Web3 Foundation, the company responsible for Polkadot and Kusama, has announced that Polkadot native token DOT is now software and no longer a security.
The Foundation claimed that the announcement is premised on its three years of active engagement with the US Securities and Exchange Commission (SEC) which started in November 2019. The company took the SEC’s offer to “come in and talk to us.”
Polkadot Engages SEC
A blog post by Web3 Foundation Chief Legal Officer Daniel Schoenberger also explained the development. He said that Polkadot did not envision that its DOT token would be security and has worked to be in compliance with federal securities law.
In 2019, a few months before Polkadot launch in 2020, the SEC’s Strategic Hub for Innovation and Financial Technology (“FinHub”) published its Framework for “Investment Contract” Analysis of Digital Assets. This framework made almost all digital assets offered and sold for fundraising purposes considered a security.
However, the framework also highlighted the possibility of an asset that was initially seen as a security to be re-evaluated.
Web3 Foundation Says DOT Morphed Into Software
This led Web3 Foundation to start a dialogue with the SEC FinHub, and it has been doing so for three years. During the period, the Foundation prioritized compliance and obeyed all US securities laws regarding issuing its native token and treatment of purchasers.
Schoenberger claimed the experience with the SEC has been positive and helped the company better understand the regulator’s concerns and develop appropriate solutions for them.
The company now believes that given the interaction with the SEC over the period and how it has complied with all applicable laws, the DOT token has morphed into software.
“In our view, current-day offers and sales of DOT are not securities transactions, and DOT is not a security. It is merely software.”
SEC vs Crypto
Meanwhile, Polkadot approach to compliance is markedly different from the current dynamic between the SEC and the crypto industry.
While crypto stakeholders have urged the SEC to provide more regulatory clarity, the Commission’s chairman Gary Gensler has repeatedly insisted that most cryptocurrencies are securities.
Presently, the financial regulator is involved in a number of legal battles against several crypto firms that it argued sold unregistered securities. Famous among these law cases is its two years battle with Ripple over the sales of XRP.
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