It is interesting to see the progress of the stability fund after yesterday’s community call. Whilst I’m not a securities nor tax lawyer, I’ll give a thumbnail sketch of the global regulatory regimes
- EU - passed a comprehensive set and in typical Brussels style, whilst there is red tape, at least it is known red tape
- UK has been plugging their law commissions opinions which basically give crypto property rights just below choses-in-action (court-enforced) but with flexibility of equitable precedents
- PRC is very clear, no speculative tokens, even gas needs to be paid in CNY/CNH, closed blockchain network
- India … Experimenting with CBDC but with inconvertible rupee, will likely evolve to something akin to PRC
- US … Basically an ongoing regulatory turf fight with two pieces of legislation in wings but stymied by legislative gridlock from partisan politics.
Taking the EU as example, currently UNI could be considered a non-economic governance token, ie pure utility. Due to mechanics of proposal gating and vote “staking” on delegates, arguably it falls into the RHS and thus out of scope.
However, once UNI is used within the stability fund, and UNI holder have a legal interest in any assets (not just beneficial interest), then it will need a crypto-asset service provider license, at minimum category 8 (advice) and 3 (fund conversion). If it is doing market operations for fiat-liquidity (to finance the foundation) then most likely a MiFID license (or equiv elsewhere) is also needed. Each license requires compliance and even applying for one can be up to 18 months. It also raises the risk profile for any delegate because picking assets fall into “investment” activities (interpreted broadly) and suddenly countries with extra-territorial reach (eg India with overseas Indian investors rules) start muddying waters.
So broadly speaking there are 3 fundamental paths that treasury could take
A) transmorgify the UNI (governance utility) into a hybrid token and take the regulatory/tax hit
B) have a separate asset-backed token (say timelocked-UNA) and separate the risk profile into non-contentious procurement (grant giving) vs lending/investment
C) turn the foundation + treasury + risk management into discrete services each licensed on a case-by-case basis (and thus tightly circumscribed) and allow ecosystem to “purchase” such DeFi services on arms-length contractual basis. This tends to minimise the effect of “bad” actors in that taint in say fraud in VC fund selection doesn’t pass to say the fiscal administrator of external grants.
Irregardless, any regulated service is going to take a while to put in place processes and compliance regimes. 5 years (as timeframe mentioned in the community call) might be too short.