How is Polkadot responding to the tightening of cryptocurrency regulations in the United States?

Recently, the attitude of U.S. regulatory agencies towards the Crypto Assets industry has clearly shifted towards being more stringent. This trend is partly attributed to the series of negative impacts triggered by last year's FTX incident, prompting countries to strengthen their regulation of Crypto Assets. U.S. regulatory authorities are no longer merely observing and discussing but have begun to take more direct regulatory actions.

The U.S. Securities and Exchange Commission (SEC) recently filed a lawsuit against a well-known trading platform and its CEO, which has attracted widespread attention in the industry. The SEC alleges that the platform provided core services related to securities, such as a trading platform, broker, and clearinghouse, without registration, and also illegally offered and sold unregistered securities products. In addition, the SEC accused the platform of making false statements about its U.S. business situation, which helped it attract a large amount of investment and trading volume.

It is worth noting that the SEC identified the tokens of several well-known projects as securities in the lawsuit documents, including SOL, ADA, MATIC, FIL, ATOM, and others. The SEC analyzed the initial issuance processes of these tokens, their distribution methods, and the allocation situation of the core teams, believing that they meet the characteristics of securities.

At the same time, the SEC also filed a lawsuit against another large Crypto Assets exchange, also involving issues related to the sale of unregistered securities. A total of 19 types of coins were mentioned by the SEC, covering multiple well-known public chain projects.

If these tokens are officially recognized as securities, it will have a significant impact on the entire Crypto Assets industry. This could lead to these tokens being unable to be traded on US exchanges, and even face delisting risks. Additionally, it may affect the normal development of projects, increase the policy risks faced by practitioners and projects, and undermine traditional funding's confidence in entering the Web3 space.

In this context, the approach of the Polkadot project is worth noting. As early as 2019, the Web3 Foundation behind Polkadot began active communication with the SEC. After three years of effort, the Web3 Foundation has explored a feasible theory on how to realize the transformation of token nature for decentralized projects.

In November 2022, the Web3 Foundation announced that they reached a consensus with SEC staff, believing that the native digital asset DOT of the Polkadot blockchain has undergone a transformation in nature. Currently, the provision and sale of DOT are not considered securities transactions, and DOT is not recognized as a security, but merely as software.

This achievement is not only a milestone for Polkadot but also paves the way for the entire Web3 industry. Polkadot's approach has reduced the regulatory risks it faces and provided potential regulatory support for projects within its ecosystem. Furthermore, the Web3 Foundation has stated that it will launch relevant content based on Polkadot's regulatory experience for industry reference.

Despite the tightening regulatory environment, the ultimate goal of regulation is to find a balance between development and oversight. Although the Crypto Assets industry may experience some challenging times, as regulation gradually becomes standardized, the industry is expected to welcome new development opportunities.