Polygon Labs, the organization behind the blockchain of the same name, has asserted its disagreement with recent SEC statements. In a 17-page argument, its teams reveal the lack of knowledge of regulatory authorities on the functioning of a blockchain. Although the SEC is stepping up its attacks against the Web3 industry, Polygon Labs is opening up to the institution by offering to discuss the subject for fairer regulation in the United States.
Polygon opposes the SEC
Last week, the Securities and Exchange Commission (SEC) identified a dozen cryptocurrencies that it considers to be securities. Among them, MATIC, the native cryptocurrency of the Polygon network, Ethereum (ETH) network scalability solution.
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However, it is not only cryptocurrencies that are involved in this case, but also blockchains. According to the SEC, these networks and their participants (individuals and companies) should register as a national securities exchange (“NSE”) or alternative trading system (“ATS”).
In this context, Polygon Labs responds to the American institution in an argument denouncing his lack of understanding of the technologies at work in Web3 :
” The “Reopening Release” fundamentally misunderstands how technology works and therefore seeks to regulate individuals, entities and software in a way that has never been done before in this country or, to our knowledge, anywhere else. »
The “Reopening Release” refers to the SEC’s reopening of discussions relating to cryptocurrency exchanges. The regulator wishes to propose amendments to modify the legislation and consider certain cryptocurrencies as “ securities »or securities.
Remember that Polygon is a scalability solution which allows Web3 Internet users to take advantage of low transaction fees on decentralized applications (dApps) that make up the Ethereum (ETH) blockchain ecosystem.
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Polygon’s arguments
Beyond the inability of regulatory authorities to take a serious look at the operation of these technologies, other arguments are cited by Polygon Labs such as the ambivalence of their statements.
According to the SEC, blockchain validators should fall within the scope of securities laws because they could have an influence on the protocols of decentralized finance (DeFi). The latter would constitute intermediaries between buyers and sellers of cryptocurrencies.
However, according to Polygon Labs, these previous statements are contradicted by the SEC itself. The American institution claims that validators are not only responsible for recording transactions from DeFi applications, but also for recording a significant amount of information and exchanges from various protocols and software:
“ They [validateurs] do not bring together buyers and sellers of securities, nor orders of securities. In fact, the “Reopening Release” itself acknowledges this fact by admitting that “the function they serve is not just for an alternative trading system (“ATS”)” »
Moreover, still according to Polygon, the SEC would not have defined which entity is responsible for a decentralized system. Would it be a business? The original creator of the smart contract? An informal group of individuals? Today, the regulatory institution includes all the actors of a network, proof of a confused and still not very precise regulation.
Polygon Labs concludes its response by demonstrating that the legal vagueness of the United States around cryptocurrencies and blockchains pushes American companies to relocate to more welcoming stateslike the European Union and its MiCA (Markets in Crypto Assets) regulation.
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Source: SECPR
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Always enthusiastic about new technologies, I gradually moved closer to Web3-related activities during the year 2021. Over time, I wanted to add my stone to the building. It was then that I became an editor, with the aim of explaining cryptocurrency-related topics to as many people as possible.
Timothy Bourbotte
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