US Congressmen Proposes Bill To Exempt Crypto From Securities Law
Two Congressmen in the United States have introduced a bill that suggests giving cryptocurrencies an exemption from securities law. If passed the bill will bring in a massive change in the regulatory climate of the country, in regards to the cryptocurrency ecosystem.
Dubbed as the “Token Taxonomy Act”, Rep. Warren Davidson (R-Ohio) and Rep. Darren Soto (D-Florida) introduced a bill on December 20. The bill is aimed to exempt cryptocurrencies from being classified as securities and if successful, the US securities law will no longer apply on crypto tokens once their projects become fully functioning networks.
Current Legal Framework
The SEC currently employ scrutinize virtual assets under securities law framework according to the Securities Act of 1933. In 1946, the “Howey Test” was introduced by a US Supreme Court ruling, to determine whether an asset is a security or not.
Howey Test ascertains that transactions classified as investment contracts are securities. According to this definition, the SEC considers most ICO tokens as securities. Simply because an individual investing in such ICO’s, expect profit from the efforts of the project team or third party.
The sponsors of the Token Taxonomy Act does not agree with SEC. They believe that the 70-year old Securities Act is inadequate to regulate the cryptocurrency market. The supporters of crypto carry a similar sentiment as well, the Blockchain Association chief, Kristin Smith stated over the matter:
These decentralized networks don’t fit neatly within the existing regulatory structure. This is a step forward in finding the right way to regulate them.
The senior analyst at eToro, social trading and multi-asset brokerage company, Mati Greenspan also agrees with the bill.
Excellent! When we're talking about programmable money, the old rules simply don't apply anymore.
If passed, this bill will scrap the Howey test and create a new framework for crypto assets. ?https://t.co/1dSSRReW0U
— Mati Greenspan (@MatiGreenspan) December 20, 2018
The two sponsors of the bill compare their efforts to the steps taken the early days of the internet. Rep. Davidson said:
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.
John McAfee, an internet security expert, and cryptocurrency enthusiast also believe that SEC has no right to regulate cryptocurrencies. McAfee is amongst the few who have been vocal about is disdain about SEC on his Twitter page:
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