US Lawmakers in Bid to Create New Crypto Token Framework
A Token Taxonomy Act that seeks to exclude digital tokens from being defined as securities was introduced by two members of the US House of Representatives yesterday.
If passed, the Act tabled by Warren Davidson (Republican, Ohio) and Darren Soto (Democrat, Florida), would amend both the Securities Act of 1933 and the Securities Exchange Act of 1934, effectively reducing the Securities and Exchange Commission’s (SEC) role in the blockchain arena.
Decentralised Assets “Not Securities”
The move comes just months after discussions in Washington DC sought opinions in order to formulate working regulatory measures for digital assets.
It now appears that the decentralised aspect of assets is key in moving away from being classed as Securities as the new Act states that “…the digital unit’s creation and supply cannot be altered by a single person or group of persons under common control.”
Other characteristics of such tokens, according to the proposal, will need to incorporate transaction history, consensus, capability of trade or transfer without an intermediate custodian and must not be “…a representation of a financial interest in a company, including an ownership or debt interest or revenue share.”
In a press release, Congressman Davidson advised that this Act would “…provide light-touch regulatory certainty for businesses, entrepreneurs, and regulators in the blockchain economy.”
He believes that by establishing the definition of a digital token, it is clear that it is no longer a security and so “…frees the SEC to perform its vital and much needed consumer protection duties of enforcement on those who have engaged in securities fraud…or simply attempting to engage in regulatory arbitrage to circumvent securities law.”
Warren Davidson is a member of the House Financial Services Committee which has jurisdiction over financial law. Darren Soto sits on the House Agriculture Committee which oversees the Commodity Futures Trading Commission (CFTC).