U.S. Lawmakers Present Bill to Exempt Crypto from Existing Securities Laws

Lawmakers cryptocurrencies exemption blockchain bitcoin

Lawmakers in the U.S. have brought forward a bill that would exempt cryptocurrencies from federal securities laws, in a move that would ease regulation around developing and promoting digital tokens.

At present, cryptocurrencies and digital assets often find themselves designated as a type of security, resulting in significant regulatory hurdles for developers and promoters. If passed, the bill would seek to establish a new class of designation for digital tokens, with a view to reducing the burden of regulation.

Introduced by Reps. Warren Davidson and Darren Soto, the Token Taxonomy Act is the product of a roundtable event held in Washington, D.C., to establish more effective regulation for the cryptocurrency and digital token sectors.

The bill seeks to amend the Securities Exchange Act of 1934 and the Securities Act of 1933 to take account of “digital tokens.” Under the wording of the bill, digital tokens would be exempt from a securities designation and all the accompanying regulation that surrounds promoting and issuing securities.

The bill defines tokens as “digital units created … in response to the verification or collection of proposed transactions,” or “as an initial allocation of digital units that will otherwise be created.”

According to the bill, a digital token “has a transaction history that … is recorded in a distributed, digital ledger or digital data structure in which consensus is achieved through a mathematically verifiable process; and … after consensus is reached, cannot be materially altered by a single person or group of persons under common control; … is capable of being traded or transferred between persons without an intermediate custodian.”

Crucially, the definition extends to say tokens are “not a representation of a financial interest in a company, including an ownership or debt interest or revenue share.”

According to Davidson, the bill will enable American markets to compete with other leading blockchain destinations.

“This bill provides the certainty American markets need to compete with Singapore, Switzerland and others who are aggressively growing their blockchain economies. ... 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.”