A Bill Introduced in Congress Seeks to Exclude Cryptocurrencies from Federal Securities Laws

 

Two congressmen are introducing a bill that seeks to exclude digital currencies from the traditional definition of security.

Exactly two weeks ago, Newconomy reported about the efforts from two congressmen to introduce two bills in order to prevent virtual currency price manipulation and keep the country competitive in the cryptocurrency area.

One of the two representatives who introduced these two bills, Democrat Darren Soto, is also sponsoring the “Token Taxonomy Act“, this time with colleague Warren Davidson (Republican). Again, the bipartisan efforts are being made to make necessary changes in better regulating the cryptocurrency area.

Besides excluding digital currencies from the definition of security, the bill also aims to “direct the Securities and Exchange Commission (SEC) to enact certain regulatory changes regarding digital units secured through public key cryptography”.

Today, the SEC uses the “Howey Test” to determine whether or not a cryptocurrency is a security. The test comes from a 1946 U.S. Supreme Court decision which determined that any transactions that qualify as “investment contracts” are considered securities.

Hence, the aim of the two congressmen is to change a 72-year-old definition of “security”.

“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”, congressman Davidson said in a statement.

As expected, the introduction of the Token Taxonomy Act has been welcomed by crypto and blockchain community.

“This is a step forward in finding the right way to regulate them”, said Kristin Smith, head of the Blockchain Association.

On the other hand, these efforts are contrary to the statements from the SEC Chairman Jay Clayton. During his appearance before the Senate recently, he said that:

“Every initial coin offering he has seen is a security”.