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- A new IOTA-backed INATBA policy paper states that regulators are incorrectly conflating distributed ledger technology with the legal nature of underlying assets.
- The paper notes that regulators are ignoring the fact that tokenization is simply a digital representation, not a legal reclassification.
The International Association for Trusted Blockchain Applications (INATBA) released its new policy paper slamming the new Web3 rules and the “regulatory conflation” in the digital economy. In a direct involvement, IOTA Foundation’s Giannis Rousopoulos is among the five experts authoring the document. The policy paper notes that treating all tokenized assets as financial securities threatens innovation.
INATBA’s Policy Paper Slams Regulatory Overreach
In its policy paper, INABTA has delivered a clear message to global policymakers as frameworks for digital assets continue to evolve. They added that the broad and assumption-based classifications of tokenized assets don’t align with long-term regulatory policies.
It notes that it won’t be right for regulators to treat all virtual digital assets as financial instruments. INATBA argues that regulators have confused the distributed ledger technology (DLT), used to record ownership, with what is actually owned. They added that tokenization is just a new way to keep digital records, while the regulators treat it as if it changes the legal nature of something.
Co-chairs Jean-Christophe Mathonet of ProSquare and Izzat-Begum B. Rajan of Imani Partners emphasize that regulators are applying the principle of “same activity, same regulatory outcome” too broadly. Although applicable to traditional markets, this framework is not suitable for decentralized business models.
“Tokenization is merely a technological process for digital representation and consequently is not a legal reclassification of the underlying asset,” the paper states. Tokenized real-world assets like commodities or infrastructure rights represent property interests, not financial securities.
In its policy paper, INATBA uses the example of fractional real estate ownership. In it, multiple people jointly purchase property through traditional contracts and share costs and benefits proportionally. Any subsequent sale transfers are not a financial product.
INATBA argues that using blockchain tokens for the same arrangement should not transform the underlying asset into a security that requires financial reporting.
IOTA Foundation’s Role In Regulatory Policy
Being the founding member of INATBA, the IOTA Foundation has a major contribution in this policy paper. At the same time, IOTA’s legal team, including former Director of Legal and Regulatory Affairs Anja Raden, had co-authored several papers for decentralized finance (DeFi), non-fungible tokens (NFTs), and autonomous organizations.
The IOTA Foundation has also provided feedback to the European Commission on anti-money laundering packages as well as the Markets in Crypto Assets (MiCA) regulation. The organization’s involvement reflects its broader commitment to make sure that regulations accommodate decentralized technologies while maintaining market integrity
