“Congressmen Warren Davidson (OH-08) and Darren Soto (FL-09) today introduced the long-awaited Token Taxonomy Act, H.R. 7356,” a press released announced, “to provide light-touch regulatory certainty for businesses, entrepreneurs, and regulators in the blockchain economy.” If passed, it would be a first of its kind in the United States, essentially exempting crypto from most SEC regulations.
Token Taxonomy Act
Coming regulation, which everyone in the ecosystem believes to be inevitable, might be shaped by a piece of bipartisan legislation emanating from a law making body thought to be one of the most divided in American history, the 115th US Congress.
Nevertheless, the Act reportedly “draws a bright line for businesses and regulators by defining a ‘digital token’ and clarifies that securities laws do not apply to companies that use blockchain once they reach their goal of becoming a functional network. Implementing this fix will stop fraud from spreading and provide the certainty innovation needs to flourish,” congressmen who sponsored the Act claim.
Of particular concern for initial coin offerings (ICOs) and their related projects is if they match up against what’s known as the Howey Test. It’s used by regulators to determine what is a security and, therefor, under its jurisdiction and often heavy enforcement hand. “This bill clarifies a 1946 court case that the SEC has been using,” the press released explained, “and effectively makes it clear that the finished product (or oranges as it relates to the Howey Test) is no longer a security.”
Much Needed Certainty
Analysts of the nascent crypto space have asked not so much for regulation but for legal clarity to help them plan as businesses. Governments have a long history of playing gotcha with innovation, especially in the financial and tech sectors.
“Providing this much needed certainty,” the members stressed, “frees the SEC to perform its vital and much needed consumer protection duties of enforcement on those who have engaged in securities fraud by making false claims or simply attempting to engage in regulatory arbitrage to circumvent securities law,” which is a line of argument not normally made. The SEC has enough to do, basically.
Both lawmakers understand the rest of the world is dabbling in so-called blockchain technology, and payment systems akin to crypto, so to fall behind in the US out of fear laws might be twisted against startups means lost opportunity. “To be certain, there will be other regulatory initiatives at some point, but this legislation is an essential first step to keeping this market alive in the United States,” they noted.
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