Hyperliquid Requests Five Improvements to Digital Asset Regulations from the U.S. SEC: What’s the Core?

[Reporter Myungjeong Seon, Block Media] Hyperliquid Policy Center (HPC) has requested the U.S. Securities and Exchange Commission (SEC) to amend five key provisions of its virtual asset regulatory proposal. They argue that legal standards regarding airdrops, secondary trading of tokens, and self-token buybacks should be clarified to reduce regulatory uncertainty for blockchain projects.

On the 20th (local time), major foreign media outlets such as Crypto Potato reported that HPC submitted an official opinion letter regarding the SEC's ongoing 'Regulation Crypto Assets'. While they support the basic direction of the regulatory proposal, they believe that some provisions are open to interpretation and should be supplemented in the final regulations.

In March, the SEC announced its interpretation of how securities laws would apply to token distributions, including airdrops. In August, it proposed new regulations regarding the issuance and trading of virtual assets.

The regulatory proposal includes an exemption clause allowing startups to raise up to $5 million over four years and a separate fundraising exemption allowing up to $75 million to be raised within 12 months. It also includes a Safe Harbor provision to determine when tokens that meet certain requirements are no longer connected to investment contracts.

Clarification of Regulations on Airdrops, Secondary Trading, and Buybacks

HPC's first demand is to clarify the criteria for applying securities laws to airdrops. They argue that if users receive tokens without providing separate monetary compensation, these should not be considered investment contracts.

They emphasized that simply receiving tokens through network usage, validator activities, or liquidity provision should not automatically classify them as securities transactions. They also stated that routine procedures such as wallet connections or checks for sanctions should not be interpreted as compensation for token purchases.

The second demand pertains to the criteria for secondary market trading of tokens. They requested that the conditions under which tokens issued under the regulatory exemption clause can be traded should be specifically defined. They pointed out the need to clarify the scope in which decentralized trading protocols and intermediary services can support trading without SEC registration.

The third demand concerns regulatory standards for token buybacks. They argue that it should be made clear how the act of a blockchain project repurchasing its own tokens affects the determination of securities status or eligibility for regulatory exemptions.

HPC presented the opinion that the relationship between token buybacks and investment contracts should be clarified to reduce legal uncertainties that may arise during project operations.

Expanding Safe Harbor Application and Distinguishing Token Buybacks

The fourth demand is linked to the effectiveness of Safe Harbor. HPC pointed out that the current regulatory proposal could effectively require projects applying for Safe Harbor to acknowledge the existence of past investment contracts or issuing entities.

They argued that the criteria should be amended to allow projects that were judged not to have established investment contracts from the outset to apply for protection. They proposed expanding the protection scope to include not only completed projects but also those with ongoing core development and operational activities.

Regarding token buybacks, they emphasized the need to distinguish between automatic purchases and discretionary purchases. They stated that actions to automatically purchase tokens according to pre-disclosed rules and actions where specific entities decide whether to purchase based on circumstances should be evaluated differently from a regulatory perspective.

Additionally, they argued that the definition of 'Central Party', which exerts influence over token issuance and operations, should be unified across the regulations, and that validators or users should not be judged as a single controlling group merely because their interests align.

Demand for Continued Federal Regulatory Protection and Concerns Over State Regulatory Burdens

The final demand is for the continuation of federal regulatory protection.

HPC pointed out that under the current regulatory proposal, once a project meets the Safe Harbor requirements, the exemption from state law at the federal level could end. In this case, the project may be subject to separate securities registration regulations in various U.S. states.

This could impose new regulatory burdens on completed projects and could lead to the adverse effect of delaying completion to maintain legal protection.

HPC emphasized that federal protection should be maintained even after meeting the Safe Harbor requirements.

The core of this opinion letter is that consistent regulatory standards should be established from token issuance to distribution, operation, and post-completion development. However, it has yet to be determined whether the SEC will accept these demands. The content reflected in the final regulations is expected to impact the token issuance and trading structure of blockchain projects in the U.S.

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