Canton Coin Clears SEC’s Enforcement Path as Wall Street Tokenization Goes Live 🪙

The SEC’s Division of Corporation Finance said in a letter dated Tuesday that Canton Coin, the native token of the Canton Network, qualifies as a “digital commodity” under the agency’s March interpretation of how securities laws apply to crypto. Staff also said they would not recommend enforcement action if Canton validators and application providers mint the token programmatically without registering it.

The relief is limited to staff’s enforcement position, is not a legal conclusion and depends on the facts presented by Canton. Canton’s lawyers represented that Canton Coin derives its value from the network’s programmatic operation and supply and demand rather than the managerial efforts of others, and that the network has no “central party.” Canton Coin launched without an initial coin offering or premine, with tokens initially earned only by running network infrastructure and applications, according to a statement from Canton. Canton’s request letter was dated Oct. 30, four days before staff responded.

The decision follows the Oct. 28 launch of the DTCC Tokenization Service, which runs on Canton and DTCC’s own private network. Operated by the Depository Trust Co., a subsidiary of the Depository Trust & Clearing Corp., the service allows 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, converting U.S. equities and Treasuries into tokenized form. The DTC is the post-trade backbone of U.S. markets.

“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. Canton said the SEC letter marks the first relief of its kind since the agency’s March interpretive release, which found that most crypto assets aren’t securities, and the first since the August Regulation Crypto Assets proposal.

The move comes as the Clarity Act stalled in the Senate in September, with the SEC and CFTC taking the lead on crypto rules. SEC Chair Paul Atkins said in July the agency was ready to act if Congress didn’t, and the SEC recently proposed rules covering how advisers and funds hold crypto. Digital Asset raised $355 million earlier this year from Wall Street firms and a sovereign wealth fund.