1. introduction
The cryptoasset market has grown exponentially in recent years, bringing both opportunities and challenges for companies and investors. However, the proper classification and regulation of digital tokens are key issues to ensure the safety of users and the sustainable development of the sector. In Brazil, the Brazilian Securities and Exchange Commission (CVM) has established clear guidelines for differentiating utility tokens from security tokens, making it essential for companies issuing digital assets to carry out an in-depth study of their legal nature.
1.1 The Importance of Regulation in the Token Market
The regulation of digital tokens is fundamental to bringing predictability and security to the market. A regulated utility token offers guarantees for investors, companies and consumers, avoiding legal risks and strengthening confidence in blockchain technology. Regulatory clarity allows companies to innovate without fear of unexpected legal obstacles.
1.2 The Role of the CVM in Defining Utility Tokens
The Brazilian Securities and Exchange Commission (CVM) establishes clear parameters on the classification of tokens. According to Guidance Opinion No. 40, tokens that do not grant profit sharing, do not represent an investment contract and do not have a specific function within an ecosystem are not securities. These criteria are essential for the analysis of KNN, which will be explored throughout the article.
1.3 The Meyer Axe and the Legal Validation of Kanna
Machado Meyer is one of the three largest law firms in Brazil, with extensive experience in the regulation of digital products and asset tokenization. The firm has advised major companies in the cryptoasset sector, helping to define legal strategies to ensure regulatory compliance.
The opinion issued by the firm concludes that KNN meets all the requirements of a Utility Token, reinforcing its legality and security for users and investors.
2. The Importance of a Regulated Token
2.1 Legal certainty and investor protection
Well-regulated digital tokens ensure transparency for investors and users, minimizing risks associated with regulatory uncertainty. CVM Guidance Opinion No. 40 emphasizes that tokens that do not involve the expectation of a financial return generated by third parties should not be considered securities:
“Digital assets that are used exclusively to access specific products and services, without generating the expectation of profitability, do not qualify as securities and are not subject to CVM regulation.”
2.2 Differentiation between Utility Token and Security Token
The CVM highlights three main factors to differentiate a Utility Token from a Security Token:
- Purpose of the token – If the token’s main function is to allow access to products and services, it is a Utility Token.
- Passive Income Generation – Tokens that offer profit sharing or financial returns are akin to securities.
- Dependence on Third Party Efforts – If the valuation of the token depends on a centralized entity, it can be considered a Security Token.
These criteria are key to demonstrating why KNN is a Utility Token, as detailed in Machado Meyer’s legal analysis.
3. The Machado Meyer Legal Opinion and the KNN Classification
Before we delve into the analysis of the legal opinion, it is essential to understand what distinguishes a Utility Token from a security in the Brazilian context. As mentioned earlier, the CVM and other regulatory authorities evaluate aspects such as the purpose of the token, its economic structure and the way it is used within an ecosystem.
Machado Meyer ‘s analysis highlighted three main points that confirm KNN’s classification as a Utility Token, ensuring its regulatory compliance and ruling out any classification as a security.
3.1. KNN does not represent a participation, investment contract or security
Excerpt from the document:
“The KNN does not grant its holders any right to participate in the profits or assets of Kanna, nor is it characterized as a collective investment contract.”
The classification of a token as a security depends on its adherence to the concept of a collective investment contract, as established by the Howey Test and reinforced by CVM Opinion No. 40. According to this test, an asset will be considered a security if it involves:
- An investment of money;
- In an ordinary company;
- With the expectation of profits;
- Derived from the efforts of others.
For a token to be classified as a security, the answer to all four of the above criteria must be positive. In the case of KNN, Machado Meyer ‘s analysis concludes that most of these criteria do not apply, ruling out its classification as a security token.
- Investment of money: Although KNN can be acquired through exchange or rewards in the Kanna ecosystem, its main purpose is not to raise money for the issuing company.
- Joint venture: KNN does not grant any shareholding in Kanna or its revenues.
- Profit expectation: The appreciation of the token is not guaranteed and does not depend on Kanna’s financial performance.
- Third-party effort: The rewards earned for using KNN within the platform are defined by the effort of the users themselves, when evaluating ESG certification criteria, and not by third-party effort.
Thus, it is clear that the KNN does not fit the definition of a security, reinforcing its character as a Utility Token.
3.2 KNN is a Utility Token, Linked to the Kanna Ecosystem.
Excerpt from the document:
“KNN is used exclusively within the Kanna ecosystem to access platform-specific services, certifications and benefits.”
The main criterion that defines a Utility Token is its applicability within a specific ecosystem. In the case of KNN, its function is directly linked to its use within Kanna, allowing its holders to access services such as sustainability certifications, verification of production processes and internal benefits.
Machado Meyer ‘s legal opinion reinforces that KNN is not speculative in nature, as it is not promoted as an investment asset. It does not generate the expectation of a financial return, but rather functional benefits within the platform. This differentiates it completely from a Security Token, which seeks to attract investors with the promise of future appreciation.
3.3 The Token’s Success Depends on the Ecosystem and Its Users, Not Third Parties
Excerpt from the document:
“Unlike a security, whose financial return depends on the efforts of third parties, the success and adoption of KNN depends directly on the token holders themselves.”
In the case of securities, investors expect a centralized entity to act to guarantee the asset’s financial return. KNN does not follow this logic, as its success is directly related to its use by the holders themselves within the ecosystem.
An essential aspect that reinforces this characteristic is Kanna’s reward system. The rewards obtained through sustainability certification depend exclusively on the efforts of each holder, who must verify information and answer questionnaires about the audited processes.
In this way, the return from KNN is not derived from Kanna’s efforts as a company, but from the active participation of the community. This model completely removes the token from the definition of a Security Token, as established by the CVM and Opinion No. 40.
Furthermore, this structure reinforces the link with item 2 of this article, as it demonstrates that the rewards generated come from the use of the token and the efforts of the holders, and not from an external valuation promoted by third parties or the issuing company.
3.4 Conclusion of the Legal Analysis – Compliance Checklist
Based on the regulatory criteria analyzed by Machado Meyer and the guidelines of CVM Opinion No. 40, KNN meets all the requirements to be classified as a Utility Token. See below for the main points that support this conclusion:
✅ Does not represent a collective investment contract – There is no promise of a financial return to holders.
✅ Used for internal Kanna services and benefits – Has a clear function within the ecosystem.
✅ There is no expectation of profits linked to the efforts of third parties – Your value depends exclusively on your usability on the platform.
✅ Does not confer participation in Kanna’s equity or profits – Does not grant rights similar to those of traditional shares or investments.
✅ The rewards obtained depend on the holder’s own efforts – Active participation is necessary to access benefits.
✅ Structure aligned with CVM Opinion No. 40 – Follows the guidelines established for utility tokens.
This analysis confirms that KNN is a legitimate Utility Token, guaranteeing its regulatory compliance and reinforcing the legal security of Kanna and its users.
4. Benefits of classifying KNN as a Utility Token
The correct classification of KNN as a Utility Token not only ensures regulatory compliance, but also strengthens Kanna’s ecosystem and generates direct benefits for its users and investors. Below, we highlight the main positive impacts of this categorization:
4.1 Clear regulation and legal certainty
One of the main advantages of classifying KNN as a Utility Token is the legal certainty it provides its holders and the Kanna ecosystem. With the validation of Machado Meyer and its compliance with the guidelines of CVM Opinion No. 40, the token is not subject to the same securities regulations, avoiding possible regulatory questions in the future.
In addition, this regulatory clarity offers a safer environment for companies wishing to use KNN in their operations and for investors looking for tokens that follow a sustainable model and comply with legal standards. Avoiding regulatory uncertainty means minimizing compliance risks, ensuring that Kanna can operate without unexpected legal disruptions.
4.2 Greater Adoption and Integration into the Ecosystem
KNN ‘s classification as a Utility Token allows it to be integrated directly into the Kanna ecosystem without legal restrictions that could compromise its usability. This means that token holders can use it to access exclusive services such as sustainability certifications, audits of production practices and other features of the platform.
This integration significantly increases the adoption and circulation of the token, as users perceive real value in its possession, as well as ensuring that it functions as a real instrument of engagement within the platform. The continuous and organic use of the token strengthens its relevance, ensuring that it remains a functional asset within the ecosystem.
Another important point is that this categorization allows Kanna’s partner companies to adopt KNN in their operations, further extending its usefulness and increasing its demand in the market.
4.3 Avoids CVM Regulatory Restrictions
Tokens that are considered securities need to follow strict regulations from the CVM (Securities and Exchange Commission), which can limit their circulation and adoption. As KNN does not fall into this category, it does not face the same regulatory barriers as a Security Token, allowing it greater freedom to be traded and used.
In addition, the categorization of KNN as a Utility Token:
- It avoids the CVM’s strict regulatory requirements, such as compulsory registration and specific audits;
- It guarantees a sustainable business model, as Kanna can continue to expand the use of the token without worrying about complex legal restrictions;
- It facilitates listings on exchanges, as utility tokens have fewer barriers to being accepted by trading platforms.
As a result, KNN can be widely used in Brazil and other countries, as long as the regulatory guidelines of each market are respected, allowing for an organic and healthy expansion of the project.
4.4 Openness to Strategic Partnerships and Innovation
Legal certainty and the appropriate categorization of KNN as a Utility Token make the project much more attractive for strategic partnerships with companies, institutions and platforms that wish to operate within a secure and transparent model. Companies in the cannabis, ESG and blockchain sectors can integrate into the Kanna ecosystem safely, without regulatory fears.
In addition, the recognition of KNN as a Utility Token strengthens innovation within the ecosystem, allowing new functionalities and applications to be developed to expand its use. Kanna will be able to explore new ways of using the token, such as reward systems, exclusive benefits for holders and access to new certification features.
The legal validation of the token also makes it easier to attract institutional investors, who often look for regulated projects in line with market standards to diversify their portfolios. This could significantly expand Kanna’s growth and consolidate KNN as one of the most relevant utility tokens in the sector.
5. Conclusion
The proper classification of KNN as a Utility Token is not just a regulatory issue, but a fundamental pillar for ensuring legal certainty, transparency and the sustainable growth of Kanna’s ecosystem. The Legal Opinion of Machado Meyer, one of Brazil’s largest law firms, reinforces that KNN does not fit the definition of a security according to the criteria of CVM Opinion No. 40 and the Howey Test, ruling out any classification as a Security Token. This clear regulatory framework allows the token to be widely used within the platform, boosting the adoption, innovation and reliability of the project. In addition to protecting investors and users, this categorization opens doors to new strategic partnerships, guarantees a sustainable business model and avoids regulatory barriers that could limit its application. With this, KNN is positioned as a legitimate and essential utility token for the Kanna ecosystem, providing functional benefits to holders and enabling organic and structured growth within the cryptoassets market.
