Policy Principles

Guiding Policy Principles for 3OH DAO

3OH DAO will be engaging policymakers and regulators and encouraging them to adhere to the following Web 3 policy principles:

  1. Innovators need clear guidance, room, and resources to build. Increased guidance is needed from the U.S. financial market regulators on the characterization of digital tokens, specifically when a digital token may be considered a “security” for purposes of the federal securities laws. Most digital tokens are not securities and should not be deemed so by the U.S. Securities and Exchange Commission. Digital tokens serve an important purpose within a blockchain’s ecosystem by powering transactions and providing access to services and features. Any relationship formed between a developer and consumer with respect to issuance of a digital token or its purchase on a secondary market is that of a merchant and customer. Sale of a digital token should not be treated as a relationship between a company and investors. While securities and derivatives laws may apply where a digital token is marketed in the same way as an investment product, generally, digital tokens and their developers should not be subject to regulatory oversight by financial market regulators because they are not investment products.  Ambiguity based on retrofitting the Howey Test has caused confusion among innovators and has had a chilling effect on innovation. Further, a safe harbor, such as Commissioner Hester Peirce’s proposal, and other no-action relief that lets innovators build projects using funds from sales of digital tokens would spur growth and allow networks to develop. In addition, Web 3.0 startups, like any other small businesses, need funds to operate. Accordingly, financial regulators should permit the use of cryptocurrency as collateral.
  2. Regulation and taxation of digital assets should occur at the on- and off-ramps of decentralized finance (DeFi) and should apply to the activity and actors, rather than the technology. DeFi activity is powered by cryptocurrencies, such as stablecoins, and centralized finance (CeFi) actors, such as exchanges, wallets, and issuers of cryptocurrency, play a vital role in enabling DeFi activity. CeFi actors serve as the on- and off-ramps for DeFi participants and they are regulated based on applicable state and federal laws and regulations. In addition to regulation, taxation of digital assets should occur only when a digital asset is exchanged for fiat currency or fiat-denominated cryptocurrency that can be used for payments, as opposed to when a digital asset is sold or exchanged for a different digital asset. Any capital gain would be reflected when the digital asset is converted into fiat, and this would be the appropriate time to tax any potential gains.
  3. The United States must lead in Web 3 innovation. U.S. innovators and consumers are excluded from an international community that is developing the next generation of the Internet. Not only does this hurt U.S. startups and businesses by putting them at a competitive disadvantage, it also incentivizes these companies to relocate to jurisdictions that are creating economic zones, fintech hubs, and providing tax credits and incentives for Web 3 innovation. The United States must do more to support U.S. innovation by making available to innovators resources, such as research grants and tax credits, requiring regulators to promulgate guidance for industry that increases clarity about how laws and regulations apply to Web 3 innovators prior to taking enforcement actions, and passing laws and introducing regulations that take a light regulatory approach to enable the general public to interact with this technology.
  4. Blockchain technology provides many benefits and should not be regulated. One benefit is the added layer of security given the insight into all transactions.  Blockchains can be used for multiple purposes. The ability to see all transactions and activity on a blockchain further enhance the security of the blockchain and permit regulators to see fraudulent actions. Additionally, as regulators struggle with the question of how best to regulate cryptocurrencies, blockchain is simply a platform that enables these cryptocurrencies and should not be regulated. Additionally, blockchain can have use cases outside of cryptocurrency, many of which can be utilized by the government.
  5. Stablecoins serve an important role in the payment ecosystem and should be given the same protections as fiat when included within financial accounts. Stablecoins provide an ease of payments outside of the traditional payments rails. This enables faster payments, as well as enhances financial inclusion. Stablecoins held in financial accounts should be provided deposit insurance