A pair of U.S. lawmakers are looking to bridge the gap between the crypto community and fuzzy regulation. Rep. Warren Davidson of Ohio and Darren Soto of Florida have introduced the “Token Taxonomy Act,” which would essentially remove cryptocurrencies from the securities discussion.
The bill, if it becomes law, would likely exclude most digital currencies from the SEC’s definition of what constitutes a security. The SEC’s current definition of a security, based on the Howey Test, goes back more than 70 years, with no provisions for the decentralized assets which currently circulate in the crypto markets.
According to CNBC, the new bill, which is a product of both sides of the aisle, also attaches a definition to digital securities; something that until now has been ambiguous.
Congressman Warren Davidson, who recently suggested the U.S. turn to the blockchain to raise funds for the border security wall, is cited in CNBC as 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.
Regulatory Clarity On The Way
Although the bill will need to be reintroduced next year, it is nonetheless likely to cause sighs of relief in the crypto space.
In the past months, regulators began cracking down on token sales and exchanges that do not comply with existing securities regulations. While officials have suggested that bitcoin and ETH are not securities, uncertainty still hangs over other digital currencies like XRP.
The uncertain legal status of the token, along with the strict restrictions on unregistered securities, is frequently cited as a hindrance to the token’s adoption by Ripple’s prospective partners. It has also had a dampening effect on other financial products, like the long awaited Bitcoin ETF.
The two Representatives have stepped into a gray area in which the regulations remain ambiguous, seeking to provide clarity not only on what a digital asset is – but also what it isn’t. Even the current tax regime is unclear in the USA right now.
Rep. Davidson’s office tells Crypto Briefing that the text of the bill is not yet available and the team is currently crafting an announcement. The Ohio Congressman is known to be crypto-friendly, and believes in taking a “light touch” approach to blockchain regulation. In September, he invited entrepreneurs and executives in the blockchain space to share their feedback at a roundtable conference in Washington.
He is looking to strike a balance between preventing tech innovation from going overseas, and protecting American families and Main St investors from ICO scams.
Currently there are several cases before the courts in the USA that claim various cryptocurrencies are actually securities; the best-known is Ripple Labs’ defense of a class-action suit, while a recent lawsuit against CashBet also complained that tokens had been sold to investors in contravention of US securities law.
The author is invested in digital assets.