Lawmakers Seek to Change Existing Securities Law to Exclude Cryptocurrencies
Reps. Warren Davidson, R-Ohio and Darren Soto, D-Fla have proposed a new bill titled the “Token Taxonomy Act” which seeks to establish digital tokens as a new asset class. Specifically, the bill seeks to amend the Securities Act of 1933 and the Securities Exchange Act of 1934 for being outdated.
The cryptocurrency community has been vocal in the need to update the existing laws on the books. Securities laws, for example, have not been changed for the last 72 years in the United States. However, does it even make sense to include cryptocurrencies in existing securities law? More and more lawmakers are now coming around to the opinion that the current law is outdated for digital assets.
The Token Taxonomy Act
Although there has been much discussion over establishing a new legal framework for digital assets entirely, we now have a tangible bipartisan effort being put together to make this a reality. The “Token Taxonomy Act” would establish new definitions for an asset class known as “digital tokens.” Once a cryptocurrency boasts its own network, it will no longer be considered a security according to the bill.
The act was co-sponsored by Reps. Warren Davidson, R-Ohio and Darren Soto, D-Fla. Specifically, it looks to amend the Securities Act of 1933 and the Securities Exchange Act of 1934 by adding a new definition for “digital tokens.”
Davidson commented on the proposed bill saying:
“In the early days of the internet, Congress passed legislation that provided certainty and resisted the temptation to over-regulate the market. Our intent is to achieve a similar win for America’s economy and for American leadership in this innovative space.”
One of the recurring complaints from the cryptocurrency community has been the application of the “Howey Test” to cryptocurrencies — a 72-year old test for securities that came from a time long before the advent of even the basic computer. The difference is that many cryptocurrencies are not just “investment contracts,” but oftentimes they are platforms on which applications can be built. On top of that, their decentralized nature makes them categorically different from your average stock.
The proposed bill follows a letter by concerned lawmakers to the SEC Chairman in September requesting him to clarify existing laws on tokenized securities.
The bill has been months in the making but will likely need to be reintroduced during the next Congressional year when Democrats control the House. Kristin Smith, the head of the lobbyist group Blockchain Association, has said that “there’s momentum on both sides” and that this bill will “lay the groundwork for the next Congress.”
What are the chances we see a blockchain-friendly bill in 2019? Will tokenized securities soon be considered a new asset class? Let us know in the comments below your thoughts.
Image courtesy of Politico.