Statement of SEC staff issues on encryption mining activities

On Friday, March 21, 2025, employees of the Institutional Finance Department of the Securities and Stock Exchange Committee (“Employees”) issued a statement explaining the implementation of federal securities laws on mining networks of encryption assets on work proof networks (“PW”).¹ The statement only addresses the mining of encryption assets (“covered encryption assets”) which are:

1. “It is fundamentally linked to the program performance of a public network without permission.” and
2. He is accustomed to/or earned:

   • Participate in this network consensus mechanism; or
   • Maintaining the technological process and the security of this network.

The statement clarifies that the mining of the encryption assets covered on PW networks (“Protocol Mining”) does not include the offer and sale of securities under the Securities Law of 1933 and the Securities Exchange Law of 1934.

They are protocol mining and PW networks

Blockchain networks usually use encryption and economic mechanisms to verify transactions in the assets of encryption without traditional financial intermediaries. The operation of each network is subject to software protocol imposing network rules and bonuses. One of the main components of this protocol is the “consensus mechanism”, which allows a network distributed from computers (contract) that is not related to agreement on network data, including transactions records.

PW is a consensus mechanism used to verify the health of transactions through the reward of the participants, known as “miners”, who use computers to solve complex sports puzzles. The first mine worker solves the puzzle checking the health of a set of transactions and suggests new network blocks for the network. On the other hand, miners win “rewards” in the form of newly covered encryption assets. This process secures the network by asking miners to spend large mathematical resources, which makes it difficult to change transactions or engage in fraudulent activities. Without permission, public networks allow anyone to participate in operating the network, including verifying the authenticity of the new transactions of the network according to the network consensus mechanism. Bitcoin Blockchain is a prominent example of PW without permission.

Solo miners on networks can also join “mining pools”, where they can combine their arithmetic resources to increase their chances of successfully verifying transactions and mining. The assembly operators usually coordinate mining workers resources, maintain devices and programs and ensure safety. The rewards are distributed among billiard members based on their contribution, as the pond operator takes fees for its services.

Employee statement

In the statement, employees explain that the public Blockchains mining activities do not involve the offer and sale of securities. Accordingly, participants in these activities do not need to register mining transactions with the Supreme Council for Education or fall in the exemption from registration.

Employees ’view applies to the following types of protocol mining activities:

• Mining (or individual)Mines use their mathematical resources to remove covered encryption assets.
• Mining bathroomsMines combine resources to increase their chances of extracting new blocks, while distributing bonuses in a proportional way. These rewards are distributed either directly or through the pool operator.

The statement notes that the covered encryption principles are not included in any of the financial tools included in the definition of “security” under Article 2 (a) (1) of the Securities and Article 3 (a) (10) of the exchange law. Accordingly, the employees apply the “investment contract” test in SEC V. Wj howy Co.² To determine whether the transactions that involve the covenant assets covered in the context of the protocol mining are securities. the Amateur The test states that the “investment contract”, and thus security, exists where there is an investment in money in a joint institution with a reasonable expectation of profits derived from the efforts made or administrative to others.³ The federal courts have made clear that the requirements of “the efforts of others” are being fulfilled when “the efforts made by investors other than the investor are the undeniable important efforts, those basic administrative efforts that affect the failure or success of the institution.”⁴

The statement concludes that the activities of individual miners do not involve a reasonable expectation of profits from the efforts of others. Instead, each mining worker uses his own arithmetic resources to secure the network and gain rewards issued by the network software protocol. According to employees, the mining factor only participates in an administrative or ministerial activity to secure the network, verify the validity of transactions, add new blocks, and receive mining bonuses. Thus, mining bonuses are payments for the services provided to the network, not the profits derived from the efforts of others.

Although the mining gathering can be considered a common institution, the employees, which causes the complex not to include a reasonable expectation of profits from the efforts of others. When mining workers participate in the mining group, they combine their arithmetic resources and others to successfully increase their chances of extracting new blocs. The statement indicates that by contributing to their arithmetic resources in the complex, miners participate in administrative or ministerial activities to secure the network, verify the validity of transactions and gain rewards. The basic point in this analysis is that the role of the Balearic operator Amateur“The efforts of others” requirements Amateur exam. Miners depend on their mathematical contributions, not on the efforts of the Al -Baraka operator, to gain rewards.

Conclusion: What is at stake?

Personnel statement on protocol mining is the second statement in the rapid caliphate in relation to the lack of security of some transactions in encryption assets. The previous statement of employees on the MEME currencies (which we are discussing in NewSflash) is followed.⁵ Participants in the encryption industry will undoubtedly welcome clarifying the statement regarding protocol mining, but they will also indicate that he does not say anything about the “evidence” networks, which differ from PW networks.⁶

The Supreme Education Council has already entered the settlement orders against the entities that submit “delegated smoke”, where the participants in the evidence of evidence falls to delegate their encrypted assets into an entity that collects and risks the assets collected on their behalf, and then restore the agreed rewards in an agreed percentage.⁷ In the delegated violation, unlike the mining group, the factors did not make any other mathematical efforts that exceed the mandate of their assets to Staker. While the Securities and Stock Exchange Authority withdrew from litigation against some authorized fishermen, it did not publicly reconsider its position on the delegated deadline.⁸ Industry participants will look at knowing whether SEC reaches a different result from the deduced deceptive.

The statement will also be studied closely by the sponsors of the participants and participants accredited in many of the traded products (ETPS “) in the United States. None of this ETPS is currently pledged, although some have requested the approval of SEC to participate in the ether they keep. ETHE ETP sponsors may read the statement of the statement about individual verification activities with attention and consider the effects of their cars.

Since the formation of the new CRYPTO workplace, SEC and SEC employees have been active in searching for comments on various activities related to encryption and guidance to industry, including seven data^{9, 10} Since the work group was formed for the first time. You will likely follow more data and clarifications.