Web3 Foundation Testifies On Digital Asset Regulation Before the U.S. House of Representatives
In a historic event, Daniel Schoenberger, Chief Legal Officer at Web3 Foundation, was invited to present the Polkadot network and Web3 vision before the United States House of Representatives House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, and the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development. In a hearing titled “The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Asset Markets,” Schoenberger, who has an extensive background in emerging technologies and law, emphasized the potential of Web3 to revolutionize the internet and deliver unprecedented efficiency, innovation, and connectivity.
Schoenberger highlighted that Web3 aims to return control of data to users, making the internet more decentralized, secure, and user-centric. He also introduced the lawmakers to Polkadot as a next-generation blockchain protocol that unites an ecosystem of purpose-built blockchains, enabling them to operate together and share security, interoperability, and scalability.
Schoenberger highlighted the benefits of Web3 technologies that can provide a more secure and transparent social media Apps, streamline supply chains, and video gaming experiences.
In summary, Web3 holds vast potential for secure and decentralized solutions in various applications, such as land registration and property rights management for both physical and digital worlds. It can offer transparent and tamper-proof records for land ownership, revolutionize management of digital assets in virtual reality and metaverse, and facilitate decentralized identities, management of digital intellectual property, including proof of ownership and tracking. Web3’s versatility highlights its transformative capabilities across numerous use cases.
A specific use case that highlights the importance of decentralized social media is MeWe, a social network with 20 million members focused on user privacy. MeWe recently announced its adoption of the Decentralized Social Network Protocol (DSNP) from Project Liberty, created by Frank McCourt, former owner of the Los Angeles Dodgers baseball team. DSNP is an open-source project that provides the fundamental infrastructure of a social network but is not tied to a specific company, giving users greater control over their data. The technology operates on the Polkadot network, showcasing the versatility and potential of Polkadot in facilitating decentralized applications and services.
In both his oral and written testimony, Schoenberger explained in detail the regulatory process Web3 Foundation undertook regarding the classification of DOT, the native currency of the Polkadot network. As he noted, DOT was initially sold as a security in compliance with U.S. federal securities laws. However, it was designed to secure the network, support governance, and obtain parachain slots, not as a speculative investment vehicle. Web3 Foundation engaged with the SEC staff for over three years, striving for compliance while seeking validation that DOT is coordinating software. Schoenberger also discussed the process of launch and decentralization by which control over the Polkadot network was handed over to the community on both a technical and governance level, and suggested that congress establish a procedure for tokens to be reclassified over time.
The current regulatory approach has held back innovation in the Web3 space. The U.S. faces two primary obstacles: the lack of a comprehensive legislative framework for digital assets and blockchain technology, and attempts to apply laws and regulations not specifically designed for this emerging space. Schoenberger urged the development of a balanced, appropriate, and responsible legislative and regulatory framework to address these challenges.
Web3 technology and the Polkadot network offer immense benefits to the U.S. and the world, with the potential to revolutionize the global economy and daily life. However, without a sound regulatory framework tailored to the technology, the U.S. may not fully reap the benefits and could lose its leadership position in the development of blockchain technology.
To learn more on Schoenberger’s full testimony, you can watch the hearing here.
