In a recent tweet on X, Friend Tech announced a notable change: the change of their core token’s name from “Shares” to “Keys.” The initial label, they revealed, was merely a temporary placeholder during the developmental phase of the Decentralized Social Media (DeSo), as this token would be their proposal for the decentralized finance (DeFi) world, and keys would better represent the Friend Tech brand in that context.
This shift, however, was motivated by the desire to more accurately convey the function of these in-app items as tools to unlock private chatrooms among friends, as key rooms in a manner of speaking, yet this is not the only reason for this change.
Friend tech Wants to Steer Clear of Regulatory Concerns
The alteration wasn’t solely about aesthetics. Industry observers suggest that the company’s decision might have been prompted by regulatory concerns. Friend.tech found itself operating in the crosshairs of heightened regulatory scrutiny, notably from Gary Gensler, the crypto-critic chair of the American SEC. Meaning that by referring to their assets as “shares,” the company inadvertently aligned itself with the securities domain, potentially inviting further scrutiny.
Meanwhile, the United States utilizes the Howey test to discern if a transaction qualifies as an “investment contract,” a classification that falls under securities regulations. This test concentrates on marketing strategies and economic structures, factors that shape a buyer’s belief in potential financial returns. In effect, if a transaction clears the Howey test, it becomes subject to stringent securities regulations.
In the case of Friend.tech, the term “Shares” held a double-edged connotation. While it accurately conveyed ownership, it also drew parallels with traditional stocks. This similarity blurred the lines with the Securities and Exchange Commission’s (SEC) classification of shares as securities.
By changing the term, Friend Tech aimed to clarify that their tokens weren’t akin to traditional stocks, thereby avoiding the SEC’s potential regulatory grasp.
Despite the shift, experts remain divided on whether Friend.tech’s tokens are entirely out of the securities domain. They emphasize that how users present their tokens matters considerably. Certain aspects, such as promotion methods, chat structure, and fund distribution, can influence whether the tokens lean toward securities or not.
Confidence Amidst Regulatory Uncertainties
Interestingly, many users are confident in the face of potential SEC challenges. They believe that the project can effectively navigate regulatory hurdles.
Friend.tech, built atop Coinbase’s Base Layer-2 blockchain, offers a unique concept. It empowers users to tokenize their identity, allowing them to sell Shares (now Keys) of themselves to their followers and granting them direct messaging access.
This change follows a notable incident involving scraped data from over 101,000 Friend.tech users, including addresses and Twitter usernames. Friend Tech, however, downplays these concerns, attributing the data to public API scraping, akin to examining a public Twitter feed.