How Can a Company Use a Token Buyback Program to Support Utility without Implying a Security?
The company can use a portion of its operational revenue to buy back tokens from the open market, but only for the purpose of using them within the ecosystem (e.g. for staking rewards, governance incentives, or burning). The key is to clearly communicate that the buyback is for operational utility, not for financial support or to guarantee a price floor for investors.
A buyback solely to support the price would imply an investment contract.
Glossar
Circulating Supply
Token ⎊ The circulating supply within cryptocurrency contexts represents the number of tokens currently available and actively traded on exchanges or held by investors, excluding those locked in smart contracts, staking agreements, or otherwise inaccessible.
Token Buyback Program
Mechanism ⎊ A Token Buyback Program, within cryptocurrency ecosystems, represents a capital allocation strategy where a project utilizes funds ⎊ typically generated from revenue or treasury holdings ⎊ to repurchase its native token from the open market.
Operational Revenue
Revenue ⎊ The operational revenue stream, within cryptocurrency derivatives and options trading, represents the income generated directly from the execution of trading activities and the provision of related services.
Financial Support
Collateral ⎊ In the context of cryptocurrency derivatives, options trading, and financial derivatives, collateral represents the assets pledged to secure obligations, mitigating counterparty risk.