The Web3 Foundation has announced last November that The Polkadot (DOT) blockchain token, which was initially offered, sold and delivered to users as a security or digital asset, has evolved to reach a next phase in which it is no longer considered a security but software. This was reported to Cointelegraph in a statement.
This announcement could be considered as a fundamental step to reach Web3 and marks the third anniversary of the Web3 Foundation’s first engagement with the US Securities and Exchange Commission’s (SEC) Strategic Center for Financial Innovation (“FinHub”). At that time, the Web3 Foundation was still six months away from taking the initial step to launch the Polkadot blockchain in May 2020, and that concluded with the launch of the parachains in December 2021.
In November 2019, the regulatory climate for digital assets was tense. When the Web3 Foundation first turned to FinHub, the SEC had recently filed its complaint against Telegram, and the framework for analysis of “investment contractsFinHub Staff’s Digital Assets Report had been published just a few months earlier, in the wake of numerous other actions and enforcement announcements from the SEC, including its Investigative Report 21A: The DAO, the Munchee Cease and Desist Order, and the Kik Decision.
Daniel Schoenberger, Legal Director of the Web3 Foundation, said in this regard: “The framework suggested that nearly all digital assets offered and sold for fundraising purposes were highly likely to constitute value when delivered to initial purchasers. Nevertheless, this framework also contained a compliance pathway, which would allow a digital asset initially offered and sold as a security to be subsequently reassessed.. For the purposes of US federal securities law, there was a possibility that it would cease to be a security. In other words, digital assets had the ability to evolve”.
During the next three years, the Web3 Foundation states that the experience was positive, as they held regular meetings with the SEC, tried to break new ground, comply with federal and securities laws from the United States; including with respect to the offer and sale, marketing and delivery to initial users of tokens as securities, as well as the treatment of retail buyers, generally in line with public companies.
Daniel Schoenberger added: “In the opinion of the Web3 Foundation, the current offers and sales of DOT, the token of the Polkadot blockchain, are not securities transactions. DOT is used for its intended purpose – among other things to bid and secure parachains and facilitate on-chain governance. Control of the Polkadot network has long been in the hands of DOT holders. Today, the DOT is not a value. It’s software”.
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