Digital Assets Regulation Explained

This page explains the Zone’s Digital Assets Regulation in a simple language.

Digital Assets Definition

Digital assets are electronic files of data that can be owned and transferred by individuals and used as a currency to make transactions.

A digital asset is anything digital that has value, established ownership, and is discoverable.

They are also a way of storing intangible content, such as computerised artworks, video or contract documents.

Examples of digital assets include cryptocurrencies, such as bitcoin, asset-backed stablecoins, such as tether, and non-fungible tokens (NFTs) — certificates of ownership of original digital media.

Definitions in our Digital Assets Regulation

Non-Fungible Tokens

1. Digital assets that represents real-world objects like art, music, or videos.

2. They are bought and sold online with cryptocurrency.

3. They live on the blockchain.

Blockchain

1. Blockchain is a digital, decentralized, and publicly accessible database used for recording and tracking transactions and assets in a network.

2. It uses a secure and immutable ledger technology that reduces risk and costs for all parties involved.

Smart Contracts

1. They are Programs stored on a blockchain that run when predetermined conditions are met.

2. Used to automate the execution of an agreement without intermediary’s involvement.

3. They automate a workflow, when conditions are met.

Read Our Digital Assets Regulation

Digital Assets covered by the Catawba Digital Assets Regulation:

Digital Consumer Asset

Used, borrowed, or bought primarily for personal or household consumption, and that is different from a Security or Virtual Currency.

Digital Security

A security under UCC article 8, an investment property under UCC, Art. 9 and not a Digital Consumer Asset or Virtual Currency.

Virtual Currency

Used as a medium of exchange, unit of account, or store of value. Not recognized as legal tender by the United States government; and Not a Digital Consumer Asset or Digital Security.

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Digital Assets covered by the Catawba Digital Assets Regulation:

Why the Zone's initial focus on digital assets?

1. Web3 is constantly threatened by lack of regulatory clarity, too bureaucratic or unstable regulatory environments. Without any jurisdiction to support continued growth, companies are often regulated unevenly, unpredictably, and sometimes aggressively.
2. Having regulatory clarity is important to stabilize and grow this trillion dollar market.

What can you find in our Digital Assets Regulation?

1. The fundamental building blocks for digital asset businesse.
2. Rules for DAOs, NFTs and Stablecoins.

Where can I find about Digital Assets in the Zone Authority’s Civil Ordinance ?

1. The CDEZ's Digital Assets Regulation can be found here. Title VI. Chapter 10. of the Zone Enabling Law reads: “Digital Asset” means a representation of economic, proprietary, or access rights that is stored in a computer readable format and is either a Digital Consumer Asset, Digital Security or Virtual Currency, and qualifies as a type of intangible personal property under the Zone Civil Ordinance. The Zone Authority shall define, classify, and regulate Digital Assets and their treatment under this Title.

What resemblances are there between the Catwaba Digital Economic Zone’s Digital Assets regulation and Wyoming’s?

- Wyoming was the first state to:
- - Enact blockchain-enabling legislation.
  - Establishes that digital assets such as cryptocurrencies and non-fungible tokens (“NFTs”) are intangible property.
- Digital Assets are covered by the general Wyoming scheme of property rights:
- - Property protection and enforcement.
  - Sale, lease, licensing, etc.
- For a full comparison between our Zone's Digital Assets Regulation and Wyoming's, scroll down.

Comparison of Digital Assets Regulation. Catawba vs Wyoming:

Blockchain

For the definition of blockchain, we departed from the Wyoming statute, the Utility Token Act, W.S. 34-29-106(g)(I), and modified the concept slightly for accuracy.

Wyoming defines blockchain as follows: a “Blockchain” means a digital ledger or database which is chronological, consensus-based, decentralized and mathematically verified in nature;”.

Instead, we define a blockchain as a “distributed ledger database that uses a consensus-based, decentralized, and mathematically verifiable process to record an ordered sequence of transactions in Digital Assets reliably.”

Digital Assets

We left the same definition of Digital Asset as Wyoming: "Digital asset" means a representation of economic, proprietary or access rights that is stored in a computer readable format and is either a digital consumer asset, digital security or virtual currency.

Digital Consumer

We left the same definition of Digial Consumer Asset as Wyoming.

A Digital Consumer Assets is defined as: “Digital consumer asset" means a digital asset that is used or bought primarily for consumptive, personal or household purposes and includes:

(A) An open blockchain token constituting intangible personal property as otherwise provided by law;

(B) Any other digital asset which does not fall within paragraphs (iii) and (iv) of this subsection.

Legal Classification Of Non-Fungible Tokens

We also added a legal classification of NFTs, which was not included in the Wyoming Act:

A Non-Fungible Token may be classified as a Digital Consumer Asset or Digital Security depending on the nature of its use under this Regulation.”

Non-Fungible Token (NFT)

We went one step further than Wyoming by defining NFTs. Wyoming does not define Non-Fungible Token versus the Zone does.

We defined Non-Fungible Tokens as “Non-Fungible Token” or “NFT” means a type of indivisible Digital Asset verified by a Blockchain to have unique attributes and associated with an electronic signature.”

Our regulation allows NFTs to be considered Digital Securities or Digital Consumer Assets depending on how they are used (Section 103(c)(3). The Wyoming Act is a bit unclear on this point, but seems to indicate that NFTs have to be Digital Consumer Assets. However, there are instances in which an NFT might function as a Digital Security, for instance, which would create a lot of confusion under the Wyoming Act. We decided to take a step forward and avoided this issue with this regulation.

Virtual Currency -s.103

For Wyoming, Virtual currency is intangible personal property and shall be considered money, notwithstanding W.S. 34.1-1-201(b)(xxiv), only for the purposes of article 9 of the Uniform Commercial Code, title 34.1.

For the Zone, this was repealed by Resolution 001 of Zone Authority Commission adopting the Uniform Commercial Code Amendments (2022) and Article 12: Controllable Electronic Records:

(a)(3) Virtual Currency is intangible personal property and shall be considered money, notwithstanding Zone Civil Code Title VI, Ch. 1 § 1-201(b)(24), only for the purposes of Uniform Commercial Code article 9, as codified at Title VI, Ch. 9 of the Zone Civil Code.

Virtual Currency -s.104

For Wyoming: Perfection of security interests in digital assets; control; possession; security agreements; location.

At the CDEZ, this was repealed by the Resolution 001 of Zone Authority Commission Virtual adopting the Uniform Commercial Code Amendments (2022) and Article 12: Controllable Electronic Records.

Consumer Protection

In the Wyoming statute, the Consumer Protection Statute was at the end. We thought the regulation flowed better if it was placed at the beginning of the regulation, because it applies generally to the entire regulation.

Consumer protection statute

We have also substituted the term “consumer protection statute” for “a different rule for consumers” because the zone has not yet established a consumer protection law other than those in the GEZ Civil Code. “A different rule for consumers” is a phrase that appears in §9-201(b).]

Jurisdiction Of Courts

This section is similar to Wyoming's. The Zone Authority simply modified it as to reference the applicable section of the Civil Zone Ordinance.

Banks

Since the CDEZ has only recently adopted a banking regulation, we cannot reference one yet like Wyoming did. Instead, this section recognizes banks from any state in the U.S

For the CDEZ, “A bank providing custodial services under a banking regulation of the Zone or of any other jurisdiction in the United States, including its possessions and territories, shall be considered to meet the requirements of Zone Civil Code Title VI, Ch. 8 § 8-102(a)(14).”

Custodial Services

For the CDEZ, any part of this regulation that may be applied to custodial services pertaining to digital assets shall be regulated under a banking regulation adopted for the Zone.

This was later repealed by the Repealed by Resolution 001 of Zone Authority Commission Virtual adopting the Uniform Commercial Code Amendments (2022) and Article 12: Controllable Electronic Records.

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Digital Assets Regulation Explained

Digital Assets Definition