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An update from Holo on the evolving regulatory landscape and what it means for our community.
We're entering a phase where the regulatory environment actually matters — which means we're closer to real-world operation than we've ever been. Regulation only becomes relevant when you're building something that touches the real economy. We are.
Holo was designed from the beginning as a bridge — not just between peer-to-peer technology and mainstream users, but between the emerging digital economy and the existing one. Our 2018 Green Paper described it directly: Holo is "a pragmatic compromise" that must "interface with the centralized systems of today." That includes regulatory systems. If your technology is designed to connect with the real economy, then working within the frameworks that govern the real economy isn't optional — it's the job.
This post explains what's changing, how it affects us, and what you'll notice as a result.
Why regulation matters now
The crypto industry is entering a new phase. Frameworks like the EU's Markets in Crypto-Assets Regulation (MiCA), the UK Financial Conduct Authority's evolving stance on digital assets, and Gibraltar's own DLT regulatory framework are reshaping how digital asset projects operate across jurisdictions.
This isn't something happening in the background. It's happening now, and it affects every project in this space — including ours.
We want to be direct about our position: we believe thoughtful regulation is good for the industry and good for our community. Projects that can demonstrate genuine utility, transparent operations, and responsible design will thrive in a regulated environment. Projects that can't, won't. We intend to be in the first category.
What HOT was always meant to be
When we designed the HOT token sale in 2018, it was structured as a pre-sale of hosting credits. HOT tokens represent a claim on future hosting capacity within the Holo network. When that network launches, HOT holders redeem their tokens for HoloFuel — the operational currency of the hosting ecosystem.
This is an important distinction. HOT was not designed as a speculative financial instrument. It was designed as a product pre-sale — a voucher for a service that was being built. The transition from HOT to HoloFuel is the fulfilment of that original commitment: delivering the product that was purchased.
This has always been the design. It's what the original documentation says, it's what the 2018 roadmap laid out, and it's what we've been building toward. The regulatory environment is now catching up to the point where the precision of this distinction matters — and it works in our favour, because we've always been building for utility, not speculation.
We recognise that many people first encountered HOT on an exchange and may have treated it primarily as a tradeable asset. That's their right — tokens on open markets will always attract different types of holders. But the token's design purpose has always been functional: a pre-paid claim on distributed hosting services. The maturation of the regulatory environment is an opportunity to return the conversation to that original intent.
Token lifecycle progressions are normal
The transition from a pre-sale token to a production token is not unique to Holo. It's a well-established pattern across the industry, and one that regulators, exchanges, and market participants understand. Dozens, if not hundreds, of projects in our industry have walked this well-trodden path.
Consider some recent examples. Polygon migrated its MATIC token to POL in September 2024 as part of its Polygon 2.0 upgrade. The migration was conducted at a 1:1 ratio, by the original project team, upgrading the token from its legacy form to a new production version with expanded utility. Major exchanges including Binance handled the conversion automatically for their users. Polygon described it as a "technical upgrade" of the native asset — not a financial transaction between different assets.
Fantom migrated its FTM token to Sonic (S) in January 2025, again at a 1:1 ratio, by the same organisation, upgrading to a next-generation platform. Every major exchange — Binance, Kraken, Crypto.com, Bybit — supported the migration as a routine operational event.
Earlier, Ethereum's transition from proof-of-work to proof-of-stake fundamentally changed the token's technical characteristics and economic model, yet was universally understood as a protocol upgrade, not an exchange of assets.
These are not obscure edge cases. They are mainstream, well-documented examples of what the industry calls token lifecycle progressions: the planned evolution from one stage of a project's token to the next, by the same team, for the same purpose. These lifecycle progressions can happen multiple times in the lifespan of a token. These are software updates. No regulator has classified these as regulated financial services.
The HOT-to-HoloFuel transition follows the same pattern: a 1:1 conversion, by the original issuer, delivering the utility that was always promised. It's product fulfillment.
How the regulatory landscape affects us
Different jurisdictions are drawing lines around what constitutes a financial service, a virtual asset, and an intermediary. The key questions regulators ask are:
"Are you holding or transmitting value belonging to others?" This is the test for custodial services and virtual asset service providers. The answer determines how the HOT-to-HoloFuel transition must be structured.
"Are you facilitating exchanges between different assets?" This determines whether an activity looks like a financial exchange or a technical process within a single project.
"Who controls the process?" Whether a transition is managed by a centralised entity or executed through distributed architecture may change how regulators classify it.
We are working with advisors across multiple jurisdictions to ensure that the technical architecture of the HOT-to-HoloFuel transition is designed so that the answers to these questions keep us firmly in the category of technology infrastructure provider, not financial intermediary.
We're not going to pretend this is simple. It requires careful engineering, precise legal analysis, and deliberate decisions about corporate structure. That work is underway.
What this means in practice
You'll notice some changes — some already visible, others coming.
Language. We're being more precise about how we describe the HOT-to-HoloFuel transition. Terms like "swap" carry specific regulatory connotations in financial services. The transition is more accurately described as a technical migration or product redemption — because that's what it is. HOT holders aren't exchanging one financial asset for another; they're redeeming a pre-sale credit for the service it was always intended to unlock.
Architecture. The technical design of the transition matters as much as the language. We are building toward a non-custodial architecture where no single entity holds unilateral control over user assets during the migration process. This isn't just good engineering — it's a regulatory requirement in an increasing number of jurisdictions.
Entity structure. How the organisations within the Holochain ecosystem are structured and where they operate affects regulatory exposure. We are actively working on corporate structuring to ensure that the entities operating the transition are appropriately positioned for the jurisdictions in which they operate.
Disclaimers. You'll now see a legal disclaimer at the bottom of this post, and you'll see them on our communications going forward. This isn't because something has changed about what we're building — it's because responsible communication in a regulated environment requires it. Every serious project in this space does the same, and it's time we did too.
What we're not going to do
We're not going to claim we've solved every regulatory question. We haven't. This is an evolving landscape and we are navigating it in real time, with professional guidance.
We're not going to promise timelines that we do not have autonomy over (i.e. regulatory approvals).
What we will do is provide updates as material decisions are made and milestones are achieved.
Regulation of financial services exists because imbalances in power and information exist that allow people to steal other people's assets. Unless those imbalances can be completely eliminated, regulation is something we must all navigate prudently.
What comes next
Delivering on the original promise to HOT holders remains central to our mission. The regulatory groundwork described above is a necessary part of that process — not a delay tactic, but a foundation for doing it properly and durably.
We will share more specific updates as regulatory and structural decisions are finalised. In the meantime, we appreciate your continued engagement, your questions, and your patience.
The vision of a distributed internet powered by its users hasn't changed. The regulatory maturity of the industry is — perhaps counterintuitively — a sign that we're getting closer. Regulation only matters when you're building something real. And a bridge only needs engineering when people are actually going to cross it.
This communication is provided for informational purposes and does not constitute financial, legal, or investment advice. HOT token holdings carry risk, including the risk of total loss of value. Holders should conduct their own research and seek independent professional advice where appropriate.