US State Legislators Submit Bill to Exempt Certain Blockchain Assets from Securities Laws
On February 27th 2019, state lawmakers from the U.S. state of Rhode Island filed House Bill 5595 which, if passed into law, would effectively exempt some blockchain-based tokens from securities laws and regulations.
Rhode Island Drafts Legislation to Exempt Securities Laws
House Bill 5595 was filed last Wednesday in Rhode Island. The bill states that the Rhode Island Uniform Securities Act should be amended to allow for developers or sellers of “open blockchain tokens” to not be classified as issuers of securities. If passed, the bill would exempt issuers of “open blockchain tokens” from the act.
The bill went on to define open blockchain tokens as a digital unit created in a distributed ledger that is “capable of being traded or transferred between persons without an intermediary or custodian of value”.
The bill featured a collaboration among US political parties, where a total of five Democratic and Republican senators jointly filed the bill.
In order to qualify for the exemption, issuers must first meet certain conditions, according to the bill.
Details of Rhode Island’s Bill to Exempt Securities Laws from Tokens Explained
There are three primary conditions that issuers can satisfy in order to be exempt from the state’s securities act.
First, the blockchain-based tokens should serve a “consumptive purpose” meaning they can “only be exchangeable for, or provided for the receipt of, goods, services or content, including rights of access to goods, services or content.”
Second, token issuers cannot sell tokens as a financial investment:
“If the token does not have a consumptive purpose available at the time of sale, the initial buyer of the token is prevented from reselling the token until the token is available for use for a consumptive purpose.”
Third, individuals or enterprises who facilitate token exchanges should not be treated as broker-dealers or as any entity that deals with securities. They must first “electronically file a notice of intent with the secretary of state”, however.
Rhode Island is not the only state drafting such legislation.
Wyoming legislators have also drafted numerous bills to incorporate blockchain technology.
Until the regulatory ambiguity is cleared up, the majority of enterprises wishing to raise capital through digital assets have turned to security tokens given their regulatory clarity.
What do you think of Rhode Island’s bill to exempt certain digital assets from state securities laws? Will the bill be passed into law? Will other states draft similar legislation? Let us know what you think in the comments section below.
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