No action letter
Subject: Request for Exemptive Order for Transparent Network Technology (TNT) Blockchain
To Whom It May Concern,
We are writing to formally request an exemptive order from the SEC to initiate the approval and/or registration process for securities using Transparent Network Technology (TNT) blockchain. We seek your assistance under a unique legal theory, rather than simply requesting a no-action letter as a utility token.
We are not requesting an exemption from registration based on classification as a utility token. Instead, we seek SEC “approval-by-exemptive-order” for our product as a utility token that can represent and exchange fractional asset ownership of US dollar income-producing assets, for example. Additionally, we seek SEC regulatory registration and approval under the same legal framework that allows Bitcoin to operate independently of being an underlying asset of an ETF. TNT is a direct competitor to Bitcoin, offering several significant advantages:
Reduced Electricity Consumption: TNT technology consumes significantly less electricity compared to Bitcoin, which annually uses as much power as Argentina. Despite this reduced consumption, TNT is provably more secure.
Superior Security: Our blockchain features enhanced security measures that improve the integrity and reliability of transactions both ex-ante and ex-post, as detailed in our white paper. TNT is mathematically provably more secure than Bitcoin.
Full AML Compliance: TNT embeds comprehensive and transparent real-time Anti-Money Laundering (AML) compliance for all TNT-Bank transactions. In contrast, Bitcoin and other competing blockchains lack any AML functionality.
We are seeking an exemptive order instead of a no-action letter because, as the enclosed use case of using TNT bank money to monetize current gold reserves held by central banks illustrates, some of our intended use cases may fall outside the utility token exemption. We are unwilling and unable to bear that legal risk, especially considering we can offer our products outside the US, such as to mBridge, without violating any security laws.
Our objective is to introduce TNT technology as a direct competitor to Bitcoin and Ethereum, mirroring their current use cases. Given the superior technology in TNT, including embedded full regulatory AML compliance, we seek equitable regulation. Unequal treatment under the law, as represented by SEC regulations, would create a regulatory monopoly favoring inferior competitors like Bitcoin, which has de facto regulatory approval evidenced by legal Bitcoin-backed ETFs. We do not intend to offer any ETFs but seek equal legal status to Bitcoin, which any Fidelity client can legally own.
We urge the SEC to consider the implications of unequal treatment given the benefits offered by TNT technology. Our request for an exemptive order, rather than a no-action letter, is driven by the need for full legal certainty for our product offerings. Our principals are unwilling to bear any unnecessary legal risk and will not sell any non-fully approved security in the US. As an intermediate option, we could register as an ADR in the US the underlying TNT coin that represents fractional ownership of a carbon sink in India.
We believe TNT technology represents a significant advancement in the cryptocurrency space, providing a more efficient, secure, and compliant alternative to existing options. We respectfully request that the SEC grant us an exemptive order to facilitate the introduction of TNT technology to the market, ensuring fair and equitable treatment under the law. We wish to emphasize that due to our patent-pending batch processing technology, this is a one-time exemptive order that will not result in a flood of similar applications, owing to the unique and patented nature of our TNT product.
Using TNT Coins to Monetize Central Bank Gold Reserves
As we proceed to describe the use case referenced previously, it is crucial for the reader to understand the content of our white paper. However, before delving into the white paper, please review this legal brief, which explains its admissibility as evidence in court: School of Thought.
Our white paper is accessible at the following links:
For a concise summary of the white paper, without the unnecessary technical details, please refer to the following Q&A: Interview Presentation.
This contextual information will provide a foundational understanding of the use case we are about to present, ensuring clarity and comprehensiveness.
Suppose, for the sake of argument, that a subset of central banks, such as those of Russia, China, Saudi Arabia, and other countries that currently use and accumulate gold to back their currencies, decided to issue a digital currency directly backed by the gold held in their vaults. In this scenario, such a digital currency would represent fractional ownership of the gold held by these central banks or a designated portion of it.
For simplicity, let's consider three countries—referred to as A, B, and C in this example—each deciding to monetize a portion of their gold reserves: A with 1 ton, B with 3 tons, and C with 2 tons. If country C issued 100,000 monetary units, such as ‘C-GLD’ TNT bank coins, and considering that 2 metric tons of gold is approximately 64,301.5 troy ounces, each C-GLD coin would be convertible to 0.643 ounces of gold at central bank C on demand. Similar to how paper money used to be convertible to gold upon being presented to a bank teller, C-GLD would be convertible to gold upon being deposited into central bank C’s digital wallet, settled subsequently akin to futures contracts.
Each country could then settle payments with other countries in its own A, B, or C-GLD currencies, effectively taking us back to the pre-WWI gold standard, but without fractional reserve banking, offering 100% backing and real, honest true fractional ownership of gold metal instead. Just as you would own shares of IBM, you would own shares of the physical gold reserves held by each of the central banks. That is what these monetary units, A, B, and C-GLD TNT-Bank coins would effectively represent: ounces of physical gold.
Despite the fact that each of these monetary units—A, B, and C-GLD—would be backed by gold, the number of these coins will vary, and consequently, each of these coins will have its own market exchange rate to physical gold, which will define the exchange rates of A, B, and C-GLD coins to each other.
We selected this use case study due to the unique structure of TNT peer-to-peer nodes. In this scenario, central banks A, B, and C would collectively maintain a core node ring, forming a circle of trust, to which all other banks can send payment instructions. Banks A, B, and C could each provide one primary core node in this ring. All other banks (non-core ring peer-to-peer nodes) would send debit and other payment requests to either A, B, or C, and similarly, send all credit approvals to either A, B, or C. For example, a regular peer-to-peer node could send payments through B and approve credits via A.
This node structure ensures that the only way any denial of a transaction could occur is if all three central banks were to collude. Here, we assume that each central bank will require all banks under its control to set their dual (credit) approval public key to one controlled by their central bank. In other words, suppose you are a regular bank under central bank B’s jurisdiction. In this case, bank B would provide you with a public key for your wallet for approving incoming credits, and B could then reject any dirty funds from entering your wallet. Without this approval, B would not allow you to convert your funds into gold by wiring B-GLD into B’s wallet. By using one public key for approving all incoming credits, bank B is able to fully implement all AML requirements that are currently implementable by any fiat money bank.
Thank you for your attention to this matter. We look forward to your favorable consideration.
Sincerely,
Joseph Haykov
Managing Partner
HH Research and Management, LLLP