcement over the token's programmatic minting.

In a letter dated Tuesday, agency staff said they would not recommend enforcement action if Canton's validators and application providers mint the token programmatically without registering it. The determination falls under the agency's March interpretation of how securities laws apply to crypto assets and came four days after Canton's lawyers submitted their request, which was dated Oct. 30.

Staff pointed to two representations from Canton's counsel. 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."

According to a statement from Canton, Canton Coin launched without an initial coin offering or a premine, and tokens were initially earned only by running network infrastructure and applications.

The letter has limits, as the SEC noted. It reflects only the staff's position on enforcement rather than a legal conclusion by the agency, and it rests on the facts and representations Canton presented. In practice, staff positions of this kind are scoped to the record behind them: they hold as long as the operation matches what was represented.

The relief arrives a week after the Depository Trust & Clearing Corp. launched a tokenization service that runs on Canton and DTCC's own private network, allowing firms to convert DTC-held stocks and Treasuries into tokens. Morgan Stanley said Tuesday that it was among the first banks to use the service.

"Financial institutions need confidence in both the technology they use and the economic model that supports it," said Yuval Rooz, CEO of Digital Asset, which created the Canton Network. The letter lands on that second half of Rooz's equation: alongside the technology, firms adopting Canton now have a staff-level view on the token minted by the validators and application providers running its infrastructure and applications.

Canton said the letter is the first relief of its kind since the SEC published its March interpretive release, which examined crypto activities including staking, airdrops and bitcoin mining and found that most crypto assets are not securities. It is also the first since the agency's August Regulation Crypto Assets proposal. In its announcement, Canton described the letter as providing additional regulatory clarity for institutional adoption.

The decision fits a broader regulatory shift that has taken shape since the Clarity Act stalled in the Senate in September, leaving the SEC and the Commodity Futures Trading Commission to take the lead on crypto rules. SEC Chair Paul Atkins said in July that the agency was ready to act if Congress did not, and the SEC recently proposed rules on how advisers and funds hold crypto. No-action letters, interpretive releases and rule proposals have effectively become the agency's working toolkit in the absence of legislation. From here, the markers are procedural: whether the Clarity Act moves in the Senate, and how the SEC's proposed custody rules progress, will show how much of the framework gets settled by Congress or continues to be built by the agencies.

Digital Asset raised $355 million earlier this year in a funding round that included Wall Street firms and a sovereign wealth fund.

Source: Decrypt