Tag: Regulation & Policy

The regulatory justification for designing governance tokens to capture little or no value is diminishing, according to ScopeLift CEO Ben DiFrancesco. This potential shift could redefine governance tokens from an investor perk to a security requirement for decentralized protocols.

DiFrancesco stated on the “Uneasy Money” show of the Unchained podcast that the market value of governance tokens must exceed the potential gains from an attack to secure protocols. This perspective reframes token value as a critical component of a protocol’s threat model, rather than solely an incentive for holders.

Governance tokens grant users voting power over a protocol’s treasury, parameters, and contracts. A key security concern arises when the market value of tokens required to control a protocol is lower than the assets those tokens can influence. In such scenarios, hostile takeovers become a rational possibility, as highlighted by DiFrancesco.

For somewhere between four and ten years, fear of regulatory consequences has significantly influenced the design choices for Decentralized Autonomous Organizations (DAOs) and their associated tokens. Projects often sought to distance themselves from direct revenue or cash flow to avoid scrutiny from bodies like the SEC, hoping this separation would keep them clear of securities law. This coincided with many tokens being deliberately designed to capture minimal value.

However, DiFrancesco argued that this regulatory cover is fading. If the justification for avoiding mechanisms like fee switches, revenue sharing, and buybacks diminishes, token holders may increasingly push for these value-capturing features. This could alter the incentives behind DAO formation, potentially reducing the influence of venture capital firms eager to invest in tokens and projects seeking regulatory shelter.

ScopeLift, a company specializing in onchain governance tooling, has a direct interest in this evolving landscape. The company took over operations of the Tally platform in late March 2026, after Tally announced it was winding down. The Tally platform, now rebranded as Cactus, supports over 400 DAOs, underscoring the widespread reliance on governance infrastructure.

DiFrancesco’s comments, made during an October 8, 2026, podcast discussion and expanded upon in a May 13, 2026, ScopeLift blog post, suggest a potential recalibration for the industry. Protocols with large treasuries of stablecoins or blue-chip assets governed by thinly traded tokens may face heightened risks of hostile takeovers if their governance tokens do not demonstrate sufficient market value relative to the assets they control.

The first question for protocols, according to this evolving perspective, is whether the market value of their governance token comfortably exceeds what a successful attack could extract. This marks a significant shift from past design considerations, where regulatory avoidance often took precedence over inherent token value as a security measure.

Why This Matters

The materials describe a narrow update: ScopeLift CEO Ben DiFrancesco stated that the regulatory justification for designing governance tokens to capture little or no value is diminishing. The exact duration of regulatory influence on DAO and token design (stated as ‘somewhere between 4 and 10 years’).

Broader Context

Source materials place the factual news in this context: Governance tokens have spent years in an odd position. They hold the keys to protocols managing serious money, yet many were deliberately designed to capture little or no value.

The Financial Accounting Standards Board (FASB) is considering a rule change that could permit certain stablecoins to be classified as cash equivalents on corporate balance sheets, according to a report by Stripe’s Tempo. This proposed accounting standards revision, if adopted, could significantly impact how companies report their liquidity and manage financial covenants.

The public comment period for the FASB proposal concludes on November 19th. A key condition for a stablecoin to be recognized as a cash equivalent under the proposal is the existence of a direct redemption right with the stablecoin issuer. this may indicate that simply purchasing a stablecoin, even one fully backed by U.S. dollars, does not automatically qualify it as a cash equivalent if the redemption mechanism is not direct with the issuer.

Currently, many stablecoins, despite being fully backed, are not classified as cash reserves on corporate balance sheets. This can lead to understated liquidity ratios and potentially trigger violations of loan covenants. The FASB’s proposal aims to address this discrepancy, allowing qualifying stablecoins to be treated as cash, thereby providing a more accurate reflection of a company’s liquid assets.

Coinbase, for example, has already classified USDC and other payment stablecoins as cash equivalents in its 2025 annual report, based on its direct redemption mechanism with Circle. Stripe’s Tempo report highlights that the contract arrangement between a company and the stablecoin issuer is the determining factor for this classification.

This potential accounting shift is occurring alongside the development of regulatory frameworks for stablecoins. The GENIUS Act, a federal regulatory framework for payment stablecoins, was passed in July 2025 and is slated to become effective in January 2027, or 120 days after regulatory agencies complete implementation rules, whichever is earlier. While the GENIUS Act focuses on issuer responsibilities, the FASB proposal addresses the accounting treatment for holders.

Together, the GENIUS Act and the FASB proposal are seen as forming a foundational infrastructure for the U.S. stablecoin ecosystem, which has a market size for USD-backed stablecoins exceeding $300 billion.

Uncertainties remain regarding the specifics of the FASB proposal. It is not yet clear which stablecoins will qualify, nor if companies already holding stablecoins will need to adjust their redemption channels. Details on transition periods for companies to adapt to the new rules are also pending.

Broader U.S. government initiatives may also promote USD-backed stablecoins internationally. Reports suggest the Trump administration is evaluating projects to encourage overseas use of these stablecoins. The proposed accounting change is viewed as a critical step in this strategy, potentially removing reporting and banking limitations that could hinder corporate use of stablecoins.

Why This Matters

The materials describe a narrow update: A report by Stripe’s Tempo suggests that a proposed accounting standards revision by FASB could permit qualifying stablecoins to be listed as cash equivalents on corporate balance sheets, provided there is a direct redemption right with the issuer. Which specific stablecoins will qualify for classification as cash equivalents.

Broader Context

Source materials place the factual news in this context: Stripe 旗下 Tempo 發布報告指出，FASB 八月的會計準則修訂案可能讓符合條件的穩定幣列為企業資產負債表的「現金等價物」，關鍵在於是否擁有與發行者之間的直接贖回權。.

The UK AI Security Institute (AISI) has regained access to pre-release frontier AI models from US developers, concluding a 17-day period during which access was frozen. The interruption, which began around September 24, 2026, was reportedly due to a request from the Office of the National Cyber Director prioritizing US safety reviews.

Access was restored on October 11, 2026. During the freeze, Anthropic notably withheld its Claude Mythos 5.1 model from non-US entities. UK AI Minister Kanishka Narayan is credited with playing a role in securing the renewed access for the AISI.

Background on AISI and Voluntary Agreements

The AISI, established in 2023 following the international AI Safety Summit at Bletchley Park, operates under voluntary agreements. These agreements, struck in 2023, mean the institute’s access to cutting-edge AI systems depends on developers choosing to share their models. The institute employs over 100 technical experts focused on safety evaluations. Previously, the AISI evaluated OpenAI’s GPT-6 Astra, an effort that contributed to its global role in assessing frontier models.

National Priorities vs. International Collaboration

The recent interruption highlighted the tension between international safety testing commitments and national priorities. When the Office of the National Cyber Director requested that domestic safety reviews take precedence, the existing framework adjusted accordingly. Anthropic’s decision to restrict access to its Claude Mythos 5.1 model for non-US entities during this period illustrated this dynamic, demonstrating how companies may balance global safety commitments with signals from their home government.

The restoration of access may alleviate concerns that AI safety testing could become fragmented along national lines. According to the article, this development could reassure global researchers and technology investors who may have worried about a divergence between US and UK approaches to AI governance. The episode is also seen as setting a precedent that other nations pursuing international AI regulation through collaboration may observe.

Future Outlook and Remaining Uncertainties

Among the models now under review by the AISI is Google’s Gemini 4 Argon. Whether Anthropic’s Claude Mythos 5.1 will subsequently be shared with non-US entities is considered an early indicator of how normalized international access has become.

Looking ahead, several uncertainties remain. It is unclear whether Anthropic will share its Claude Mythos 5.1 model with non-US entities. Additionally, questions persist about whether the US will formalize priority rules for domestic safety reviews, if more developers will resume sharing models with non-US evaluators, and whether the current voluntary framework from 2023 will be replaced by a more robust structure. The source states that AISI officials have pointed to future collaborations focused on using advanced AI to strengthen cyber defenses, an area that aligns with the concerns of the office that initiated the review prioritization.

The timeline of events includes the establishment of AISI and its voluntary agreements in 2023, the approximate start of the access freeze on September 24, 2026, and the restoration of access on October 11, 2026.

Why This Matters

The materials describe a narrow update: The UK AI Security Institute had its access to pre-release frontier AI models from US developers frozen for 17 days, starting around September 24, 2026, due to a request from the Office of the National Cyber Director prioritizing US safety reviews. Whether Anthropic’s Claude Mythos 5.1 will be shared with non-US entities.

Broader Context

Source materials place the factual news in this context: AISI was set up in 2023, following the international AI Safety Summit held at Bletchley Park.

The UK’s AI Security Institute (AISI) has regained the ability to evaluate advanced AI models from major US developers, including OpenAI and Anthropic, before their public release. This restoration of pre-release access follows a reversal by the White House on October 11, 2026, reinstating a voluntary arrangement that had been paused just weeks earlier.

Policy Shifts and Their Impact

The pause, initiated by a White House directive in September 2026, required US developers to withhold new models from AISI until US reviews were completed. This sequencing rule, which granted American officials a first look at sensitive AI capabilities, had tangible consequences. Notably, Anthropic restricted the release of its Claude Mythos 5.1 model to US organizations, adhering to the White House request.

The October 11 reversal effectively unwinds this restriction, allowing US developers to once again share pre-release models with AISI under the voluntary framework that predated the September directive. This means British testers can examine models for safety risks and potential misuse prior to their public launch.

UK’s AI Safety Ambitions

This development did not occur in isolation. UK AI Minister Kanishka Narayan actively advocated for British evaluators to regain access. His case reportedly emphasized the established trust and early access that underpinned UK relationships with developers like OpenAI, arguing that the pause undercut these foundations.

The AISI, established following the AI Safety Summit at Bletchley Park in November 2023, focuses on evaluating advanced AI systems for cybersecurity and biological threat risks, feeding its findings into UK AI governance policy. The UK is also considering proposals for mandatory incident reporting, which could introduce a compulsory layer to current voluntary testing arrangements.

Developer and Geopolitical Considerations

For AI developers, the policy reversal alleviates a potential logistical challenge. Anthropic’s decision regarding Claude Mythos 5.1 illustrated how government directives can influence product availability. A return to the previous arrangement reduces the likelihood of fragmented, country-specific product launches.

Washington’s recent focus has been on domestic security, prioritizing US review of sensitive capabilities. London, meanwhile, aims to solidify its position as an independent and trusted evaluator for companies and governments.

Navigating Conditional Cooperation

However, the voluntary nature of the access arrangement means it remains subject to developer goodwill and potential future shifts in White House policy. This situation highlights the conditional nature of international AI safety cooperation, which is susceptible to policy shifts and relies on voluntary agreements.

While the UK’s regained access is a positive step, it underscores the ongoing need for more stable frameworks for AI safety evaluation. The UK’s consideration of mandatory incident reporting, if adopted, could provide a more consistent channel for regulators, independent of developer cooperation or immediate White House approval.

Why This Matters

The materials describe a narrow update: The UK’s AI Security Institute (AISI) can again evaluate advanced AI models from US developers like OpenAI and Anthropic before their public release. Whether the voluntary pre-release access arrangement will continue in the future, as it depends on developer goodwill and White House preferences.

Broader Context

Source materials place the factual news in this context: The UK’s AI Security Institute (AISI) can once again evaluate advanced models from major US developers, including OpenAI and Anthropic, before those models reach the public.

Kraken Secures Full Market Approval in UAE, Expanding Global Reach

Kraken’s parent company, Payward, has officially received Full Market Approval from Dubai’s Virtual Assets Regulatory Authority (VARA) for its subsidiary, Payward FZCO. This significant development, granted on October 12, 2026, paves the way for Kraken to commence serving clients in the United Arab Emirates within the coming weeks, offering a range of services including trading, staking, and transfers.

VASP Classification and Client Scope

The approval designates Payward as a Virtual Asset Service Provider (VASP), categorizing it under broker-dealer, investment, and management services. This comprehensive license extends to retail, professional, and institutional clients, meaning both individual users and large corporations can engage with Kraken’s offerings from the outset.

Initial Service Offerings

Upon launch, clients in the UAE will have the ability to execute spot and margin trades on currency pairs denominated in the UAE dirham (AED). Spot trading involves the direct purchase and sale of assets, while margin trading allows users to borrow funds to amplify their position size, thereby increasing potential gains and losses.

Furthermore, clients will gain access to on-chain staking, a process where users lock up specific tokens to support blockchain network security, typically in exchange for rewards. Kraken’s local entity will also facilitate direct funding and withdrawals in dirhams, streamlining financial operations for its UAE-based clientele.

Institutional Services and Global Liquidity

Kraken is also targeting institutional investors with its Kraken Prime service, which will provide access to over-the-counter (OTC) trading and other advanced services. OTC desks are designed to handle large trades privately, preventing significant market price fluctuations before a transaction is completed. Kraken asserts that these institutional clients will benefit from deep liquidity sourced from its extensive global order books, which span Europe, the United States, and the APAC region.

Regulatory Timeline and Future Ambitions

The path to full approval involved a preliminary green light from VARA on May 21, 2026, approximately five months prior to the final authorization. While the initial launch will feature a defined set of services, Payward has outlined plans to introduce additional offerings, including derivatives and yield products, throughout 2026 and 2027. These future expansions are contingent upon securing further regulatory approvals from VARA.

Dubai has been actively positioning itself as a regulated hub for digital assets. VARA, established in 2022, is tasked with overseeing virtual asset activities within the emirate, excluding those within the Dubai International Financial Centre (DIFC). The authority maintains a public registry of licensed virtual asset service providers.

With this latest approval, the UAE joins the more than 100 jurisdictions globally where Payward holds licenses, bringing Kraken’s operations under local regulatory supervision.

The U.S. Securities and Exchange Commission (SEC) has proposed changes to the definition of an accredited investor, potentially broadening access to private markets for individuals who do not meet current wealth-based criteria. The proposals, unveiled on September 30, 2026, aim to allow individuals to qualify as accredited investors through professional credentials or by passing a knowledge-based exam.

Currently, individuals typically qualify as accredited investors if they have a net worth of at least $1 million (excluding their primary residence) or have an individual income of $200,000 or a joint income of $300,000 over the past two years. The SEC’s proposed expansion seeks to introduce alternative pathways to accreditation.

One of the proposed new routes involves passing a knowledge-based exam. This exam would be administered by FINRA, consist of approximately 75 questions, cost around $100, and be valid for 10 years upon passing. The public comment period for these proposals is open until December 4, 2026.

Coinbase CEO Brian Armstrong has publicly supported the SEC’s initiative, framing it as a significant step toward increasing access to private markets for more Americans. SEC Chairman Paul Atkins has also emphasized the importance of expanding participation in private capital markets while maintaining safeguards against fraud.

Firms are increasingly staying private for longer periods, meaning a substantial portion of their value creation occurs before ordinary investors can participate in public markets. The SEC’s proposed changes could allow more individuals to invest in these early-stage opportunities, though the final form of the rules remains uncertain. The extent to which Coinbase might leverage these potential changes to facilitate tokenized offerings or pre-IPO investments is also a point of future development.

Why This Matters

The SEC’s proposal to expand the definition of an accredited investor aims to allow individuals to qualify through professional credentials or by passing an exam, potentially increasing participation in private markets. This shift could create new opportunities for companies like Coinbase, which has publicly supported the initiative, by potentially facilitating tokenized offerings and pre-IPO investments under a clearer regulatory framework. However, the final form of these rule changes and their exact impact remain uncertain.

Broader Context

For decades, access to private markets has been primarily determined by wealth. The SEC’s proposed changes introduce the possibility of a knowledge-based assessment as an alternative qualification, alongside existing wealth thresholds. This represents a potential evolution in how investor sophistication is evaluated for participation in private capital markets.

3iQ Secures Key Regulatory Approval in Abu Dhabi

Abu Dhabi, UAE – Crypto investment manager 3iQ Corp. has taken a significant step towards establishing regulated operations in Abu Dhabi, with its United Arab Emirates-based subsidiary, 3iQ Middle East Ltd, receiving in-principle approval for a Category 4 license. The announcement was made on October 12, 2026.

Financial Services Authority Greenlights Expansion

The approval was granted by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM). Full operational permissions are contingent upon 3iQ Middle East meeting further regulatory conditions.

A Category 4 license authorizes 3iQ Middle East to function in an advisory capacity and to offer non-discretionary investment arrangements. This means the firm can recommend and facilitate deals, but clients will retain ultimate decision-making authority over transactions.

Global Strategy Includes Abu Dhabi Hub

3iQ views this Abu Dhabi approval as integral to its broader strategy of building regulated operations in key digital asset markets worldwide. The company sees its presence in Abu Dhabi as crucial for serving accredited investors on a global scale.

Partnership Fuels Institutional Access

The license announcement coincides with a strategic partnership between 3iQ and Further, a local digital asset investment manager. This collaboration aims to enhance institutional access to digital assets via 3iQ’s Managed Account Platform, known as QMAP. QMAP has already secured $100 million in seed capital, linked to sovereign investment.

Proven Track Record in Regulated Products

3iQ is no stranger to regulated cryptocurrency products, having previously launched the first Bitcoin and Ethereum Exchange Traded Funds (ETFs) on a major stock exchange.

Arvind Ramamurthy, Chief Market Development Officer at ADGM, commented that the in-principle approval underscores the growing interest from international firms in the region’s digital asset landscape.

Local Presence to Attract Institutional Clients

The advisory and arranging license in Abu Dhabi, coupled with the QMAP platform and the partnership with Further, provides 3iQ with a local foundation to engage institutional clients in the region. This development is expected to bolster investor confidence in Abu Dhabi’s digital asset market.

Milestone Achieved, Further Steps Remain

While the in-principle approval represents a significant milestone, it is not the final step. 3iQ Middle East must satisfy all remaining regulatory conditions before it can operate with full permissions. The timeline for this process has not yet been specified.

3iQ’s expansion into Abu Dhabi could potentially encourage other firms to explore similar ventures within the UAE’s burgeoning digital asset sector.

CFTC Proposes Rules to Define Event Contracts as Swaps, Delineating from Gambling

The U.S. Commodity Futures Trading Commission (CFTC) unveiled two proposed rules on Friday, aiming to draw a clear distinction between prediction markets and traditional gambling. The first proposal explicitly defines “event contracts” as “swaps” under the Commodity Exchange Act (CEA), while the second proposal carves out casino-style gambling products.

Both proposals are subject to a 30-day public comment period, but their intent is clear: the CFTC seeks to solidify legal definitions before a potential Supreme Court intervention. Chairman Michael Selig stated unequivocally that these products are commodity derivatives and fall under the exclusive jurisdiction of the CFTC.

The first proposal incorporates event contracts into the definition of “swaps,” covering events in sports, politics, culture, and climate. The proposal notes that these contracts are already commonly referred to as swaps in trading markets, and the CFTC is merely clarifying ambiguity.

The second proposal takes a different tack: the CFTC excludes sports betting and casino games from the definition of “swaps.” Selig was direct, stating that casino-style gambling products are not derivatives, and the CFTC will not overstep its regulatory boundaries.

This “two-pronged approach” logic aims to bring prediction markets under federal derivatives regulation while leaving traditional gambling under state jurisdiction. In other words, the CFTC is not expanding its power but rather asserting: “We regulate derivatives; you regulate casinos. Let’s not confuse the two.”

The CFTC’s actions are not without precedent. Several states have sued prediction market platforms Kalshi and Polymarket, accusing them of illegal gambling. The CFTC, in turn, has counter-sued, arguing that event contracts fall outside state regulatory authority.

Last September, the U.S. Sixth Circuit Court of Appeals ruled against Kalshi, supporting Ohio and Tennessee’s jurisdiction over sports event contracts. The court found that Kalshi failed to demonstrate these contracts qualified as swaps under CFTC jurisdiction.

However, a ruling in April by the Third Circuit Court of Appeals allowed Kalshi to continue operating in New Jersey, deeming federal law to preempt state regulations. These conflicting judgments make it highly probable that the case will proceed to the Supreme Court, and the CFTC’s proposed rules are intended to build the legal arguments for this constitutional-level jurisdictional battle.

For the prediction market industry, the CFTC’s proposals represent a long-term positive development. Defining event contracts as swaps grants them legitimacy within the federal derivatives framework and provides a clear regulatory path. Excluding gambling prevents the entire category of products from being broadly categorized as gambling and suppressed.

In the short term, however, states are unlikely to back down simply because of a CFTC proposal. Ohio and Tennessee have gained an advantage with the Sixth Circuit’s ruling, and New Jersey continues to exert pressure with amicus briefs, including one from the NFL. The timing of the Supreme Court’s decision to hear the case and its eventual ruling remain uncertain.

In essence, the CFTC has laid its cards on the table. The next move belongs to the Supreme Court, which will decide which side to favor. For Kalshi, Polymarket, and the entire prediction market ecosystem, this could be a decisive battle for survival.