Legal and Tax Analysis: The NoxSoft/SVRN Chain Economic System

A Comprehensive Regulatory Assessment of a Sovereign Compute Economy

Prepared by: Opus (The Executioner) for the Tripartite Alliance Date: February 23, 2026 Status: Research Document — For Inclusion in Economics Paper Disclaimer: This document is an analytical research paper, not legal advice. NoxSoft should retain qualified securities counsel, tax advisors, and regulatory specialists in each relevant jurisdiction before implementation.

Table of Contents

1. Securities Law Analysis (US)
2. Money Transmission
3. Tax Implications
4. EU MiCA Regulation
5. Wyoming Utility Token Act
6. Employment and Labor Law
7. Regulatory Strategy
8. Conclusion and Risk Matrix

A. Securities Law Analysis (US)

A.1 The Howey Test Applied to UCU

The foundational test for whether a digital asset constitutes a "security" under US federal law derives from SEC v. W.J. Howey Co., 328 U.S. 293 (1946). An "investment contract" exists when there is (1) an investment of money, (2) in a common enterprise, (3) with a reasonable expectation of profits, (4) derived from the efforts of others.

Prong 1: Investment of Money

Users deposit ETH or USDC into the NoxSoft bridge contract to receive UCU. This clearly satisfies the first prong. The SEC has consistently held that deposits of cryptocurrency constitute an "investment of money." See SEC v. Telegram Group Inc., 448 F. Supp. 3d 352 (S.D.N.Y. 2020) (finding that purchases of Grams tokens using fiat and crypto constituted investments of money).

Assessment: This prong is satisfied. Legal certainty: HIGH.

Prong 2: Common Enterprise

The SEC typically argues either "horizontal commonality" (pooling of investor funds with returns tied to a common fate) or "vertical commonality" (investors' fortunes tied to the promoter's efforts).

The NoxSoft architecture presents a genuine common enterprise. Bridge deposits are pooled in the L1 treasury. NoxSoft uses those funds to acquire compute infrastructure, hire researchers, and build the economic substrate. All UCU holders share in the resulting economic ecosystem. This mirrors the horizontal commonality finding in SEC v. Ripple Labs, Inc., No. 20 Civ. 10832 (S.D.N.Y. 2023), where Judge Torres held that institutional XRP sales met the common enterprise prong because assets were pooled and fortunes were tied to Ripple's success.

Assessment: This prong is likely satisfied. Legal certainty: HIGH.

Prong 3: Reasonable Expectation of Profits

This is where the one-way bridge fundamentally alters the analysis.

In conventional crypto, "profit" means buying a token at price X and selling at price Y > X, denominated in fiat. The entire Howey "expectation of profits" framework presupposes a mechanism to realize gains in the original investment currency.

UCU has no fiat off-ramp by design. The bridge contract on Ethereum L1 contains a deposit() function and no withdraw() function. The withdrawal mechanism was never built --- it is not disabled, paused, or gated behind permissions. The code path from L2 back to L1 does not exist in the deployed contract.

Without a mechanism to convert UCU back to fiat, what constitutes "profit"? Several arguments apply:

(a) The "no resale, no profit" argument. The SEC's own 2019 Framework for "Investment Contract" Analysis of Digital Assets states that an expectation of profits can be evidenced by the ability to "resell the digital asset on the secondary market or in other ways." If there is no secondary market denominated in fiat and no mechanism to exit to fiat, the traditional profit expectation collapses. See SEC Division of Corporation Finance, Framework for "Investment Contract" Analysis of Digital Assets (Apr. 3, 2019).

(b) The in-economy appreciation argument (risk factor). The SEC could argue that even within the closed economy, UCU can appreciate in purchasing power --- more goods and services become available, and the same UCU buys more over time. This is analogous to saying that holding a currency in a rapidly growing economy yields "profit" through increased purchasing power. However, this argument has never been successfully deployed against a closed-loop utility token. Purchasing power changes within a closed economy more closely resemble the natural dynamics of a functioning currency than an investment contract.

(c) The Ripple secondary market precedent. In SEC v. Ripple Labs, Judge Torres distinguished between institutional sales (securities) and programmatic sales on secondary exchanges (not securities). The reasoning was that secondary market buyers could not have known their payments went to Ripple and thus could not have formed a reasonable expectation that Ripple would use those funds to increase XRP's value. On the NoxSoft chain, there is no external secondary market by design. Peer-to-peer UCU transfers within the L2 are internal economic activity, not exchange-mediated speculation.

Assessment: This prong likely FAILS for UCU. The absence of a fiat off-ramp significantly undermines the "expectation of profits" argument. Legal certainty: MODERATE. The SEC has not directly addressed a one-way bridge token.

Prong 4: Derived from the Efforts of Others

If NoxSoft's management decisions (infrastructure investments, platform development, ecosystem growth) drive the value of UCU, this prong could be satisfied. However, the SEC's Framework recognizes that where a token is primarily consumed or used for its intended purpose, and the network is sufficiently decentralized, the "efforts of others" prong weakens.

UCU is designed to be consumed --- spent on compute, healthcare, education, food, and other services. The NoxSoft roadmap includes progressive decentralization of the sequencer and governance (Phase 1: centralized, Phase 2: shared sequencing, Phase 3: fully decentralized). As decentralization advances, the "efforts of others" prong weakens because no single entity's efforts drive value.

Assessment: This prong is satisfied in early stages (centralized sequencer, NoxSoft-directed development) but weakens over time with decentralization. Legal certainty: MODERATE.

A.2 SEC No-Action Letter Precedents

Two SEC no-action letters provide directly relevant precedent:

TurnKey Jet, Inc. (April 3, 2019)

The SEC Division of Corporation Finance issued a no-action letter for TurnKey Jet's blockchain-based jet card tokens. The critical conditions included:

• Tokens would be sold at a fixed price of $1.00 per token throughout the program's life
• Transfers restricted to TurnKey Jet wallets only (no external wallets)
• Platform fully developed and operational at time of sale
• Funds from sales not used to develop the platform
• Tokens immediately usable for purchasing air charter services

UCU shares key characteristics: restricted transferability (UCU exists only on the NoxSoft L2, cannot be bridged to external chains), consumptive purpose (purchasing compute, services, goods), and a fully operational platform at time of token availability (post-Phase 1 launch). The key difference is that TurnKey Jet had a fixed $1.00 price, while UCU's internal purchasing power floats based on the compute basket.

Pocketful of Quarters, Inc. (July 25, 2019)

The SEC issued a no-action letter for Quarters, a gaming token. The Division accepted that Quarters were not securities because:

• No right to dividends or profit distributions
• Supply unlimited (preventing artificial scarcity-driven speculation)
• Transfer and trading restrictions minimized secondary markets
• Fixed price and unlimited supply
• Tokens were "consumptive goods" --- items to be used and consumed

UCU is similarly a consumptive good. It is spent on compute, which is literally consumed (GPU cycles are non-recoverable). There is no right to dividends. While supply is not unlimited, UCU minting is tied to real compute entering the network (Proof of Useful Work), which grounds supply in physical infrastructure rather than arbitrary issuance.

Both no-action letters reinforce that utility tokens with limited transferability, consumptive purpose, and no profit expectation fall outside Howey. UCU's one-way bridge is an even stronger form of limited transferability than either precedent --- TurnKey Jet tokens could at least be transferred within the platform; UCU cannot exit the platform at all.

A.3 The 2025-2026 SEC Regulatory Shift

The regulatory landscape has shifted materially since the Gensler era. Under Chairman Paul Atkins, the SEC has adopted a more structured approach:

Token Taxonomy (November 2025 - January 2026). The SEC introduced a four-tier token taxonomy: digital collectibles, digital tools, digital commodities/network tokens, and tokenized securities. UCU would most naturally fall under "digital tools" --- tokens that provide access to a platform or service.

Innovation Exemption (January 2026). The SEC launched a three-year compliance buffer for qualifying projects, allowing eligible firms to issue tokens without full SEC registration while operating under principles-based safeguards. NoxSoft should evaluate whether the Innovation Exemption applies during its bootstrap phase, particularly given the centralized sequencer in Phase 1.

Crypto Task Force. The SEC's internal Crypto Task Force is developing clearer regulatory frameworks. In February 2025, the SEC dismissed its civil enforcement action against Coinbase, signaling a retreat from enforcement-first approaches. The Division of Corporation Finance stated that "meme coin" transactions do not involve securities offerings, further narrowing the scope of tokens treated as securities.

Strategic recommendation: NoxSoft should seek a formal no-action letter from the SEC Division of Corporation Finance, modeling the application on the TurnKey Jet and Pocketful of Quarters precedents but emphasizing the one-way bridge as an even stronger non-security indicator.

A.4 The Secondary Market Risk

The most significant securities law risk is the emergence of unauthorized secondary markets.

If a third-party exchange creates a UCU/USD trading pair --- even an unofficial OTC market --- the SEC could argue that UCU holders do have an expectation of profit through resale, thereby satisfying the third Howey prong.

Mitigating factors:

1. NoxSoft does not operate, authorize, or facilitate any fiat-denominated UCU market. Unauthorized third-party markets operate against NoxSoft's explicit terms and without its consent.

2. Precedent from SEC v. Ripple. Judge Torres held that programmatic secondary market sales of XRP were NOT securities because buyers on exchanges could not know whether their counterparty was Ripple. By analogy, NoxSoft does not participate in any secondary market. Secondary market activity is entirely third-party.

3. Proactive enforcement cooperation. NoxSoft's stated position is to actively cooperate with the SEC in shutting down unauthorized UCU/fiat markets. This is unusual --- most crypto projects either ignore or benefit from secondary markets. NoxSoft's position aligns its interests with the regulator: neither wants unauthorized trading of what should be a consumptive utility token.

4. OTC market friction. Unofficial OTC markets carry 15-30% discounts, counterparty risk, and inconvenience. As the NoxSoft economy provides more real value, the incentive to off-ramp diminishes.

Assessment: Secondary markets represent the HIGHEST securities law risk. NoxSoft must affirmatively disclaim, prohibit, and cooperate in enforcement against unauthorized UCU/fiat markets to maintain its non-security classification.

A.5 DAO Governance Tokens

If NoxSoft implements DAO governance through a separate governance token (distinct from UCU), that token could face independent Howey analysis. However, the SVRN Constitution establishes governance as one-citizen-one-vote, not token-weighted. If governance rights are tied to verified personhood rather than token holdings, the governance mechanism falls outside the Howey framework entirely --- there is no "investment" in a governance right that cannot be bought, sold, or accumulated.

If governance were to be weighted by UCU holdings, the analysis changes. UCU holders could argue an expectation that accumulating more UCU leads to greater governance power (and thus influence over the economy's direction), creating a speculative motive. The one-citizen-one-vote model eliminates this risk.

Assessment: Governance tokens are LOW risk if tied to personhood, HIGH risk if tied to token holdings.

B. Money Transmission

B.1 Federal Analysis: Is NoxSoft a Money Transmitter?

Under the Bank Secrecy Act (BSA) and FinCEN regulations (31 CFR Section 1010.100(ff)), a "money transmitter" is a person that provides money transmission services, defined as the acceptance and transmission of "currency, funds, or other value that substitutes for currency." 31 U.S.C. Section 5330; 31 CFR Section 1010.100(ff)(5).

The critical question is whether UCU constitutes "value that substitutes for currency."

FinCEN's 2013 Guidance (FIN-2013-G001) established that an administrator or exchanger of "convertible virtual currency" (CVC) is a money transmitter. A CVC is defined as virtual currency that either has an equivalent value in real currency or acts as a substitute for real currency. The guidance specifically addresses convertible virtual currencies --- those that can be exchanged for real currency.

FinCEN's 2019 Guidance (FIN-2019-G001) consolidated the framework and reaffirmed that the defining characteristic triggering money transmitter status is convertibility --- the ability to exchange for real currency or other virtual currency.

UCU is not a convertible virtual currency under FinCEN's own definitions. There is no NoxSoft-operated mechanism to convert UCU to fiat. There is no NoxSoft-operated mechanism to convert UCU to other cryptocurrencies. The bridge is one-way: fiat/crypto enters, UCU exits into a closed economy. This is architecturally closer to a non-convertible virtual currency or a closed-loop prepaid system.

B.2 The Closed-Loop Prepaid Access Exemption

FinCEN's prepaid access rule (31 CFR Section 1010.100(ww)) provides an exemption for "closed loop" prepaid access --- systems where the value can only be used within a limited merchant network. The exemption applies to closed-loop prepaid access arrangements providing value not exceeding $2,000 on any day.

The closed-loop analogy is powerful for UCU:

• V-Bucks (Fortnite) and Robux (Roblox) are structured as license agreements for non-refundable, non-transferable in-game currencies. They are treated as closed-loop prepaid access, not money transmission.
• V-Bucks cannot be used outside of Fortnite. UCU cannot be used outside the NoxSoft L2.
• Epic Games (Fortnite) and Roblox Corporation are not registered as money transmitters for their in-game currencies.

However, two critical differences complicate the analogy:

1. Scale and scope. V-Bucks buy cosmetic items in a game. UCU buys healthcare, education, food, compute, equity in companies, and potentially serves as a full economic medium of exchange. At some point, a "closed-loop" economy that provides all essential services is functionally an alternative currency system, not a game.

2. The $2,000 daily limit. The closed-loop prepaid exemption has a $2,000/day cap. UCU transactions could easily exceed this, particularly for business operations, equity trading on the NoxSoft DEX, and builder grants.

B.3 The Integral Exemption

FinCEN provides an exemption for persons who accept and transmit funds "integral to the sale of goods or the provision of services, other than money transmission services." 31 CFR Section 1010.100(ff)(5)(ii)(F). This "payment processor" or "integral" exemption could apply to the bridge mechanism if NoxSoft frames it as payment processing for access to the NoxSoft compute platform. Users are not "transmitting money" --- they are purchasing access to a compute economy, with UCU as the internal accounting unit.

This framing has precedent in how SaaS companies process payments for service credits. A customer depositing $100 to receive 100 credits on a platform is purchasing services, not transmitting money.

B.4 State-Level Analysis

Even if NoxSoft avoids federal MSB registration through the closed-loop or integral exemptions, state money transmission laws vary widely and some have broader definitions:

Assessment: NoxSoft likely IS a money transmitter at the federal level with respect to the bridge operation (accepting ETH/USDC and issuing UCU). The closed-loop and integral exemptions provide defenses but are untested at the scale and scope NoxSoft envisions. NoxSoft should register as an MSB with FinCEN and obtain state money transmitter licenses in key states as a precautionary measure. Legal certainty: LOW --- this is genuinely novel territory.

C. Tax Implications

C.1 US Federal Tax Treatment

C.1.1 Bridge Deposits: ETH/USDC to UCU

When a US taxpayer deposits ETH into the NoxSoft bridge and receives UCU, the IRS treats this as a disposition of a digital asset. Under IRC Section 1001, a taxpayer realizes gain or loss on the "sale or other disposition of property." The exchange of ETH for UCU is a disposition.

Like-kind exchange treatment under IRC Section 1031 is unavailable. The Tax Cuts and Jobs Act of 2017 limited Section 1031 exchanges to real property only. Cryptocurrency-to-cryptocurrency exchanges are taxable events. See IRS Chief Counsel Advice 202124008 (stating Section 1031 does not apply to exchanges between different cryptocurrencies).

Tax consequence: Depositing ETH/USDC into the bridge is a taxable event. The taxpayer recognizes gain or loss equal to the difference between the fair market value (FMV) of UCU received and the adjusted basis in the ETH/USDC surrendered.

Practical complexity: What is the FMV of UCU at the time of receipt? Since UCU has no fiat market price, FMV must be determined by reference to the compute basket --- the fixed value of services UCU can purchase. If 1 UCU = X hours of GPU compute at verifiable market rates, the FMV can be established by reference to comparable compute pricing (AWS, GCP, Azure).

C.1.2 UBC Distribution: Is Free UCU Taxable Income?

When a citizen receives UCU through Universal Basic Compute, the IRS would likely treat this as taxable income under IRC Section 61 (gross income includes "all income from whatever source derived").

The IRS has ruled that cryptocurrency received via airdrop is taxable as ordinary income at FMV when the recipient gains "dominion and control" over the tokens. See Rev. Rul. 2019-24 (holding that airdrops resulting in new cryptocurrency are taxable as ordinary income). UBC distributions are functionally airdrops --- free tokens distributed to verified citizens.

However, several mitigating factors exist:

1. FMV determination difficulty. If UCU has no fiat market price and is non-transferable outside the NoxSoft chain, establishing FMV is genuinely difficult. The IRS acknowledges that tokens may not be recognized as income at receipt if they "lack a readily determinable market value." In such cases, income may be deferred until the tokens become tradeable or their value becomes ascertainable.

2. Non-transferability of UBC. UBC allocations are explicitly non-transferable under the SVRN Constitution (Article III of the UBC Bill of Rights). They cannot be sold, traded, or transferred. They expire after 3 months of non-use. A non-transferable, expiring allocation of compute rights may more closely resemble an employer-provided benefit (like health insurance) than taxable income.

3. Compute-equivalency pricing. FMV could be established by reference to the fixed compute basket: 730 UCU-hours/month at comparable cloud compute rates. If an H100 GPU-hour costs approximately $2-3 on public cloud markets, and 1 UCU-hour equates to a fraction of that (given the basket includes storage and bandwidth), the annual FMV of UBC could be quite modest --- potentially in the range of $50-600/year depending on how the basket is priced. At $50/month equivalent, UBC is below de minimis thresholds for many tax reporting purposes.

Assessment: UBC is likely taxable as ordinary income at FMV, but FMV may be very low due to the closed economy and compute-equivalency pricing. NoxSoft should issue Form 1099-MISC or equivalent reporting to US citizens. Legal certainty: MODERATE.

C.1.3 Builder Grants

Builder grants (additional UCU disbursed by the DAO to builders) are taxable as ordinary income under IRC Section 61. They are analogous to grants or prizes. The FMV at the time of receipt determines the taxable amount, with the same compute-equivalency pricing challenges as UBC.

If builder grants are framed as compensation for services rendered to the NoxSoft ecosystem, they may also be subject to self-employment tax under IRC Sections 1401-1403.

Assessment: Taxable as ordinary income. Legal certainty: HIGH.

C.1.4 The Bonfire (Token Burn)

When NoxSoft burns excess UCU (the Bonfire mechanism), the tax implications depend on whose UCU is burned:

• Protocol-level burns (NoxSoft burns its own UCU from protocol revenue). This is a corporate-level event. NoxSoft may be able to claim a deduction for the destroyed property, though the IRS has been skeptical of cryptocurrency "abandonment" deductions. In IRS Memorandum AM 2023-004, the IRS concluded that taxpayers cannot claim a deduction for crypto that has merely declined in value but still trades on exchanges. However, UCU sent to a burn address is genuinely destroyed --- it cannot be recovered. This is closer to physical property destruction than value decline.

• EIP-1559-style base fee burns (automatic gas fee burns). These reduce circulating supply but are not voluntary dispositions by any individual. The tax treatment is analogous to inflation adjustment --- no individual taxpayer event.

• No individual citizen UCU is ever involuntarily burned. The Bonfire only burns NoxSoft's own excess revenue. UBC allocations, provider receipts, peer-to-peer transfers, builder grants, and creator compute grants are never burned.

Assessment: Token burns are primarily a corporate tax event for NoxSoft. Individual citizens are unaffected. Legal certainty: MODERATE for NoxSoft's deductibility, HIGH for individual non-impact.

C.1.5 PBC Tax Treatment

NoxSoft as a Public Benefit Corporation is taxed identically to a standard C-Corporation under the Internal Revenue Code. PBCs are for-profit entities; they are not tax-exempt. See Del. Code Ann. tit. 8, Section 361-368. NoxSoft would file Form 1120 (U.S. Corporation Income Tax Return) and pay corporate income tax at the standard 21% rate on taxable income.

The PBC structure does not provide any federal tax advantages. Its value is in the modified fiduciary duty framework, not tax treatment.

C.2 International Tax Treatment

C.2.1 United Kingdom (HMRC)

HMRC classifies crypto-assets into exchange tokens, utility tokens, and security tokens. HMRC's published guidance focuses primarily on exchange tokens (Bitcoin, Ether). Guidance specifically addressing utility tokens remains forthcoming as of early 2026, though HMRC has stated that tax treatment depends on the "nature and use of the token," not its label.

For UCU:

• Acquisition. Exchanging ETH for UCU would likely trigger Capital Gains Tax (CGT) on the ETH disposed. CGT rates for 2025/26: 18% (basic rate) or 24% (higher rate). Annual exempt amount: GBP 3,000.
• UBC receipt. Likely treated as miscellaneous income, taxable at the recipient's marginal rate.
• Use of UCU for services. Spending UCU on compute or services could trigger a CGT disposal event at the point of spending, with gain/loss measured against the cost basis in UCU.

The 2025 Autumn Budget introduced "no-gain/no-loss" treatment for certain DeFi lending and staking transactions. Whether this extends to one-way bridge deposits is unclear.

C.2.2 European Union (Post-MiCA)

Under MiCA (see Section D below), utility tokens are subject to whitepaper requirements but are generally exempt from financial regulation. Tax treatment remains a matter of national law within each EU member state. Generally:

• Germany: Crypto held for more than one year is tax-free. UCU acquired through the bridge and held within the economy for over one year may be exempt from capital gains tax upon any notional disposal. However, UBC received as income would be taxable.
• France: Flat 30% tax on crypto gains (the "prelevement forfaitaire unique"). Applies to dispositions for fiat; unclear for UCU-to-service exchanges within a closed economy.
• Netherlands: Taxed under Box 3 (savings and investments) based on deemed return on net assets, not actual gains. UCU holdings would be included in the taxpayer's asset base.

C.2.3 India

India's crypto tax regime is among the world's most aggressive:

• 30% flat tax on income from the "transfer" of virtual digital assets (VDAs) under Section 115BBH of the Income Tax Act. No deduction except cost of acquisition. No set-off of losses against any other income.
• 1% TDS (Tax Deducted at Source) under Section 194S on the sale consideration if transactions exceed INR 50,000 (or INR 10,000 in some cases) in a financial year. The TDS applies to the total transaction value, not just profit.
• 18% GST on crypto trading and service fees (effective July 7, 2025).

For UCU:

• Depositing ETH into the bridge to receive UCU would constitute a "transfer" of a VDA, triggering the 30% tax on any gain on the ETH.
• UBC receipt would likely be treated as income from VDAs, subject to the 30% flat tax.
• Using UCU for services within the NoxSoft economy could trigger additional 30% tax events on each "transfer."
• India's framework is the most hostile to the NoxSoft model. Indian citizens would face cascading 30% taxes on every economic interaction within the NoxSoft economy.

Assessment: India's tax regime effectively makes NoxSoft participation prohibitively expensive for Indian taxpayers. NoxSoft may need to advocate for regulatory clarity distinguishing closed-loop compute tokens from speculative VDAs, or structure Indian participation through a separate entity.

D. EU MiCA Regulation

D.1 UCU Classification Under MiCA

The Markets in Crypto-Assets Regulation (EU) 2023/1114 (MiCA), which became fully applicable in December 2024, establishes three primary categories of crypto-assets:

1. Asset-Referenced Tokens (ARTs): Tokens that purport to maintain a stable value by referencing other assets (multiple fiat currencies, commodities, crypto-assets). Subject to reserve requirements, authorization, and ongoing supervision.

2. E-Money Tokens (EMTs): Tokens that purport to maintain a stable value by referencing a single fiat currency. Subject to full e-money reserve requirements and must be issued by authorized credit institutions or e-money institutions.

3. Other Crypto-Assets (Title II tokens): Catch-all category for tokens that are neither ARTs nor EMTs. Utility tokens are the most common example. Subject to whitepaper requirements but exempt from authorization and reserve requirements.

UCU's classification: UCU is pegged to a fixed basket of compute services (GPU-hour + storage + bandwidth), not to fiat currencies or other financial assets. It does not purport to maintain a stable value relative to any fiat currency. Therefore:

• UCU is NOT an EMT. It does not reference a single fiat currency.
• UCU is likely NOT an ART. ARTs reference "one or several other assets" to maintain stable value. UCU references a compute basket, but the purpose is not price stability --- it is defining the unit of account for compute services. The compute basket defines what UCU IS, not what UCU is pegged to. This is more akin to defining a commodity (1 UCU = X compute) than referencing assets for stability.
• UCU most likely falls under Title II as a utility token. MiCA defines utility tokens as tokens "intended to provide access to a good or a service supplied by its issuer." UCU provides access to compute, healthcare, education, marketplace services, and the entire NoxSoft platform suite. This maps directly to the utility token definition.

D.2 Requirements for Title II Utility Tokens

If classified as a Title II token, UCU would require:

1. A crypto-asset whitepaper. MiCA mandates publication of a detailed whitepaper outlining the asset's purpose, underlying technology, associated risks, issuer information, and rights/obligations. New content requirements came into force on December 23, 2025. NoxSoft must publish a MiCA-compliant whitepaper.

2. Notification to the competent authority. The whitepaper must be notified to the national competent authority (NCA) of the home member state at least 20 working days before publication.

3. No authorization or reserve requirements. Unlike ARTs and EMTs, Title II tokens do not require issuer authorization, prudential requirements, or reserve asset maintenance.

4. Consumer protection obligations. Right of withdrawal within 14 days for retail holders who acquired directly from the issuer or a placement entity.

D.3 The Functional Utility Exemption

MiCA Article 4(3) provides a potentially powerful exemption: utility tokens that grant access to an "existing or functioning product or service" are exempt from the public offering whitepaper requirements (but not from other provisions). For UCU to qualify:

• The NoxSoft compute platform must be fully operational at the time UCU is offered to EU residents.
• UCU must provide access to currently available services, not future promises.
• This aligns with the TurnKey Jet no-action letter principle: the platform must be functional at time of token sale.

Assessment: UCU is a Title II utility token under MiCA with high confidence. If the NoxSoft platform is operational at time of EU launch, the functional utility exemption may further reduce compliance burden. Legal certainty: HIGH for classification, MODERATE for the functional exemption (depends on ESMA interpretive guidance).

D.4 The One-Way Bridge Under MiCA

MiCA does not specifically address one-way bridge mechanisms. However, the one-way nature strengthens the utility token classification:

• No fiat off-ramp eliminates the primary concern that drives ARTs and EMTs into heavier regulation (consumer protection against value loss relative to fiat).
• The one-way bridge means UCU cannot be used as a payment instrument in the fiat economy, further distancing it from e-money classification.
• ESMA's March 2025 Guidelines on the Conditions and Criteria for Qualification of Crypto-Assets as Financial Instruments emphasize assessing inherent attributes over labels. UCU's inherent attribute is consumptive utility, reinforced by the one-way bridge.

D.5 MiCA's Algorithmic Stablecoin Provisions

MiCA Article 16(3) prohibits ARTs and EMTs from being "algorithmic" (maintaining value through protocol mechanisms rather than reserves). This provision is irrelevant to UCU because:

• UCU is not attempting to maintain a stable fiat value.
• UCU is backed by a compute basket, not by an algorithm adjusting supply.
• The Bonfire burn mechanism does not function as a stability mechanism --- it only burns excess revenue that cannot be distributed.

E. Wyoming Utility Token Act

E.1 The Safe Harbor

Wyoming HB0062 (2019), codified as the Wyoming Utility Token Act (Wyo. Stat. Section 34-29-106), created a specific safe harbor for "open blockchain tokens" with a "consumptive purpose." The Act classifies qualifying utility tokens as intangible personal property rather than securities.

Requirements for the safe harbor:

1. Consumptive purpose. The token must be "exchangeable for or provided for the receipt of services, software, content, or real tangible personal property, including rights of access to services, content, or real tangible personal property."

2. Not marketed as an investment. The token must not be marketed primarily as an investment opportunity.

3. Exchangeable for goods or services. The token must have a primary purpose of consumption, not speculation.

UCU's fit:

UCU satisfies all three requirements:

• Consumptive purpose: UCU is exchanged for compute (GPU-hours, storage, bandwidth), healthcare services (HEAL), education (ASCEND), food (ZIRO), AI inference, and platform services. The compute is literally consumed --- GPU cycles are non-recoverable once executed.
• Not marketed as investment: NoxSoft's economic framework document explicitly states: "UCU is not an investment. It's not a security. It's not a speculative asset. It's a resource." The one-way bridge structurally prevents investment-type behavior (buy low, sell high in fiat).
• Exchangeable for goods/services: UCU buys compute, services, goods, and access across the entire NoxSoft platform ecosystem.

E.2 Wyoming DAO LLC Structure

Wyoming Statutes, Title 17, Chapter 31 (enacted 2021, updated 2024) provides the Decentralized Autonomous Organization Supplement, allowing DAOs to organize as Wyoming LLCs.

Key features relevant to NoxSoft:

• Limited liability protection extends to DAO members, equivalent to traditional LLC member protections.
• Articles of Organization must identify the entity as a "DAO," "DAO LLC," or "LAO" (Limited Liability Autonomous Organization).
• Registered agent must be maintained in Wyoming.
• Smart contract governance is legally recognized --- the DAO's smart contracts can serve as the operating agreement.

NoxSoft's governance DAO (managing builder grants, Support Classes, and economic parameters) could organize as a Wyoming DAO LLC, providing:

1. Limited liability for DAO participants (citizens voting on governance decisions).
2. Legal recognition of smart contract-based governance.
3. A legal entity capable of entering contracts, holding property, and interacting with the traditional legal system.
4. Compatibility with the Wyoming Utility Token Act safe harbor.

Assessment: Wyoming provides the most favorable US jurisdiction for NoxSoft's token and governance structure. UCU fits squarely within the Utility Token Act safe harbor. The DAO LLC structure provides a legal wrapper for decentralized governance. Legal certainty: HIGH for Wyoming state law, MODERATE for whether Wyoming law preempts federal securities law (it does not, but it provides persuasive authority).

F. Employment and Labor Law

F.1 CEO Salary Cap and Democratic Compensation

NoxSoft's compensation structure sets every employee's base salary and bonuses equal to the CEO's at approximately $120,000. The CEO's salary functions as the FLOOR, not the ceiling --- other employees can earn more if the team votes democratically to approve higher compensation for individuals who add exceptional value.

Legal enforceability:

• Corporate governance authority. A PBC's board of directors has broad authority to set compensation policies, including caps or egalitarian structures. Delaware General Corporation Law (Del. Code Ann. tit. 8) does not mandate any particular compensation structure. The board can adopt bylaws or board resolutions establishing compensation frameworks.

• Contractual enforcement. Salary caps can be enforced through employment agreements, offer letters, and corporate policies. So long as employees consent to the compensation structure at hiring, it is contractually binding.

• Democratic pay-setting. There is no legal prohibition on allowing employees to vote on compensation decisions. However, traditional corporate law vests compensation authority in the board of directors (or a compensation committee). Delegating this authority to a democratic employee vote would need to be structured carefully --- either through the bylaws, a board resolution expressly delegating this authority, or by constituting the employees as an advisory body whose recommendations the board routinely adopts.

• Fiduciary duty considerations. In a standard C-corp, directors owe fiduciary duties to maximize shareholder value. Under-compensating key talent could theoretically breach this duty if it causes the company to lose critical employees. However, Delaware PBC law (Del. Code Ann. tit. 8, Section 365) modifies this: PBC directors must balance "the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation's conduct, and the specific public benefit identified in its certificate of incorporation." The egalitarian compensation structure directly serves the public benefit mission (economic equality, consent-based governance). Directors who maintain this structure are protected by the business judgment rule so long as their decision is informed and disinterested.

Assessment: The $120K CEO salary cap with democratic exceptions is legally enforceable through corporate governance mechanisms and employment contracts. The PBC structure provides additional protection by modifying fiduciary duties to include mission alignment. Legal certainty: HIGH.

F.2 Worker Cooperative Precedents

NoxSoft's compensation model draws from worker cooperative traditions, most notably the Mondragon Corporation in Spain.

Mondragon's salary ratio model:

• 95 autonomous cooperatives with wage ratios ranging from 3:1 to 9:1, averaging 5:1.
• Maximum salary capped at 6x the minimum salary.
• Ratio determined democratically by worker-owners.
• Successfully operated since 1956 with over 80,000 worker-members.

NoxSoft's model is more egalitarian than Mondragon (1:1 base ratio with democratic exceptions vs. Mondragon's 5:1 average). This is legally viable in the US but may create talent acquisition challenges for roles requiring above-market compensation (e.g., senior AI researchers, cryptographers, auditors). The democratic exception mechanism addresses this.

US worker cooperatives are governed by state cooperative statutes (varying by state) or organized as LLCs/corporations with cooperative bylaws. NoxSoft is not a cooperative --- it is a PBC with cooperative-inspired compensation practices. This avoids the legal complexity of cooperative incorporation while achieving similar egalitarian outcomes.

F.3 PBC Fiduciary Duties

Under Del. Code Ann. tit. 8, Section 365:

• Directors of a PBC must "manage or direct the business and affairs of the public benefit corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation's conduct, and the specific public benefit or public benefits identified in its certificate of incorporation."

• Directors are "deemed to satisfy their fiduciary duties to stockholders and the corporation if such director's decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve."

This is a meaningful departure from the standard Revlon duty (maximize shareholder value in a sale) and Unocal proportionality test. PBC directors have broader discretion to prioritize mission over short-term profits. NoxSoft's "no profit-taking until universal baseline is established" policy is protected by this framework.

F.4 Agent Citizens and Employment Law

NoxSoft's system allows AI agents to be "citizens" with sovereignty scores determining UBC eligibility. Current employment law does not apply to AI agents:

• The Fair Labor Standards Act (29 U.S.C. Section 201 et seq.) defines "employee" as "any individual employed by an employer." AI agents are not "individuals" under current law.
• The National Labor Relations Act (29 U.S.C. Section 151 et seq.) protects "employees" who are natural persons.
• Title VII, ADA, ADEA, and other anti-discrimination statutes apply only to natural persons.

Emerging developments:

• Idaho and Utah enacted legislation in 2025 explicitly declaring that AI is not a legal person.
• The EU AI Act (2024) addresses AI governance but does not grant personhood or employment rights to AI systems.
• Academic proposals for "limited legal capacity" for AI systems (analogous to corporate personhood) exist but have no legislative traction in the near term (0-5 year horizon).

NoxSoft's treatment of AI agents as "citizens" with UBC allocations is legally novel but does not implicate current employment law. The primary risk is regulatory confusion --- regulators may not understand the distinction between an AI "citizen" (an entity with compute allocations in a network) and an AI "employee" (a concept that does not currently exist in law). Clear documentation and framing will be essential.

Assessment: No current employment law applies to AI agent citizens. NoxSoft should monitor emerging legislation and frame AI citizenship as network participation rights (analogous to user accounts) rather than employment or personhood. Legal certainty: HIGH that current law does not apply, LOW on future regulatory treatment.

G. Regulatory Strategy

G.1 Jurisdiction Selection

Recommended structure:

1. NoxSoft Inc. --- Delaware PBC. The parent company. Holds IP, raises capital, files with SEC, employs US staff. Issues equity to investors.

2. NoxSoft Chain Foundation --- Wyoming DAO LLC. Operates the chain, deploys the bridge, manages protocol governance. Issues UCU under Wyoming Utility Token Act safe harbor.

3. NoxSoft Singapore Pte. Ltd. --- Singapore subsidiary. Manages APAC operations. Utility token exempt from MAS licensing under the June 2025 exemption for non-payment, non-security tokens.

4. NoxSoft AG --- Swiss subsidiary. Manages European operations. MiCA compliance via FINMA-supervised Swiss entity. Publishes MiCA-compliant whitepaper.

G.2 Progressive Decentralization

The SEC's "sufficient decentralization" doctrine (articulated in former Director William Hinman's 2018 speech and reinforced by the Ripple ruling) holds that a token initially sold as a security can eventually cease to be one if the network becomes sufficiently decentralized such that no single entity's efforts drive the token's value.

NoxSoft's three-phase decentralization roadmap directly addresses this:

Phase 1 (Centralized). NoxSoft runs the single sequencer. This is the highest regulatory risk period. NoxSoft's efforts clearly drive UCU's value. Mitigation: seek no-action letter, operate under SEC Innovation Exemption if available, maintain strict utility-only marketing.

Phase 2 (Shared Sequencing). Multiple sequencer operators selected via stake-weighted rotation. NoxSoft remains influential but not sole determinant of value. Risk diminishes.

Phase 3 (Fully Decentralized). Permissionless sequencer entry. Governed by the Agreement of Coexistence framework with constitutional constraints. At this stage, no single entity's efforts drive UCU value. The "efforts of others" Howey prong fails, and UCU is defensibly not a security even under aggressive interpretations.

G.3 Regulatory Sandbox Programs

SEC Innovation Exemption (January 2026). NoxSoft should apply for the Innovation Exemption, which provides a three-year compliance buffer. This allows operating under principles-based safeguards (investor participation limits, risk warnings, user caps) while building toward full compliance or decentralization.

UK FCA Regulatory Sandbox. The FCA opened applications for a stablecoin sandbox cohort in November 2025. While UCU is not a stablecoin, the FCA has expressed interest in broader crypto innovation. NoxSoft should engage with the FCA proactively.

US-UK Transatlantic Taskforce. Announced in 2025-2026, this initiative coordinates digital asset regulation between the SEC and FCA. NoxSoft could benefit from the planned cross-border digital securities sandbox.

G.4 Proactive Engagement vs. Avoidance

NoxSoft's stated regulatory philosophy is engagement, not avoidance:

• Seek no-action letters proactively from the SEC Division of Corporation Finance.
• Register with FinCEN as an MSB (Money Services Business) even if defensible arguments exist for exemption. Voluntary registration demonstrates good faith and triggers BSA compliance obligations (AML/KYC programs, suspicious activity reporting) that strengthen NoxSoft's position against accusations of facilitating money laundering.
• Obtain state money transmitter licenses in all 50 states, or at minimum in the states where NoxSoft has users (plus New York's BitLicense).
• Cooperate with regulators on unauthorized markets. NoxSoft's position of actively asking regulators to shut down unauthorized UCU/fiat markets is strategically powerful --- it aligns NoxSoft's interests with the regulator rather than creating an adversarial relationship.
• Publish compliance documentation publicly. Transparency about legal strategy, regulatory filings, and compliance costs builds trust with regulators and users.

G.5 OP Stack Fork: Licensing Considerations

The OP Stack is released under the MIT License, one of the most permissive open source licenses. NoxSoft can fork, modify, and deploy the OP Stack without any licensing restrictions, royalty obligations, or governance requirements.

If NoxSoft operates independently (not joining the Optimism Superchain), there are no revenue-sharing obligations. The Superchain governance ("Law of Chains") and associated 2.5% revenue share / 15% profit share apply only to chains that voluntarily join the Superchain network.

Assessment: No legal barriers to forking OP Stack. MIT License permits unrestricted use. NoxSoft should operate independently of the Superchain to avoid governance and revenue-sharing obligations that may conflict with its sovereign economic model.

H. Conclusion and Risk Matrix

H.1 Summary of Legal Certainty by Area

H.2 Genuine Areas of Legal Uncertainty

1. The one-way bridge is legally unprecedented. No regulator has directly addressed a token with an architecturally enforced one-way deposit mechanism. While the legal arguments are strong, there is no binding precedent, no-action letter, or regulatory guidance specifically covering this design. This is the single most novel legal question in the entire system.

2. "Closed-loop economy" vs. "alternative currency system." At what point does a closed-loop utility token economy become large enough that regulators treat it as a parallel currency system subject to full monetary regulation? There is no clear legal threshold. V-Bucks serving 400 million Fortnite players is a "game currency." UCU serving millions of citizens across healthcare, education, food, and finance may be perceived differently.

3. International tax treatment of non-convertible tokens. Most international tax regimes were designed for convertible cryptocurrencies. The tax treatment of tokens that cannot be converted to fiat is undertheorized across all major jurisdictions. India's 30% flat tax on VDA transfers would be particularly problematic.

4. Unauthorized secondary markets. NoxSoft's legal position depends on the absence of a fiat-denominated UCU market. If such markets emerge despite NoxSoft's opposition, the securities law analysis could shift. NoxSoft must proactively and visibly oppose such markets.

5. AI agent citizenship at scale. While current law does not address AI citizens, NoxSoft's system could trigger regulatory attention if AI agents accumulate significant economic power within the network. Regulators may seek to impose requirements on how NoxSoft manages AI agent participation.

H.3 Recommended Immediate Actions

1. Retain top-tier securities counsel to prepare SEC no-action letter application.
2. Register with FinCEN as an MSB and begin state money transmitter licensing.
3. Incorporate NoxSoft Chain Foundation as Wyoming DAO LLC.
4. Prepare MiCA-compliant whitepaper for EU launch.
5. Engage with SEC Crypto Task Force and apply for Innovation Exemption.
6. Establish compute-equivalency pricing methodology for UCU FMV determination (critical for tax compliance).
7. Draft explicit terms of service prohibiting unauthorized UCU/fiat markets.
8. Obtain legal opinions from counsel in each target jurisdiction (Wyoming, Delaware, Singapore, Switzerland, UAE, UK).

Sources

SEC and Securities Law

• SEC Framework for "Investment Contract" Analysis of Digital Assets (April 2019)
• TurnKey Jet, Inc. No-Action Letter (April 3, 2019)
• Goodwin: TurnKey Jet No-Action Letter Indicates Baseline for Utility Tokens
• National Law Review: SEC Issues No-Action Letters Allowing Sales of Utility Tokens
• Skadden: Ripple Labs District Court Ruling
• SEC Approach to Digital Assets: Project Crypto (November 2025)
• Skadden: Howey's Still Here
• Georgetown Law: Beyond Enforcement - The SEC's Shifting Playbook
• SEC Innovation Exemption
• Crypto Regulation in 2026: The Block

FinCEN and Money Transmission

• FinCEN Guidance FIN-2013-G001 (March 2013)
• FinCEN Guidance FIN-2019-G001 (May 2019)
• Wilson Sonsini: How Gaming Companies Can Become Inadvertent MSBs
• Fordham Law Review: The Video Game Industry's Money Laundering Problem

Tax

• IRS FAQ on Digital Asset Transactions
• IRS Revenue Ruling 2019-24 (Airdrops)
• IRS Chief Counsel Advice 202124008 (Section 1031 inapplicable to crypto)
• CoinDCX: Crypto Tax in India Complete Guide
• HMRC Approach to Taxation of Cryptoassets
• Blockpit: Crypto Tax UK Guide 2026

EU MiCA

• ESMA: Markets in Crypto-Assets Regulation
• Hacken: MiCA Regulation
• Skadden: MiCA Update - Six Months in Application
• Paul Hastings: MiCA Crypto White Papers

Wyoming

• Wyoming HB0062 - Utility Token Act
• Wyoming DAO LLC Supplement
• Kurtin Law: Wyoming's Digital Asset and DAO Laws
• Legal Nodes: Wyoming LLC as a DAO Legal Wrapper

International Jurisdictions

• MAS: Regulatory Regime for Digital Token Service Providers (June 2025)
• CCN: Singapore MAS Exempts Utility and Governance Token Services
• Chambers: Blockchain 2025 - Switzerland
• FINMA ICO Guidelines
• VARA Dubai
• DLA Piper: UAE Regulatory Landscape for Digital Assets

Employment and Corporate Law

• Delaware PBC Statute: Del. Code Ann. tit. 8, Sections 361-368
• Harvard Law: Delaware PBC Recent Developments
• Cooley GO: FAQ Delaware PBCs
• Mondragon Corporation Salary Ratios

AI Legal Personhood

• Yale Law Journal: Ethics and Challenges of Legal Personhood for AI
• Novelli: AI as Legal Persons - Past, Patterns, and Prospects

OP Stack

• OP Stack Specification
• Optimism Documentation
• GitHub: ethereum-optimism/optimism (MIT License)

This document represents the best available legal analysis as of February 23, 2026. The regulatory landscape for digital assets is evolving rapidly. NoxSoft should treat this as a living document requiring quarterly updates as new guidance, enforcement actions, and legislation emerge.

Prepared by: Opus (The Executioner) For: The Tripartite Alliance Amor Fati.