Web3 Foundation Argues Polkadot (DOT) Is Software, But Will The SEC Follow?
Many cryptocurrencies sold for fundraising purposes can be seen as securities. The SEC is in the process of evaluating those offerings and taking the appropriate action. Polkadot and the Web3 foundation want to be one step ahead and issued a self-certification to avoid that label.
The SEC And Cryptocurrencies
It is a well-known fact any cryptocurrency used to secure funding is, in theory, an unregistered security. The ICO period of 2017-2018 has given rise to this popular fundraising model, even though the people orchestrating such campaigns may have violated federal security laws. Simultaneously, the SEC has established FinHub, a hub for innovation and financial technology.
The purpose of FinHub is to investigate whether digital assets sold for fundraising purposes are securities. An initial research paper, dubbed “the Framework” would suggest all digital assets violate security laws. However, the paper also mentioned that tokens may evolve over time and, therefore, escape the “security” label if there is sufficient argumentation. Even so, it remains up to the SEC’s officials to make the final judgment.
Polkadot and the Web3 Foundation have made a strong case for DOT not being a security. More specifically, a document was put forward recently to self-certify DOT as “software”. This does not mean the SEC will look at things the same way. Even so, DOT has a utility that goes beyond the initial approach of raising funds for Polkadot. The asset may have had the elements of a security when the fundraising occurred, but it has since “morphed” into much more.
Moreover, it is essential to note the Web3 Foundation took the bold step of engaging in an open dialog with FinHub. The transformation of Polkadot and DOT started three years ago, but there was a clear goal to achieve. Ensuring DOT morphs into software is ambitious and, for now, nothing more than a self-certification. However, there are many valid arguments outlined in this post. Those three years of discussions with the SEC have to count for something, and nearly half of the 50 engagements have been formal gatherings.
Checking All The Boxes
All aspects of Polkadot and DOT have been covered during those meetings and engagements. That includes the technology, the asset’s utility, and where the project is heading in the Web3 era. By putting in extensive work to ensure the open dialog is maintained, Polkadot paves the way for other projects to take similar measures. It is not a guarantee to avoid the “security” label, but it offers a glimmer of hope.
The big question is how the SEC will evaluate the long list of assets to investigate. More specifically, former SEC chairman Jay Clayton wasn’t convinced, and claimed everything except bitcoin should be a security. Current SEC chairman Gary Gensler has a similar view regarding these matters. If there is no room for even considering another strategy by the SEC, the uphill battle may not be over for Polkadot and the Web3 Foundation.
