Congressman Warren Davidson says he plans to reintroduce a bill in the US House of Representatives in a matter of weeks that aims to distinguish digital assets from securities. The bipartisan proposal would specify certain types of cryptocurrencies as an asset class of their own. Dubbed the Token Taxonomy Act, the bill is a response to the exodus of cryptocurrency startups that have fled strict US regulations in search of blockchain-friendly nations and crypto safe havens.
First introduced last December, the bill will be reintroduced to the new 116th Congress, which began on January 3. After the reintroduction, it will go to the Financial Services Committee for review. Davidson told Forbes he expects the bill to pass, but can’t give an exact date on when it will happen.
The cryptocurrency space saw a sharp decline in market capitalization in 2018, and many cited regulatory uncertainty as a major contributing factor to the market’s volatility.
In response, many blockchain firms have packed their bags and relocated to countries such as Switzerland where regulators have declared that not all initial coin offerings (ICOs) are securities. Exemption from securities laws means much more freedom to acquire funding, an enticing boon for any nascent project. And as such, Switzerland has far more blockchain startups relative to its population than the US.
Davidson, a Republican who introduced the bill along with Democrat Darren Soto, says he wants to support blockchain innovation in the US and stabilize the cryptocurrency market. He’s confident the bill will pass.
The Token Taxonomy Act aims to amend the Securities Act of 1933 and the Securities and Exchange Act of 1934, which form the basis of regulation of the financial markets. The primary focus of the bill is to provide some ICOs exemption from securities status, and as such, securities regulations, under certain conditions.
The criteria an ICO must meet in order to gain exemption are: the token must have an already functioning blockchain; its supply cannot be controlled by a single person or group of people; its transactions cannot be altered by a single person or group; and the token must not represent ownership in any company.
The bill would represent “a significant advance if it were to pass”, says Caitlin Long, chairman and president of enterprise blockchain company Symbiont, and it could be a contributor to the cryptocurrency market’s re-emergence from bear territory.
Kyle Samani, a partner at crypto fund Multicoin Capital, sees potential in the bill as well.
“It would provide a lot of clarity and ensure that blockchain innovation stays in the U.S.”
The Token Taxonomy Act could give the cryptocurrency space the final element that many veterans are waiting for: legitimacy. And as Davidson puts it, his bill would help “get the regulatory certainty that I feel like the market needs.”
Davidson’s bill and others like it will also provide the necessary on-ramps for institutional investors and companies such as Bakkt and Circle to enter the space with confidence, and potentially mark a dramatic shift in the public perception of digital assets as a whole.
On January 4, 2019, lawmakers in Colorado introduced the Colorado Digital Token Act which would exempt cryptocurrencies from securities laws in the state.