The Unigrid Foundation wins court decision
Governments and government entities have generally taken a cautious approach to cryptocurrencies. The resistance from government entities is primarily due to concerns over the potential for illegal activities such as money laundering and tax evasion. Additionally, some governments have raised concerns over the decentralization of cryptocurrencies and the potential for them to disrupt traditional monetary systems.
In Sweden, the cryptocurrency market is still in its infancy, making the Unigrid network and it's utility token something that government entities do not quite know how to handle. As one of the few infrastructure-based blockchain projects in Sweden, The Unigrid Foundation has a role to push for change and educate government entities on the importance of cryptocurrencies, blockchain technology and distributed systems. This is something we are very passionate about and consider very important for the future of blockchain and crypto not only in Sweden, but in the whole nordic region in general.
On 2021/05/19, The Unigrid Foundation was officially registered by the founders and a request was sent to the County Administrative Board of Västra Götaland shortly after, requesting our addition into the Swedish foundation registry. Not surprisingly, the county denied our application and when we appealed to the county board, they argued;
The duration requirement for The Unigrid Foundation must be evaluated based solely on the property that is separated at the time of formation, without considering any future commitments. This is because crypto assets are highly volatile and cannot maintain a stable value, which does not meet foundation's requirement for duration to achieve its stated purpose. The Swedish Financial Supervisory Authority has determined in its "Financial instruments with crypto assets as underlying asset" report that financial instruments linked to crypto assets are more risky than many other high-risk assets, such as derivatives, due to the lack of intrinsic value in crypto assets and the absence of widely accepted and reliable valuation models. Simply separating crypto assets for a foundation is not sufficient to meet the duration requirement for the purpose of the foundation.
In Sweden, the duration requirement, as referenced in the argument above, is something that has to be fulfilled by a foundation at the date of formation. Simply put, the amount of assets in a foundation has to be enough to guarantee its operation for at least a few years.
Because of the fact that we had registered the foundation primarily with crypto assets, the county insisted that what we had registered was, in fact, not a foundation, arguing that crypto assets were not an acceptable asset class for the formation of a foundation because of their volatility.
When we got this decision from the county, our legal advisor, Camilla Waldenberg, appealed it to the court of appeal in Gothenburg. Some of our response to the decision was the following;
The administrative court has not taken into account the fact that the foundation has been operating as a non-profit blockchain project for several years without incurring any direct costs in assessing the duration requirement. While the assessment of the duration requirement must be forward-looking, it is also important to consider the actual needs of the foundation in order to fulfill its specified purposes. The foundation document states that the purpose can be supported by supporting the operation of the network and development, and there is no indication that this will be associated with significant costs. The potential costs would be small in relation to the foundation's capital at the time of formation. The assessment of the duration requirement should also take into account the development of the foundation's capital since formation.
Unigrid is a utility token. Utility tokens are defined as tokens relating to the operation of a digital platform in the European Parliament and the Council's regulation on markets for crypto assets. Tokens and crypto assets are a relatively new asset class, but that does not mean they should be rejected as assets and foundations should not be able to participate in the same market as foundations in other countries.
You can download the PDF files of the complete ruling (and the arguing of each party) in original Swedish and translated to English via the following links;
Not only does this underline that cryptocurrency assets are an accepted asset class during the formation of foundations in Sweden - it also creates an important precedent that can be used for any foundations registering in the future. Counties can now lean back on this ruling when they make their future decisions. This means that other foundations registering with crypto assets won't have to wait 1½ years before they get registered into the foundation registry.
For the benefit of other foundations, businesses and the broader public, The Unigrid Foundation will keep pushing for the adoption of blockchain technology, cryptocurrencies and distributed systems in Sweden.