Ensuring that fractionalized NFTs (Non-Fungible Tokens) do not fall under the category of security tokens is crucial to comply with regulatory frameworks and avoid unintended legal consequences. The following plan outlines our key steps and strategies to maintain this distinction.
1. Clear Utility and Purpose
Non-Investment Use Case: We emphasize the utility aspect of NFTs, ensuring they provide access, membership, or rights within the DAO ecosystem rather than being primarily investment instruments.
Access to Services and Experiences: Highlighting ownership of fractionalized NFTs grants access to specific DAO services, voting rights, or other utilities that are not tied to financial returns.
2. Avoid Profit Expectations
No Promises of Returns: We clearly communicate that purchasing or holding NFTs does not guarantee or suggest financial profit, dividends, or any other form of monetary gain.
Use-Case Over Investment: Our NFTs are tools for participation and engagement rather than investment vehicles. This includes emphasizing community involvement, decision-making, and governance activities rather than profit motives.
3. Decentralized and Autonomous Operation
Decentralized Control: We ensure that DAOs operate in a decentralized manner, with no central authority promising profits or benefits to NFT holders. The value of participation should be in the collective decision-making and access to services.
Autonomous Functionality: DAOs should function independently of the original creators or developers, with decision-making power resting with the community.
4. Clear and Transparent Documentation
Terms of Use and Disclaimers: We provide detailed documentation explaining the purpose of the NFTs, the rights they confer, and disclaimers stating they are not securities. We ensure these documents are easily accessible and clear.
Educational Material: Offering educational resources to our users about the nature of NFTs, focusing on their role within the platform and clarifying that they are not investment vehicles.
5. Legal and Regulatory Compliance
Consult Legal Experts: We will regularly consult with legal professionals specializing in blockchain and securities law to ensure compliance with relevant regulations.
Jurisdictional Considerations: We are aware of different legal definitions and regulations across jurisdictions, and ensure that the platform’s operations comply with local laws.
6. No Centralized Profit Redistribution
No Revenue Sharing: Avoidance of structures where revenue or profits from the platform’s operations are shared directly with NFT holders, as this could be construed as a profit-sharing arrangement akin to securities.
Focus on Membership and Access: We maintain that NFT ownership is tied to membership, access, or voting within the DAO, not to financial returns.
7. Community and Governance Focus
Active Community Engagement: Promoting our platform as a community-driven project where the value lies in collective governance and participation, not financial speculation.
Voting Rights and Governance: We ensure that the primary benefit of NFT ownership is participation in governance processes, such as voting on proposals, rather than financial rewards.
8. Continuous Monitoring and Adaptation
Ongoing Legal Review: Continuous monitoring of the regulatory landscape and adapt policies as needed will ensure we stay compliant with evolving laws and regulations.
Stakeholder Communication: Maintaining open communication with our stakeholders, ensures they are informed about the nature of the NFTs and any relevant legal considerations.
By focusing on these strategies, Borderless DAOs aim to clearly differentiate their fractionalized NFTs from security tokens, emphasizing utility, community engagement, and decentralized governance. This approach helps us to minimize legal risks and aligns with the ethos of decentralized technology.
Our Proposed Roadmap
