Author: Jae, PANews

Another project in the crypto space has received the green light from the SEC (U.S. Securities and Exchange Commission). Recently, the SEC issued a NAL (No Action Letter) to Fuse Crypto Limited (hereinafter referred to as Fuse), officially confirming that the ENERGY token will not be considered a security under specific issuance and sales structures.

This development not only gives Fuse a compliance advantage but also indicates that the DePIN (Decentralized Physical Infrastructure Network) sector is more likely to complete the compliance puzzle compared to other sectors.

SEC Approval, Fuse Authorized to Issue ENERGY Token

On November 24, the SEC issued a crucial NAL regarding Fuse's ENERGY token. This decision is further evidence of the SEC's systematic shift in regulatory attitude, especially towards blockchain projects aimed at solving real-world problems.

Fuse Energy is a DePIN project focused on energy technology innovation, with its core business operating an energy network on the Solana blockchain. It incentivizes household users to install and use DER (Distributed Energy Resources) such as rooftop photovoltaics, electric vehicle charging stations, and home energy storage batteries through a reward system. Fuse aims to coordinate these decentralized resources to help deconstruct the grid and manage load pressure, thereby alleviating grid congestion.

The NAL states that as long as Fuse strictly adheres to the issuance and sales methods described in its application submitted on November 19, the SEC will not take enforcement action against it under Section 5 of the Securities Act of 1933 (Registration of Securities) and Section 12(g) of the Exchange Act of 1934 (Registration of Equity Securities).

The compliance exemption for the ENERGY token is not an isolated case. Multicoin Capital, heavily invested in the DePIN sector, has led financing rounds of up to $12 million and $28 million for the two major DePIN projects, Fuse and DoubleZero, respectively. Coincidentally, Fuse's NAL is the second similar document issued by the SEC shortly after DoubleZero's 2Z token received a similar NAL in September. Perhaps Multicoin Capital has long recognized the significant compliance potential of these two DePIN projects, or their successive receipt of NALs may have been influenced by Multicoin Capital's support.

This continuous stream of positive signals also indicates that the SEC's regulatory path is shifting from past enforcement forms to conditional compliance guidance. With the support of a new leadership team, the SEC is attempting to establish a "token classification law" to distinguish utility tokens from investment contracts. The emergence of NALs provides regulatory protection for projects with utility value. This kind of regulatory clarity may significantly reduce compliance risks in the DePIN sector.

The Compliance Cost of the ENERGY Token Will Sacrifice Business Model Flexibility

A NAL is an administrative decision. The SEC will conduct an in-depth review of Fuse Energy's business model based on the core standards determined by U.S. securities law, specifically the Howey Test, and make judgments based on specific facts and circumstances.

Therefore, the NAL has strict limitations. The SEC stated in the announcement that any different facts or circumstances could lead the department to reach different conclusions. This wording will impose long-term compliance constraints on Fuse Energy, effectively "locking" Fuse's business model, token issuance methods, and market promotion strategies legally within the application documents submitted to the SEC. Any attempt by Fuse to define the ENERGY token as an investment contract or to imply that its value will increase due to the project team's management efforts will constitute legal risks and may lead to the SEC revoking the NAL.

In short, this compliance will sacrifice flexibility in the business model.

The key to Fuse Energy avoiding the Howey Test lies in the project's token economics model, which fails to meet the fourth element of an investment contract, namely, the reasonable expectation of profits derived from "the efforts of others."

Fuse Energy's core argument is: the purpose of users acquiring ENERGY tokens is for consumption and rewards, not investment.

• Acquisition Method: Users do not directly invest funds to earn ENERGY tokens but participate in network activities and contribute physical resources, such as reducing energy consumption during peak hours, using electric vehicle charging stations, and storing solar energy. This makes the incentives for ENERGY tokens more like "loyalty rewards" for environmentally friendly behavior.
• Distributed Efforts: In the structure of Fuse Energy, the increase in token value primarily depends on the efforts and contributions of a large number of participants (i.e., the deployment and operation of users' own devices), rather than solely relying on centralized management and efforts from the Fuse team. This legal argument of "distributed efforts" may lay a solid regulatory compliance foundation for DePIN projects.

To further eliminate the association between the token and the project's financial success, Fuse has also taken depersonalization measures in the token value design. The redemption value of the ENERGY token is linked to Fuse's profit margin and the average market price of the token when used. This design aims to ensure that ENERGY is viewed as a utility token with immediacy, encouraging users to consume quickly (for example, obtaining discounts on electricity bills or carbon offsets). Under the condition that the value of the ENERGY token does not depend on Fuse's financial success, users will be dissuaded from hoarding tokens in anticipation of future performance surges.

These factors collectively prompted the SEC to determine that the ENERGY token does not meet the definition of an investment contract.

Beyond Token Compliance, Fuse Still Faces Regulatory Challenges on the Business Side

The NAL temporarily mitigates the compliance risk of the ENERGY token being classified as a security, but Fuse Energy is not out of the woods. Fuse sacrificed the liquidity of the token for compliance. Users cannot freely transfer tokens, and the channels for capital exit are limited and singular, significantly reducing the asset's attractiveness.

If Fuse Energy becomes dissatisfied with the status quo and changes its products or modifies the token mechanism (such as opening secondary market trading, changing pricing strategies, etc.), or if actual operations do not align with stated facts, the NAL does not have legal binding force, and the SEC can revoke it and initiate enforcement actions at any time, posing a risk of regulatory backlash.

Therefore, even though the ENERGY token has been "de-securitized," Fuse still has the responsibility to enhance its operational transparency, disclose project risks, and strengthen education for market participants to ensure that users do not misunderstand it as a traditional investment contract.

It is worth noting that the energy sector is a highly localized market, typically subject to strict regulation by state and local utility commissions.

• Regulatory Compliance and Licensing: Fuse is likely to spend significant resources dealing with complex administrative procedures to obtain licenses and approvals required to operate in different states or regions.
• Potential Policy Constraints from Utility Companies: Traditional utility companies often have established customer bases, infrastructure, and political influence. These companies may leverage their brand advantages to hinder the growth of retail suppliers and competitors like Fuse by promoting regulatory policies in the renewable energy sector, further constraining the development space for non-utility developers.

The SEC's approval of Fuse represents a rational return of regulatory agencies in the niche area of "utility tokens." For the industry, this is both a shot in the arm and a wake-up call: the cost of compliance often involves sacrificing investment attributes and liquidity. While celebrating the regulatory breakthrough, the market needs to clearly recognize that this is merely a permission for a specific business model, not a euphoric path toward the comprehensive "de-securitization" of tokens.

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