Polkadot (DOT) Argues it is Not A Security But Software
There is a lot of debate on whether cryptocurrencies are unregistered securities. Opinions on that front are divided, yet Polkadot wants to be taken off the list. More specifically, the DOT token can be seen as “software” rather than a security.
Polkadot (DOT) Evolved And Morphed
Like any other cryptocurrency initially sold for fundraising purposes, Polkadot’s DOT was on the radar as a potential security. However, it would be an unregistered security, which could create tremendous problems for the project, token holders, exchanges, wallet operators. etc. The 2019 “FrameWork” would only emphasize that point, even if it allows digital assets to be re-evaluated later.
Much has changed since 2019, yet the labels and phrasing remain uncertain. The SEC has shown an increase in scrutinizing cryptocurrencies, especially those used for fundraising purposes. As such, many projects, including Polkadot, find themselves in an awkward position. However, the team has taken the necessary steps to rebuke doubt over DOT being a security.
Following a lot of hard work, DOT can now be classified as software rather than a security. It is the culmination of a three-year dialog between the Web3 Foundation and the SEC. There has been plenty of back-and-forth regarding how Polkadot positioned itself when it launched and what it has become since then. With decentralized governance and on-chain treasury, DOT is – in the view of the Web3 Foundation – merely software.
Making that argument is one thing, but convincing the SEC is never easy. While Chief Legal Officer Daniel Schoenberger makes a solid case for how DOT has “morphed”, the SEC has yet to sign off on this new label. The healthy and cordial relationship between the Web3 Foundation and the SEC’s FinHub outfit may help move things in the right direction. A resolution of the matter remains up in the air, but the progress by Schoenberger confirms initial securities can evolve into something else.
Self-Certification Sends A Strong Signal
It remains crucial to note that the SEC can still treat DOT as security. The label “software” is a self-certification by the Web3 Foundation rather than an official ruling. However, it confirms the team’s commitment to providing clarity to the project and potentially creates a precedent for other assets that might fall under the “security” label today.
One thing to consider is how DOT has real utility. The same cannot always be said about most crypto assets. DOT is used for network governance, staking, and bonding. Asset holders have complete control over the protocol and keep the network secure by staking DOT. In addition, by bonding tokens, they enable the addition of more parachains and removal of outdated or non-useful chains.
