US Lawmakers Suggest Exempting Crypto from Securities Law
In the US, recent actions have been taken that would exempt crypto from falling under the decades-old definition of a security.
The “Token Taxonomy Act” was introduced Thursday (December 20, 2018) by Rep. Warren Davidson (R-Ohio) and Rep. Darren Soto (D-Florida). If the bill is passed, US securities law will no longer apply to virtual currency tokens once projects become fully functioning networks.
The Token Taxonomy Act looks to amend the Securities Act of 1933 and the Securities Exchange Act of 1934, which established the current structure for what a security is, known as the “Howey Test.” According to the Howey Test, transactions that can be classified as investment contracts are securities.
William Hinman, head of the Division of Corporation Finance for the Securities and Exchange Commission (SEC), has said that bitcoin and ether are not securities because they are decentralized. ICOs, or initial coin offerings, he said, are securities because individuals expect a return from a third party.
But supporters of the bill say those standards should be more nuanced for digital assets.
The bill also directs the IRS to adjust taxation for virtual currencies, create a tax exemption for exchanges of one virtual currency for another, and to create de minimis exemption for taxation for gains realized from the sale or exchange of virtual currency.
The proposal follows a roundtable hosted back in September by Rep. Davidson where more than 50 industries gathered to discuss regulatory shortcomings. Supporters claimed that without concise rules, large corporations have little motivation to invest a large amount of money in building blockchain solutions.
Will the Token Taxonomy Act help the US cryptocurrency market catch up to markets overseas? Share your thoughts with us in the comment section.
The full bill can be found below:
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