Crypto Assets industry faces strict regulation, how did Polkadot successfully respond

Recently, the Crypto Assets industry has faced a series of regulatory challenges. Last year’s FTX incident triggered a tightening of regulations worldwide, and the attitude of U.S. regulatory agencies towards the industry has also become more stringent. Recently, the U.S. Securities and Exchange Commission (SEC) has initiated lawsuits against several major Crypto Assets trading platforms, which has attracted widespread attention in the industry.

The SEC has filed a lawsuit against a well-known trading platform and its CEO, accusing them of providing securities trading services without registration and of making false statements. At the same time, the SEC has also sued another large trading platform, similarly accusing it of selling unregistered securities. In these lawsuits, the SEC has classified tokens from multiple well-known projects as securities, including SOL, ADA, MATIC, and a total of 19 types.

This practice of broadly classifying tokens as securities could have far-reaching effects on the entire industry. If these tokens are ultimately deemed to be securities, they may not be able to be traded on U.S. exchanges and could even face delisting risks. This would not only impact the development of related projects but could also undermine investor confidence and deter talent from entering the industry.

However, in this regulatory storm, Polkadot’s native token DOT successfully avoided being classified as a security. This is thanks to the Web3 Foundation, which has been actively communicating and adjusting with the SEC since 2019. After three years of efforts, they developed a theory explaining how to achieve the transformation of the nature of decentralized project tokens.

In November 2022, the Web3 Foundation announced that SEC staff agreed that DOT has completed its nature transformation, no longer being considered a security, but recognized as software. This achievement is not only a milestone for Polkadot but also provides valuable experience for the entire Web3 industry.

The success case of Polkadot provides a reference for other projects. The Web3 Foundation plans to launch the “Polkadot Yellow Paper” to share its experiences in communicating with regulatory agencies. This not only reduces Polkadot’s own regulatory risks but may also attract more projects to choose Polkadot as their infrastructure.

Despite the current harsh regulatory environment, the purpose of regulation is to find a balance between development and order. The Crypto Assets industry, although facing challenges, is expected to welcome new development opportunities in the future as regulation gradually becomes standardized. The experience of Polkadot indicates that actively communicating with regulatory bodies and taking proactive compliance may be the direction for the industry’s future development.