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Regulatory Overview

Version: 1.0

Last Revised: April 2026

Important Notice — Please Read Carefully​

This Regulatory Overview (the "Overview") is provided by Overlayer Labs Ltd, a business company incorporated under the laws of the British Virgin Islands (the "Operator", "Overlayer Labs", "we", "us" or "our"), in respect of the Overlayer Protocol (the "Protocol"), the decentralized application and related interfaces (the "Interface"), the digital assets generated by or through the Protocol (the "Overlaid Assets"), the governance and utility token of the ecosystem (the "OVER" token), and related services (together, the "Services").

The primary purpose of this Overview is to:

(a) describe, in consolidated and public-facing form, the intended legal and technical positioning of the Protocol, the Services, Overlaid Assets and the OVER token under a range of regulatory frameworks;

(b) explain the architectural and structural choices (including the use of a non-custodial design, a Receipt-Token-style token model and a separation of the operating and stewardship entities) that underpin that positioning;

(c) assist Governmental Authorities, supervisory bodies, institutional counterparties, auditors, exchange listing desks and similar professional stakeholders in understanding the nature of the activities undertaken in connection with the Protocol; and

(d) clarify the limits of that positioning, including the residual risk that Governmental Authorities, courts or arbitral tribunals may reach different conclusions.

This Overview is provided for informational purposes only. It does not constitute legal, regulatory, tax, investment, financial or other professional advice, is not an offer or solicitation to acquire any Digital Asset, and is not a substitute for any filing, notification, registration, licence or approval that may be required under applicable Laws. It does not — and is not intended to — confer any right on any person, contractual or otherwise, and no person may rely on it as a representation or warranty. The conclusions described in this Overview represent the Operator's current interpretation of the applicable frameworks, in light of available guidance as of the date above, and may change over time.

This Overview must be read together with, and is subject to, the Terms of Use, the Privacy Policy, the Cookie Policy, the Protocol Risk Disclosure and the Legal Disclaimers (together, the "Legal Framework"). Capitalized terms used but not defined in this Overview have the meanings given to them in the Terms of Use. In the event of any inconsistency between this Overview and the Terms of Use on non-regulatory matters, the Terms of Use shall prevail.

Users, holders and prospective counterparties are strongly encouraged to obtain their own independent legal, regulatory and tax advice before using the Services or interacting with the Protocol, Overlaid Assets or the OVER token, and must not rely on this Overview as such advice.

1. Executive Summary​

1.1 Summary of Positioning​

The Overlayer ecosystem is designed as a non-custodial, middleware DeFi infrastructure that enables Users to deploy existing crypto-assets (for example, third-party stablecoins) into external DeFi strategies (for example, overcollateralised lending markets operated by third parties, including Aave V3) through autonomous smart contracts, receiving in return Overlaid Assets that represent a claim in rem against the smart-contract-held positions.

The intended regulatory positioning, in summary, is as follows:

(a) Overlaid Assets are designed and held out as non-custodial Receipt Tokens, conceptually analogous to liquid staking tokens (LSTs) and DeFi lending receipts (such as Aave aTokens). They are not electronic money tokens (EMTs), asset-referenced tokens (ARTs), payment stablecoins, endogenously collateralized stablecoins, securities, collective-investment-scheme units, bank deposits, insurance products or any other regulated instrument. They are redeemable only on a crypto-to-crypto basis through autonomous smart contracts, and confer no fiat-redemption claim against the Operator, the Foundation or any other Ecosystem Entity.

(b) The OVER token is intended solely as a utility and governance token for coordinating the Overlayer ecosystem. It is not a security, investment contract, deposit, payment instrument, regulated derivative, collective-investment-scheme unit or other financial instrument. It has no intrinsic value and should not be acquired with any expectation of profit from the efforts of the Operator, the Foundation or any other person.

(c) The Operator is limited in scope to the development, maintenance and operation of the Interface and related off-chain infrastructure. It does not take custody of User assets or private keys, does not operate an exchange, order-book or matching engine, does not act as a broker, dealer, investment manager, portfolio manager, bank, credit institution, payment institution, e-money institution, money services business, custodian or trustee, and does not interface with the traditional fiat banking system in respect of User funds.

(d) The Foundation is limited in scope to ecosystem stewardship, intellectual-property ownership, treasury management for its own account and high-level governance coordination. It is not a contractual counterparty to Users, does not provide the Services, and does not conduct public token offerings to the public from the Cayman Islands without specific structuring.

(e) No group entity in the United Kingdom is involved in the DeFi stack.

(f) Yield associated with Overlaid Assets is generated by Third-Party Protocols (for example, borrowing demand on Aave V3) and passed through programmatically by smart contracts. It is not paid, granted, promised, guaranteed or funded by the Operator, the Foundation or any other Ecosystem Entity.

1.2 Residual Reclassification Risk​

Notwithstanding the positioning described in this Overview, a Governmental Authority, court or arbitral tribunal may adopt a different characterization of any component of the ecosystem. The Operator accepts that, as described in the Protocol Risk Disclosure and the Legal Disclaimers, such reclassification is a material risk. This Overview does not purport to eliminate that risk; rather, it explains the basis of the Operator's current positioning and the operational measures it takes to support that positioning.

2. Scope, Purpose and Limitations​

2.1 Scope of This Overview​

This Overview addresses the principal regulatory frameworks the Operator considers most materially relevant to the Protocol, the Services, Overlaid Assets and the OVER token at the date above, namely:

(a) the European Union framework for crypto-assets, in particular Regulation (EU) 2023/1114 on Markets in Crypto-Assets ("MiCA") and related measures;

(b) the United States framework for payment stablecoins, in particular the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (the "GENIUS Act"), together with complementary federal and state regimes;

(c) the United Kingdom perimeter, including the Financial Services and Markets Act 2000 ("FSMA"), the Financial Services and Markets Act 2023, the Regulated Activities Order ("RAO"), the Electronic Money Regulations 2011 ("EMRs"), the Payment Services Regulations 2017 ("PSRs") and forthcoming UK stablecoin and crypto-asset regimes;

(d) virtual asset service provider ("VASP"), crypto-asset service provider ("CASP") and digital asset service provider ("DASP") regimes in the British Virgin Islands, the Cayman Islands and other relevant jurisdictions;

(e) sanctions, anti-money-laundering ("AML") and counter-terrorist-financing ("CFT") regimes, including those administered by OFAC, the EU, the UK and the United Nations; and

(f) analogous frameworks in Switzerland, Singapore, Hong Kong, the United Arab Emirates, Japan, Canada, Brazil and other jurisdictions, at a high level and without detailed analysis.

2.2 Not an Exhaustive Review​

This Overview is a summary of the Operator's current positioning only. It does not purport to cover every Law, guidance document or enforcement position that may apply, nor does it review the positioning of Third-Party Protocols, Third-Party Services, Wallet providers, stablecoin issuers or other ecosystem participants, each of which is subject to its own regulatory treatment.

Nothing in this Overview constitutes legal, regulatory, tax, investment or financial advice. The Operator has obtained, or expects to obtain, legal advice from qualified counsel in relevant jurisdictions as part of its ongoing operations; however, this Overview is not a substitute for such advice and may not reflect the advice received. No person should rely on this Overview in making any decision, whether as a User, counterparty, investor, regulator or otherwise. Any reliance is at the reliant person's own risk.

2.4 Positions Are Not Binding on Governmental Authorities​

The Operator's positioning is not binding on any Governmental Authority, supervisory body, court or arbitral tribunal. Each such authority retains independent jurisdiction to evaluate, reach its own conclusions, and, where applicable, take enforcement or supervisory action. As described in the Protocol Risk Disclosure, reclassification risk is a material, ongoing and unavoidable feature of the present regulatory environment for DeFi, stablecoins and related technology.

The regulatory treatment of crypto-assets, DeFi protocols and related activities is rapidly evolving. Relevant Laws, regulations, guidance and enforcement priorities are subject to change, sometimes with little or no notice. The Operator monitors such developments but does not warrant that this Overview is complete, accurate or current at any particular time beyond the date above.

3. Entities, Roles and Governance​

3.1 Overlayer Labs Ltd (BVI) — Operator​

Overlayer Labs Ltd is a business company incorporated in the British Virgin Islands and serves as the operational service company for the Overlayer project. Its principal functions include:

(a) the development, testing, maintenance and upgrade of the Protocol codebase and related technical components;

(b) the operation of the Interface (including the official Website, dashboards and related off-chain infrastructure) in a non-custodial manner;

(c) coordination of third-party audits, bug bounty programmes and security measures;

(d) contracting with operational vendors and service providers (including hosting, CDN, analytics, security, RPC, indexing, compliance and communication providers);

(e) communication with Users, partners and the community through Official Channels; and

(f) acting as the single contracting counterparty under the Terms of Use, the Privacy Policy, the Cookie Policy, the Protocol Risk Disclosure and the Legal Disclaimers.

Overlayer Labs does not:

(a) provide custodial services for User assets or private keys;

(b) operate an exchange, order-book, matching engine or internal ledger;

(c) act as a broker, dealer, market maker or investment manager;

(d) provide payment services, money remittance, money-transmission or e-money issuance;

(e) take deposits or other repayable funds from the public;

(f) interface with the traditional fiat banking system in respect of User funds; or

(g) otherwise provide regulated financial services, except where expressly authorised under applicable Laws.

3.2 Overlayer Foundation (Cayman Islands) — Ecosystem Steward​

Overlayer Foundation is a foundation company incorporated in the Cayman Islands. The Foundation acts as the ecosystem-stewardship entity and, subject to its constitutional documents and applicable Laws, focuses on:

(a) holding and protecting intellectual property, trademarks, domains and brand assets related to Overlayer;

(b) holding ecosystem treasury assets for its own account (not as custodian of User funds) and funding development and ecosystem activities;

(c) providing grants, bounties and other funding to the Operator and to independent ecosystem contributors; and

(d) providing high-level governance and strategic oversight, within the limits of its constitutional documents.

The Foundation is not:

(a) the contractual counterparty to Users under the Legal Framework;

(b) a provider of custodial, exchange, brokerage, dealing, payment, investment-management or similar services;

(c) an issuer of Overlaid Assets that holds itself out as assuming a par-value redemption liability; or

(d) a participant in public token offerings or fundraising activity from or in the Cayman Islands, unless and until specifically structured and authorised as part of a future, separate framework.

3.3 UK Entities and Other Non-Involved Group Members — Excluded from DeFi Stack​

Any member of the Overlayer corporate group that is incorporated in the United Kingdom, or that has not been expressly identified as involved in the Services or the Protocol, is fully excluded from the Overlayer DeFi stack. Without limitation:

(a) no UK entity is a party to the Service Agreement between the Foundation and the Operator;

(b) no UK entity is a party to any contract with DeFi-related third-party vendors (hosting, RPC, indexing, security, marketing or similar providers);

(c) no UK entity appears as a counterparty in the Legal Framework, marketing materials, public communications or Official Channels in respect of the Protocol or the OVER token; and

(d) no UK entity holds intellectual property, domains or treasury assets related to the Overlayer Protocol, Interface or brand.

Any UK entity within the group that is used at all is limited to non-crypto, non-DeFi functions (such as generic consulting, administrative support or unrelated activities) that are structurally and publicly separated from the Overlayer DeFi project.

3.4 Independent Contributors and Ecosystem Participants​

The broader ecosystem includes, or may include over time: independent developers and contributors; integrators building their own interfaces, SDKs or dashboards on top of the Protocol; liquidity providers and institutional users; auditors, security researchers and risk analysts; governance participants, delegates and grant recipients; and other third parties. Except where the Operator or the Foundation has expressly engaged a person under a signed written agreement for a specific purpose, such persons act in their own capacity and are not employees, agents, partners or representatives of the Operator or the Foundation and have no authority to bind, speak for or create obligations for either.

3.5 Multisig Signers and Governance Participants​

Certain administrative powers over specific Protocol components or treasury assets may be exercised through multi-signature wallets ("Multisigs"), whose signers may include parties unaffiliated with the Operator or the Foundation. The Operator does not control the decisions of Multisig signers who are not its employees, contractors or agents and, as stated in the Terms of Use, shall not be liable for their actions or inactions. Governance token holders, delegates and proposal authors likewise act in their own capacity.

4. Technological Architecture​

4.1 Non-Custodial Design​

The Protocol and the Services are designed to ensure that:

(a) Users interact with the Protocol via self-hosted Wallets (browser extensions, hardware wallets, mobile wallets, smart-contract wallets or similar) that are not controlled by the Operator or any Ecosystem Entity;

(b) the Operator does not take possession of Users' private keys or operate internal account ledgers on their behalf;

(c) all asset movements occur on-chain, between addresses that Users (or their chosen third parties) control and smart contracts (of the Protocol or Third-Party Protocols); and

(d) the Interface merely constructs transaction payloads and presents information — it does not itself execute transactions on behalf of Users.

This non-custodial architecture is a central feature of the Operator's regulatory positioning. It is designed to reduce the likelihood that the Operator or the Foundation are characterised as "virtual asset custodians" under VASP frameworks; as "deposit-taking institutions", "credit institutions" or "payment institutions"; or as "brokers", "dealers" or "portfolio managers" under securities or investment frameworks.

4.2 Interface Distinct From Protocol​

The Interface is operated by the Operator and is distinct from the Protocol. The Protocol is open-source, permissionless and autonomous smart-contract code, and is not a legal person. Any User may interact with the Protocol directly on-chain — using any self-hosted wallet, any RPC provider, any block explorer or any third-party interface — without using the Interface and without any involvement of the Operator or any Ecosystem Entity.

4.3 Modular and Composable Smart Contracts​

The Protocol is a modular system of smart contracts and related on-chain components, which may include core wrapping, mint, burn and strategy contracts; routing and integration contracts with Third-Party Protocols; messaging and bridging layers; oracle and price-feed integrations; and third-party SDKs and developer tools. Composition with Third-Party Protocols (including, without limitation, Aave V3) is a design feature that enables yield-bearing functionality through market mechanisms that are external to the Protocol and external to the Operator.

4.4 Value Mechanism — Passive Arbitrage, Not Managed Peg​

Overlaid Assets derive their value-correspondence with underlying Digital Assets through passive arbitrage and smart-contract composition, not through active reserve management by the Operator. If an Overlaid Asset trades at a discount or premium on secondary markets, market participants (not the Operator) may be incentivised to arbitrage the deviation by minting or burning Overlaid Assets at the smart-contract level in exchange for the underlying Digital Asset. This mechanism is decentralized and market-driven; it does not involve the Operator managing a "reserve of assets" to defend a peg, which is the hallmark of regulated ART issuers under MiCA and of regulated payment stablecoin issuers under the GENIUS Act.

4.5 Yield Is Pass-Through, Not Paid by the Operator​

The yield associated with Overlaid Assets is generated by Third-Party Protocols (for example, borrowing demand and utilization on Aave V3 lending markets, as reflected in the supply-side interest rate) and is passed through programmatically by smart contracts. It is not paid, granted, promised, guaranteed or funded by the Operator, the Foundation or any other Ecosystem Entity. Rates are set by the market supply/demand dynamics of the relevant Third-Party Protocol, are variable, may change at any time, may be reduced to zero and may become negative. This pass-through structure is central to the Operator's position that yield is not "interest" paid by an issuer for the purposes of MiCA Article 40 or the GENIUS Act §4(a)(11).

5.1 Receipt Token Doctrine​

Overlaid Assets are designed, structured and held out as non-custodial Receipt Tokens, conceptually analogous to liquid staking tokens and DeFi lending receipts. They represent a cryptographic proof of a pro-rata position in one or more underlying Digital Assets allocated into Third-Party Protocols. They serve as a technical "key" to access and unwind that position, rather than as a new unit of currency, deposit or investment.

5.2 In Rem vs. In Personam​

The legal qualification of Overlaid Assets rests on the transition from a personal credit right (a claim in personam) against a central issuer, to a cryptographic real right (a claim in rem) over a decentralized smart-contract position. Overlaid Assets confer:

(a) no personal credit claim for fiat redemption against the Operator, the Foundation or any other Ecosystem Entity; and

(b) a technical, permissionless right to burn the Overlaid Asset at the smart-contract level and receive the corresponding underlying Digital Asset, subject to the operational status of the relevant smart contracts and Third-Party Protocols.

5.3 Crypto-to-Crypto Redemption Only​

Redemption of Overlaid Assets occurs strictly on a crypto-to-crypto basis through direct interaction with smart contracts. No Overlaid Asset is redeemable by the Operator, the Foundation or any Ecosystem Entity for fiat currency, bank deposits, central-bank money, electronic money, monetary value, stored value or any other payment instrument.

5.4 No Issuer Liability​

Unlike EMTs, ARTs, payment stablecoins or bank deposits, Overlaid Assets do not constitute a claim, liability, debt or obligation of the Operator, the Foundation or any Ecosystem Entity. Their stability (to the extent present) is a mechanical result of smart-contract composition and market arbitrage rather than discretionary reserve management by a legal person.

5.5 No Regulatory Guarantees​

Overlaid Assets are not backed by, guaranteed by, or insured by any Governmental Authority, central bank, deposit-insurance scheme, compensation fund, sponsor or private insurer. No holder of an Overlaid Asset has recourse to any such scheme in the event of loss.

5.6 Reclassification Risk Acknowledged​

Notwithstanding the positioning described above, the Operator expressly acknowledges that a Governmental Authority, court or arbitral tribunal may reach a different conclusion. In such a case, the Operator may be required to restrict, modify, suspend, discontinue or restructure aspects of the Services, the Protocol, Overlaid Assets or the OVER token, or may face enforcement action. Users are referred to the Protocol Risk Disclosure and the Legal Disclaimers for further information regarding this risk.

6. Position Under MiCA (European Union)​

6.1 Starting Point — Article 3(1)(5)​

Overlaid Assets fall within the broad definition of "crypto-asset" under Article 3(1)(5) of MiCA, as "a digital representation of a value or of a right which may be transferred and stored electronically, using distributed ledger technology or similar technology." The substantive analysis, however, turns on whether Overlaid Assets constitute EMTs (Title IV), ARTs (Title III) or another form of crypto-asset subject to Title II.

6.2 Overlaid Assets Are Not EMTs​

An e-money token, under Article 3(1)(7) of MiCA, purports to maintain a stable value by referencing the value of one official currency. Overlaid Assets reference the value of another crypto-asset (such as a third-party stablecoin), not directly a fiat currency. Moreover, the definitive characteristic of e-money, under EMD2 and MiCA, is that the holder has a par-value, fiat-denominated redemption claim against the issuer. Overlaid Assets:

(a) reference another digital asset, not directly an official currency;

(b) confer no par-value fiat-redemption claim against the Operator, the Foundation or any other Ecosystem Entity;

(c) are redeemable only on a crypto-to-crypto basis at the smart-contract level; and

(d) are not marketed as "electronic money" or as a "digital currency."

For these reasons, Overlaid Assets are not EMTs. The Operator cannot, technically and legally, comply with EMT redemption obligations under Article 49 MiCA (which require redemption in central bank or commercial bank money), because the Protocol does not hold, and the Operator does not operate, any fiat-banking rails.

6.3 Overlaid Assets Are Not ARTs​

An asset-referenced token, under Article 3(1)(6) of MiCA, purports to maintain a stable value by referencing any other value or right, or a combination thereof, including one or more official currencies. ART issuers are regulated under Title III, which imposes prudential, governance, reserve-management, conduct-of-business and disclosure requirements. Overlaid Assets are not ARTs because:

(a) the Operator does not manage a discretionary "reserve of assets" to stabilise their value (Articles 36–38 MiCA). The "backing" is a 1:1 deposit of a third-party Digital Asset into a Third-Party Protocol's smart contract, visible on-chain and mechanically composed rather than actively managed;

(b) the Operator does not exercise the investment, custody or liquidity-management discretion contemplated for ART issuers;

(c) the Operator has no par-value redemption liability against which a "reserve" would need to be maintained; and

(d) Overlaid Assets are more naturally characterised as wrapper or receipt tokens — conceptually aligned with instruments such as aTokens (Aave) and stETH (Lido) — which emerging European supervisory practice has not treated as ARTs.

Article 40 of MiCA, which prohibits ART issuers from "granting interest" in relation to ARTs, therefore does not apply. Yield associated with Overlaid Assets is generated by Third-Party Protocols and passed through programmatically; the Operator does not "grant" interest on a liability it does not owe.

6.4 Title II — Crypto-Assets Other Than ARTs or EMTs​

On the analysis above, Overlaid Assets fall within the residual Title II category of "crypto-assets other than asset-referenced tokens or e-money tokens." Title II imposes crypto-asset whitepaper requirements, notifications to the competent national authority (NCA), marketing-communication rules and conduct-of-business obligations on the "offeror" or the person seeking admission to trading on a trading platform, but does not require authorisation in the sense of ART/EMT issuer authorisation.

6.5 CASP Considerations​

Under Article 3(1)(15) MiCA, a crypto-asset service provider (CASP) is a legal person that provides, as a profession, one or more of the crypto-asset services listed in Article 3(1)(16). The Operator's current intended positioning is not to act as a CASP. The Operator does not:

(a) provide custody and administration of crypto-assets on behalf of clients;

(b) operate a trading platform for crypto-assets;

(c) exchange crypto-assets for funds or for other crypto-assets;

(d) execute orders on behalf of clients;

(e) place crypto-assets;

(f) receive and transmit orders on behalf of clients;

(g) provide advice on, or portfolio management in respect of, crypto-assets; or

(h) provide transfer services for crypto-assets on behalf of clients.

The Interface is a non-custodial, informational and transaction-constructing front-end that does not execute transactions on behalf of clients; the Operator does not hold client assets or take client orders.

6.6 Recital 22 — Fully Decentralized Provision​

Recital 22 of MiCA indicates that "where crypto-asset services are provided in a fully decentralised manner without any intermediary, they should not fall within the scope of this Regulation." To the extent Users interact directly with the Protocol on-chain, without any intermediation by the Operator, such interactions fall outside MiCA's operational scope. The Operator acknowledges that national supervisory practice on Recital 22 continues to develop.

6.7 Whitepaper, Marketing and Notification​

Where the Operator (or any other person acting as "offeror") intends to offer Overlaid Assets to retail clients in the EU within Title II's scope, the applicable whitepaper, notification and marketing-communication requirements will be assessed and addressed on a case-by-case basis, in consultation with qualified EU counsel. Consistent with Section 5.4 of the Terms of Use, the acquisition, minting, subscription or distribution of Overlaid Assets is not currently offered, directed or available to persons with their habitual residence, tax residence or registered office in the EU or the EEA.

6.8 Significance Thresholds​

MiCA's "significance" regime for ARTs and EMTs (Articles 39 and 56) is not expected to apply to Overlaid Assets, given their characterization as Title II assets. Should Overlaid Assets be reclassified as ARTs or EMTs in the future, the significance thresholds and the associated EBA supervisory regime would need to be reassessed.

7. Position Under the GENIUS Act (United States)​

7.1 Starting Point — the "Payment Stablecoin" Definition​

Section 2(22) of the GENIUS Act defines a "Payment Stablecoin" as a digital asset that satisfies all of three concurrent prongs:

(a) the Purpose Prong — it is, or is designed to be, used as a means of payment or settlement;

(b) the Redemption Prong — the issuer is obligated to convert, redeem or repurchase the asset for a fixed amount of "monetary value"; and

(c) the Stability Prong — the issuer represents that the asset will maintain a stable value relative to the value of a fixed amount of "monetary value."

Under Section 2(17), "monetary value" is defined narrowly as national currency or a deposit denominated in a national currency, and excludes digital assets. The GENIUS Act therefore regulates the "gateway" between fiat and crypto (Circle, Tether and similar issuers) rather than the internal "plumbing" of DeFi (wrapper tokens, receipt tokens, liquid staking tokens).

7.2 Overlaid Assets Are Not Payment Stablecoins​

Applying the three-prong test:

(a) Purpose Prong — While Overlaid Assets can be used for settlement between Users (as with any transferable crypto-asset), they are primarily marketed and designed as yield-bearing Receipt Tokens representing underlying DeFi positions, not as a means of payment.

(b) Redemption Prong — The Operator has no obligation (contractual, fiduciary, statutory or otherwise) to redeem Overlaid Assets for "monetary value." Redemption is crypto-to-crypto only, executed autonomously by smart contracts based on the availability of the underlying Digital Asset in the liquidity pool. The underlying Digital Asset (for example, USDC) is itself a "digital asset" under the GENIUS Act and not "monetary value." Accordingly, the redemption obligation — even if it were viewed as imposed on an issuer — is for a digital asset, not for monetary value. This is fatal to the Payment Stablecoin characterization.

(c) Issuer — There is no single "issuer" with a balance-sheet liability in respect of Overlaid Assets. Minting and burning are performed autonomously by smart contracts; the Operator does not assume a debt obligation. The GENIUS Act's concept of "issuer" presupposes a corporate entity with a balance sheet against which redemption can be enforced. Where the "obligation" is code-based and non-recourse, the statutory framework does not fit.

For these reasons, Overlaid Assets are not Payment Stablecoins under the GENIUS Act.

7.3 Overlaid Assets Are Not Endogenously Collateralized Stablecoins​

Section 14(b) of the GENIUS Act (and analogous provisions of related bills) addresses "endogenously collateralized payment stablecoins" — digital assets that "rel[y] solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price." The prototype for this category is Terra/Luna (UST/LUNA).

Overlaid Assets are exogenously collateralized by third-party Digital Assets (for example, USDC created by Circle, not by Overlayer). The collateral is not issued by the "same originator." Overlaid Assets therefore fall outside this category and are not subject to the scrutiny or restrictions attaching to it.

7.4 The Yield Prohibition Does Not Apply​

Section 4(a)(11) of the GENIUS Act prohibits a "permitted payment stablecoin issuer" or a "foreign payment stablecoin issuer" from paying the holder of any payment stablecoin any form of interest or yield "solely in connection with the holding... of such payment stablecoin." Because Overlaid Assets are not Payment Stablecoins and the Operator is not a permitted payment stablecoin issuer, this prohibition does not apply to Overlaid Assets.

In addition, yield on Overlaid Assets is:

(a) not paid by the Operator but passed through from Third-Party Protocols (where borrowers pay interest on loans);

(b) arguably paid in connection with an active economic activity (providing liquidity to Third-Party Protocol markets), rather than "solely in connection with holding"; and

(c) generated by a decentralized lending market that itself is not a payment-stablecoin issuer.

7.5 Digital Asset Service Provider ("DASP") Exclusions​

The GENIUS Act defines "Digital Asset Service Provider" but explicitly excludes certain activities, including (at a high level) "distributed ledger protocols" and entities engaged in the development of self-custodial software interfaces. The Operator's positioning relies on these exclusions:

(a) the Operator's role is limited to developing software, operating the Interface, deploying immutable or governance-constrained smart contracts, and facilitating governance;

(b) the Operator does not exchange digital assets for monetary value (it facilitates on-chain crypto-to-crypto interactions through smart-contract code) and does not custody user funds;

(c) the Interface is a non-custodial software interface, akin to the tools contemplated by the DASP exclusions; and

(d) fiat on-ramp and off-ramp functionality, to the extent available to Users, is provided by third-party licensed providers, not by the Operator.

7.6 No Federal Banking Charter or State MTL Required​

Because Overlaid Assets are not Payment Stablecoins and the Operator is not engaged in payment-stablecoin issuance, the Operator does not require a federal banking charter (OCC national trust charter, for example) or an equivalent state trust charter (such as a NYDFS limited-purpose trust charter) under the GENIUS Act's PPSI framework. Separately, because the Services are non-custodial and do not involve the transmission of "funds" in the BSA/FinCEN sense, the Operator's positioning is that state money-transmitter licences ("MTLs") are not required; however, state-level interpretations remain uncertain and are continuously monitored.

7.7 SEC and CFTC Considerations​

Overlaid Assets are not designed as investment contracts under SEC v. W.J. Howey Co. They are Receipt Tokens representing a claim against a pool of third-party Digital Assets deployed by the holder's own prior action, with yield generated by decentralized market dynamics rather than by a common enterprise managed by a central promoter. Recent SEC Division of Corporation Finance guidance on liquid-staking tokens and receipt tokens supports the view that properly structured receipt tokens are not securities where the issuing entity performs only ministerial tasks. The Operator's position is that Overlaid Assets are consistent with that guidance. CFTC commodity-based classification is likewise not designed for, and the Protocol does not offer, derivatives, leveraged retail transactions or margined commodity products.

7.8 Marketing and Public Communication Constraints​

In line with Section 4(a)(9) and related provisions, the Operator and the Foundation refrain from marketing Overlaid Assets as "legal tender," "issued by the United States," "guaranteed by the U.S. Government," "FDIC-insured," "digital dollars," "currency" or equivalent terms. Public communications emphasise Receipt-Token, wrapper, LST-analogue and DeFi-receipt terminology, consistent with the underlying legal characterisation.

7.9 Geographic Approach to U.S. Persons​

Pending clarity under the GENIUS Act and related regimes (including state-level interpretations), the Terms of Use designate the United States of America and its territories and possessions as a Prohibited Jurisdiction for the purposes of access to the Services. The Operator reserves the right to revisit this position if, and when, applicable frameworks clarify the treatment of Receipt Tokens and non-custodial DeFi interfaces.

8. Position Under the United Kingdom Framework​

8.1 FCA Perimeter​

The UK Financial Services and Markets Act 2000, the Regulated Activities Order, the Electronic Money Regulations 2011, the Payment Services Regulations 2017, the Money Laundering Regulations 2017 and forthcoming UK stablecoin and crypto-asset legislation collectively define the FCA perimeter. The Operator's intended positioning is to remain outside that perimeter in respect of the Protocol and the Services.

8.2 Not an E-Money Institution or Deposit-Taker​

The Operator does not issue electronic money within the meaning of Regulation 2 EMRs (a claim on the issuer against which monetary value is received, redeemable in funds). Overlaid Assets do not constitute electronic money, and no User holds a fiat-denominated, par-value claim against the Operator. The Operator likewise does not accept "deposits" within the meaning of the Regulated Activities Order Article 5 and is not a credit institution within the meaning of the UK's banking regime.

8.3 Not a Payment Service Provider​

The Operator does not provide payment services within Schedule 1 to the PSRs (including money-remittance, payment accounts or the execution of payment transactions). The Protocol facilitates crypto-to-crypto interactions via smart contracts executed by Users; the Operator does not execute, initiate, settle, clear or hold "funds" as defined in PSD2/PSR terminology.

8.4 Not a Collective Investment Scheme or AIF​

The Protocol is not a "collective investment scheme" under Section 235 FSMA nor an "Alternative Investment Fund" under the UK AIFM Regulations. There is no pooling of contributions, no day-to-day manager exercising discretion over pooled assets, and no single investment policy imposed at the level of a pooled vehicle. Each User's position is individual, on-chain, and directly modifiable by the User.

8.5 No Regulated Investment Activities​

The Operator does not arrange (bring about) deals in investments, deal in investments as principal or agent, manage investments, or advise on investments, within the meaning of Articles 14, 21, 25, 37 and 53 RAO respectively. The Interface is not a platform for placing orders in regulated investments and the Operator is not a broker, dealer or adviser.

8.6 Financial Promotion Restrictions​

To the extent any public communication by the Operator or the Foundation could be capable of constituting a "financial promotion" within the meaning of Section 21 FSMA or the UK Cryptoasset Financial Promotions Regime, such communication is, and will be, crafted to fall within applicable exemptions (for example, communications to investment professionals or high-net-worth individuals, where applicable), or to be lawfully approved under applicable FCA guidance. Where the Operator or the Foundation is not in a position to comply with the applicable regime for a given communication to UK-resident retail investors, such communication will not be directed at UK-resident retail investors.

8.7 Future UK Stablecoin Regime and Crypto-Asset Regime​

The United Kingdom has signalled further legislation and FCA rules covering stablecoins and crypto-asset activities. The Operator will monitor these developments and reassess its UK positioning as and when such rules come into force.

9. British Virgin Islands and Cayman Islands Considerations​

9.1 BVI Virtual Assets Service Providers Act​

The BVI Virtual Assets Service Providers Act 2022, as amended, regulates certain VASP activities. The Operator's intended positioning is to avoid the core VASP triggers, namely: custody or safekeeping of virtual assets on behalf of others; exchange of virtual assets on behalf of others; transfer of virtual assets on behalf of others in an intermediary capacity; operation of a virtual-asset exchange; and the provision of financial services related to the issuance or sale of virtual assets. The Operator designs its activities to avoid these triggers, in particular by not receiving Users' assets into Wallets controlled by the Operator and by not operating an order book or matching engine.

9.2 Cayman Islands Virtual Asset (Service Providers) Act​

The Cayman Islands Virtual Asset (Service Providers) Act, as amended, regulates VASP activities in the Cayman Islands. The Foundation does not conduct VASP activities in or from the Cayman Islands: it does not provide custodial services, does not operate an exchange, and does not conduct public token sales or transmission services for third parties from the Cayman Islands. The Foundation's activities are limited to ecosystem stewardship, IP ownership, treasury management for its own account and high-level governance, within the limits of its constitutional documents.

9.3 Ongoing Monitoring​

Should activities in either the BVI or the Cayman Islands approach any VASP trigger, the relevant entity will assess and, if appropriate, apply for the applicable licence or registration, or restructure activities to remain outside the regulated scope.

10. Other Jurisdictions (High-Level Overview)​

The Operator monitors, at a high level and in consultation with counsel as appropriate, regulatory developments in other jurisdictions that may be relevant, including:

(a) Switzerland — FINMA's guidance on payment tokens, utility tokens and asset tokens, and its approach to stablecoins and DLT infrastructure;

(b) Singapore — the Payment Services Act and MAS's framework for Digital Payment Tokens and stablecoins;

(c) Hong Kong — the SFC's licensing regime for virtual asset trading platforms and the HKMA's stablecoin regime;

(d) United Arab Emirates — the regulatory frameworks operated by VARA (Dubai), ADGM and DFSA;

(e) Japan — the FSA's frameworks for crypto-asset exchange service providers and stablecoin issuers;

(f) South Korea — the FSC's regime for virtual asset service providers and the Virtual Asset User Protection Act;

(g) Australia — ASIC's guidance on crypto-assets and AUSTRAC's AML/CTF regime;

(h) Canada — the Canadian Securities Administrators' approach to crypto trading platforms, and OSFI's approach to stablecoin-related activities;

(i) Brazil — the LGPD, the Central Bank's stablecoin framework and the broader crypto-asset law; and

(j) other jurisdictions where the Services may be made available.

Regulatory analysis in each jurisdiction is highly fact-specific and subject to change. The Operator may restrict access to the Services from any jurisdiction at any time, as provided in the Terms of Use.

11. Nature of the OVER Token​

11.1 Utility and Governance Only​

The OVER token is intended solely as a utility and governance token for the Overlayer ecosystem. Its intended functions, subject to evolution through governance, include: participation in on-chain or off-chain governance and signalling; access to certain features or parameters; and other ecosystem-coordination purposes.

11.2 Not a Security or Investment Instrument​

OVER is not designed or intended to be, and is not, a security, investment contract, share, bond, note, derivative, CIS unit, equity, debt, profit share or financial instrument. Specifically:

(a) U.S. Howey analysis — OVER is not an investment contract under SEC v. W.J. Howey Co. Holding OVER does not constitute an investment of money in a common enterprise with a reasonable expectation of profits derived predominantly from the entrepreneurial or managerial efforts of the Operator, the Foundation or any third party.

(b) MiCA — OVER is not an EMT or an ART, and is intended to fall within the Title II category of crypto-assets other than ARTs or EMTs.

(c) UK FSMA / RAO — OVER is not a specified investment under the RAO. It is neither a share, debenture, collective investment scheme unit nor any other regulated investment type.

11.3 No Intrinsic Value​

OVER has no intrinsic value. The Operator makes no representation that OVER will retain any particular value, that a liquid secondary market will exist, or that any specific utility will persist.

11.4 No Public Offering Structured in this Overview​

This Overview is not an offer, solicitation, invitation, recommendation or prospectus to buy, sell, subscribe for or trade OVER in any jurisdiction, and nothing herein shall be construed as such. To the extent OVER is offered, made available or distributed at any time, it will be done pursuant to applicable exemptions or specific frameworks, with geographic and counterparty restrictions as required, and under separate documentation.

11.5 Reclassification Risk Acknowledged​

As with Overlaid Assets, the Operator acknowledges that a Governmental Authority, court or arbitral tribunal may reach a different conclusion as to the legal nature of OVER. Such reclassification may trigger additional obligations, restrictions, forced migrations or enforcement action, as further described in the Protocol Risk Disclosure and the Legal Disclaimers.

12. Sanctions, AML, CFT and Compliance Posture​

12.1 Sanctions​

The Operator and the Foundation take sanctions compliance seriously. Measures consistent with the Services' non-custodial architecture include:

(a) restricting access to the Services from jurisdictions that are subject to comprehensive sanctions administered by OFAC, the EU, the UK, the United Nations or analogous authorities;

(b) Wallet-address screening using reputable third-party compliance providers (such as TRM Labs, Chainalysis, Elliptic or equivalents), where appropriate and practicable;

(c) IP-based geo-blocking from Prohibited Jurisdictions as set out in the Terms of Use;

(d) refusing to interact with, or list, Wallet addresses, contracts or counterparties that have been publicly designated by a competent Governmental Authority as sanctioned; and

(e) cooperating with lawful requests from Governmental Authorities, courts and law-enforcement agencies, as described in the Privacy Policy.

12.2 AML/CFT​

Although the Operator's non-custodial design does not, on its face, trigger traditional AML/CFT obligations applicable to deposit-taking institutions or money-services businesses, the Operator maintains a responsible compliance posture by:

(a) avoiding activities that would cause it to receive, hold or transfer User funds in a manner typical of regulated intermediaries;

(b) implementing front-end consent and eligibility gating;

(c) maintaining internal policies and training relating to sanctions, AML and CFT;

(d) retaining records of enforcement measures and Wallet screening for the periods contemplated by applicable Laws; and

(e) reassessing its posture as FATF recommendations and national AML/CFT frameworks for DeFi continue to develop.

12.3 Imperfection of Controls​

The Operator acknowledges that the measures described above are inherently imperfect and may be circumvented. They do not constitute a guarantee of compliance for any User or counterparty. Ultimate responsibility for compliance with all applicable sanctions, AML, CFT and related Laws remains with each User, as set out in the Terms of Use.

13. No Interface with the Traditional Fiat Banking System​

The Services are designed so that neither the Operator nor the Services interface directly with the traditional fiat banking system in respect of User funds. Specifically:

(a) the Protocol does not accept fiat currency, does not hold fiat reserves and does not execute transactions in legal tender;

(b) the Operator does not provide fiat on-ramp or off-ramp services; where Users need to convert fiat currency to Digital Assets or vice versa, they do so via independent third-party providers that are regulated in their own jurisdictions;

(c) the Operator does not operate or maintain client fiat accounts; and

(d) the Foundation's treasury, to the extent it holds fiat or fiat-equivalent instruments, holds them for its own account and through regulated financial-services providers, separately from the Protocol's operation.

This firewall is a central feature of the Operator's positioning under the GENIUS Act, MiCA, PSD2/PSR, BSA/FinCEN frameworks and analogous regimes. Any regulatory or enforcement action against third-party payment stablecoin issuers (such as Circle or Tether) or against the banking counterparties of such issuers should not, by reason of that alone, be automatically extended to Overlaid Assets or to the Operator, given the structurally distinct nature of Overlaid Assets as DeFi receipt instruments and the non-fiat-facing architecture of the Services.

14. Comparable Market Treatment​

To support the Operator's positioning, it may be helpful to consider the regulatory treatment of structurally analogous instruments and protocols. The following is illustrative and does not constitute a legal conclusion in respect of the instruments mentioned.

14.1 Liquid Staking Tokens (stETH and equivalents)​

Liquid staking tokens such as stETH (Lido) represent an Ethereum staking position plus accrued rewards. They have generally been treated, in relevant jurisdictions and by relevant supervisors, as Title II crypto-assets under MiCA or as Receipt Tokens under US interpretations, rather than as EMTs, ARTs, Payment Stablecoins or (in ordinary cases) securities. Overlaid Assets adopt a structurally analogous wrapper: they represent a DeFi deposit position plus accrued yield. To the extent stETH is not an EMT/ART/Payment Stablecoin/security, the Operator's position is that Overlaid Assets share that treatment.

14.2 DeFi Lending Receipts (aTokens and equivalents)​

aTokens (Aave) are interest-bearing tokens representing a supply position in Aave lending markets. They are generally treated as Title II crypto-assets under MiCA and as Receipt Tokens in the US context, and not as EMTs, ARTs, Payment Stablecoins or securities. Overlaid Assets are, in effect, a "wrapper of a wrapper" around aTokens and related receipts, with a user-experience layer; they should share the same regulatory treatment.

14.3 Wrapper Tokens (WBTC and equivalents)​

Wrapper tokens such as WBTC represent an underlying crypto-asset held in reserve. Although WBTC uses a custodian model that differs from the Protocol's non-custodial model, it illustrates that wrapper and receipt tokens referencing another digital asset are generally not treated as EMTs/ARTs/Payment Stablecoins.

14.4 Fiat-Backed Payment Stablecoins (USDC, USDT) — Underlying Layer​

Fiat-backed stablecoins such as USDC and USDT are, or are likely to be, treated as EMTs under MiCA and as Payment Stablecoins under the GENIUS Act. They sit underneath the Protocol (as the underlying Digital Assets that may be routed into Third-Party Protocols), not at the Protocol level. Regulatory obligations applicable to these issuers are distinct from, and should not be extended to, the Operator or to Overlaid Assets.

14.5 Synthetic/Algorithmic Instruments — Contrast​

Instruments that rely on delta-neutral hedging (for example, USDe/Ethena) or on purely endogenous collateralisation (for example, the historical UST/LUNA) raise different regulatory concerns and have attracted heightened scrutiny. The Protocol and Overlaid Assets are distinct from such instruments: they rely on 1:1 hard-asset backing by third-party Digital Assets deployed into Third-Party Protocols, without hedging strategies, derivatives exposure or endogenous collateral.

15. Ongoing Monitoring and Governance​

15.1 Ongoing Regulatory Monitoring​

The Operator monitors global regulatory developments, guidance, enforcement priorities and litigation outcomes that are material to the Services, the Protocol, Overlaid Assets or the OVER token, and, where appropriate, adjusts its positioning, architecture, product roadmap, geographic availability or communications to reflect such developments.

15.2 Audit, Security and Review​

The Operator commissions audits, code reviews, bug bounties and security reviews consistent with the evolving standard of care for DeFi protocols. As stated in the Protocol Risk Disclosure, such measures are not guarantees and do not constitute warranties of security, correctness or compliance.

15.3 Governance Evolution​

Certain aspects of the Protocol and the Services may evolve through governance over time. Any material change that affects the regulatory characterisation of the Protocol, the Services, Overlaid Assets or OVER will be assessed at the time and, where appropriate, disclosed to Users and stakeholders and reflected in updates to this Overview and the rest of the Legal Framework.

16. Limitations, Caveats and Final Notices​

This Overview is not legal, regulatory, tax or investment advice. The Operator has relied on qualified counsel in forming its positioning but has also made judgments of its own. No person should rely on this Overview in making any decision. Independent legal, regulatory and tax advice should be obtained in each relevant jurisdiction.

16.2 Not Binding on Governmental Authorities​

The Operator's positioning is not binding on any Governmental Authority, supervisory body, court or arbitral tribunal. Each such authority retains independent jurisdiction, and may reach different conclusions.

16.3 Local Compliance Is the User's Responsibility​

It remains the responsibility of each User, professional user, counterparty and institutional participant to evaluate the compatibility of the Services, the Protocol, Overlaid Assets and the OVER token with their own legal, regulatory and tax situation. The Operator does not warrant that the Services or Overlaid Assets comply with the local Laws of every jurisdiction. Users should obtain their own independent professional advice.

16.4 Final Notice to Authorities​

The Operator and the Foundation remain available to engage constructively with Governmental Authorities, supervisory bodies and similar stakeholders on the matters described in this Overview, subject to appropriate confidentiality and legal protections. Enquiries may be directed to [email protected]. Any such engagement is without prejudice to the Operator's and the Foundation's legal positions, rights and defences.

17. Disclaimers and Limitations of Liability​

To the maximum extent permitted by applicable Laws, and without prejudice to the Operator's obligations under applicable Laws:

(a) this Overview is provided on an informational basis only, and the Operator disclaims all warranties and representations in respect of it, whether express, implied, statutory or otherwise;

(b) the Operator is not responsible or liable for the regulatory positioning, representations, practices or communications of any third party (including Third-Party Protocols, Third-Party Services, stablecoin issuers, Wallet providers, or independent front-ends);

(c) the Operator's aggregate liability to any person for any matter arising out of or in connection with this Overview shall, to the extent not prohibited by applicable Law, be subject to the limitations set out in Section 12 of the Terms of Use, including the aggregate liability cap; and

(d) the Operator Parties (as defined in the Terms of Use) are intended third-party beneficiaries of this Overview to the extent relevant, and may enforce its provisions directly.

This Section 17 does not limit any liability that cannot lawfully be limited or excluded under applicable Laws.

18. Relationship with Other Documents​

This Overview forms part of, and must be read together with, the Legal Framework. In the event of any inconsistency between this Overview and any other document in the Legal Framework:

(a) the Terms of Use shall prevail as to contractual, dispute-resolution, liability-cap, indemnification, eligibility and general matters;

(b) the Privacy Policy shall prevail as to privacy and data-protection matters;

(c) the Cookie Policy shall prevail as to cookie-related matters;

(d) the Protocol Risk Disclosure shall prevail as to detailed risk-factor disclosure; and

(e) the Legal Disclaimers shall prevail as to general "As Is" / warranty / non-regulated-services / negative-definition matters.

This Overview shall prevail over any other document in the Legal Framework as to regulatory positioning and classification analysis, except where expressly set out in the relevant document.

19. Updates to This Overview​

The Operator may modify this Overview from time to time to reflect regulatory, technical, operational, corporate or strategic changes. When we do so, we will update the "Last Revised" date at the top of this document and may, where appropriate, provide additional notice (for example, by posting a notice on the Website, displaying an in-product banner or sending an electronic notice).

Your continued access to or use of the Services after the effective date of any modified Overview does not constitute an acknowledgement that the modified Overview reflects any particular legal position, but does constitute continued subjection to the rest of the Legal Framework, including the Terms of Use.

20. Contact​

For questions, enquiries or engagement relating to this Regulatory Overview, please contact:

Email (regulatory and general): [email protected]

Mailing Address: Overlayer Labs Ltd, as disclosed on the Website.

The Operator does not provide individualised legal, regulatory, tax or investment advice, and cannot respond to enquiries in a manner that would be construed as such.

This Regulatory Overview is designed to operate in conjunction with the Terms of Use, the Privacy Policy, the Cookie Policy, the Protocol Risk Disclosure and the Legal Disclaimers, each as made available through the Website and updated from time to time.

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