SEC TOKEN TAXONOMY FAQ CLARIFIES DECENTRALIZATION STANDARDS FOR BUILDERS

Summary from the TLDR Crypto newsletter

The SEC released a new FAQ expanding its token taxonomy framework, drawing on three clarifications flagged by a16z crypto General Counsel Miles Jennings. Q 1.4 confirms that projects can maintain decentralized governance while using legal entities like DUNAs (Decentralized Unincorporated Nonprofit Associations), resolving a structural question teams have faced when adding off-chain legal wrappers to on-chain protocols. Q 1.5 draws a formal line between permissioned and permissionless systems, and Q 1.6 separates "functional" tokens from tokens that qualify as investment contracts under securities law. Builders now have clearer criteria from the SEC to determine whether their protocol architecture and token design fall outside the agency's jurisdiction.