Hedera has continued to have open discussions with regulators to keep them informed of Hedera’s progress and plans. We have neither sought nor received a no-action letter or other official relief from the Securities and Exchange Commission or any other regulatory body. The SEC Staff has emphasized to the industry that its analysis will be informed by the facts and circumstances in each case. It is possible that some of those facts and circumstances can be known only in retrospect. There is still a risk that the SEC or other securities regulators could retrospectively deem hbars and transactions in hbars to be subject to applicable securities regulation. The regulatory environment in the United States remains unclear and each user needs to assess their own risk.
Nevertheless, Hedera’s view is that, based on the facts and circumstances at the time of Open Access, the sale of hbars and transactions in hbars should not be subject to U.S. securities law. At Open Access, the network will have been live for more than a year, with more than two dozen third-party developers having deployed live applications and having generated meaningful network use, and with more applications coming live soon. Developers and users need to be able to purchase hbars in order to use the network and the third-party applications running on it. In addition, meaningful growth of the network from this point forward will not be driven primarily by Hedera’s efforts, but by whether developers and enterprises bring useful applications to market on top of it. The network also is now governed by a Council of members from diverse industries and geographies and with diverse interests, ensuring that no one company controls the network or the decisions that affect it. Its governance will become even more decentralized as additional members continue to join the Council. We are of the view that the totality of facts and circumstances that exist as of Open Access support a conclusion that hbars are not securities and that transactions in hbars are not subject to the U.S. securities laws.
Although we believe that the better view is that hbars are not securities, and that no one purchasing or using hbars would expect the protections of the securities laws, there remains a risk that regulators will take a contrary view. For the question as to whether regulators will deem hbars to be securities, please go here.