Fuse obtains SEC exemption for issuing coins, why is it easier for DePIN projects to get a pass?

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, under specific issuance and sales structures, will not be considered a security.

This progress not only gives Fuse a compliance advantage, but also means that the DePIN (Decentralized Physical Infrastructure Network) track is easier to complete the compliance puzzle compared to other tracks.

SEC approval, Fuse authorized to issue ENERGY tokens

On November 24, the SEC issued a critical NAL regarding Fuse's ENERGY token. This decision also serves as 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 being an energy network operating on the Solana chain. It incentivizes household users to install and use DER (Distributed Energy Resources) through a rewards system, such as rooftop photovoltaics, electric vehicle charging stations, and home energy storage batteries. Fuse is dedicated to coordinating these decentralized resources, helping to deconstruct the power grid and manage load pressure, thereby alleviating grid congestion issues.

NAL pointed out that as long as Fuse strictly follows the issuance and sales methods described in its application documents submitted on November 19, the SEC will not take enforcement action against it under Section 5 of the Securities Act of 1933 (registration of offerings) and Section 12(g) of the Securities 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 previously led financing rounds of up to $12 million for Fuse and $28 million for DoubleZero. Coincidentally, Fuse's NAL is the second similar document issued by the SEC within a short period 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 maybe their successive receipt of NALs has been propelled by Multicoin Capital's influence.

This continuous stream of positive signals also indicates that the SEC's regulatory approach is shifting from past enforcement forms to conditional compliance guidance. With the support of the new leadership, the SEC is attempting to establish a “token classification system” to differentiate between utility tokens and investment contracts. The emergence of NAL provides regulatory protection for projects with utility value. Such regulatory clarity may also significantly reduce compliance risks in the DePIN sector.

The compliance cost of the ENERGY token will sacrifice the flexibility of the business model.

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

Therefore, the NAL has strict limitations. The SEC stated in the announcement: any different facts or circumstances may lead the department to draw 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 in the application documents submitted to the SEC. Any attempt by Fuse to define the ENERGY token as an investment contract, or any implication that its value will increase due to the efforts of the project management, 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 circumventing the Howey Test lies in the fact that the project's tokenomics model fails to meet the fourth element of an investment contract, which is that a reasonable expectation of profits comes from the efforts of others.

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

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

In order to further eliminate the correlation between the token and the financial success of the project, Fuse has also implemented de-investment measures in the design of token value. 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 an immediately utilitarian token, encouraging users to consume quickly (for example, to obtain discounts on electricity bills or carbon offsets). When 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-driven appreciation.

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

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) Despite token compliance, Fuse still faces regulatory challenges on the business side.

NAL has temporarily resolved the compliance risks of the ENERGY token being considered a security, but Fuse Energy is not completely out of the woods. Fuse sacrificed the liquidity of the token for compliance. Users cannot freely transfer the token, and the exit channels for funds are limited and singular, significantly reducing the attractiveness of the asset.

Once Fuse Energy is no longer complacent and changes its products or modifies the token mechanism (such as opening secondary market trading, changing pricing strategies, etc.), or if the actual operations do not align with the stated facts, NAL will not have legal binding force, and the SEC can withdraw and initiate enforcement actions at any time, posing a risk of regulatory backlash.

Therefore, although 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, often subject to strict regulation by state and local utility commissions.

• Regulatory Compliance and Licensing: Fuse is likely to spend a significant amount of resources dealing with complex administrative procedures to obtain the licenses and approvals required to operate in different states or regions.
• Potential policy constraints from utility companies: Traditional utility companies typically have established customer bases, infrastructure, and political influence. These companies may leverage their brand advantages to hinder the growth of retail suppliers like Fuse and their competitors by implementing regulatory policies in the field of new energy, thereby further constraining the development space of non-utility developers.

The SEC's approval of Fuse represents a rational return of regulatory agencies in the niche field 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 specific business models, not a euphoric pathway to the comprehensive “de-securitization” of tokens.