U.S.: Lawmaker Proposes Securities Exemption for Crypto Tokens
A bill introduced by a lawmaker of the California Assembly is proposing an exemption of select crypto assets from California’s securities laws.
Crypto Tokens May Enjoy Exemption From Securities Law in California
According to a proposed bill by Democrat Ian Calderon and amended in the California Assembly on May 4, 2020, the lawmaker asked the house to consider excluding certain crypto assets from the ambit of the state’s corporate securities laws. The amended bill proposed that virtual currency assets that are not investment contracts should not be categorized as securities.
An excerpt from the bill reads:
“This bill would create an exception from the above definition by providing that a digital asset meeting specified criteria is presumptively not an investment contract within the meaning of a ‘security.’ The bill would allow that presumption to be rebutted upon good cause shown by clear and convincing evidence by the Commissioner of Business Oversight, as specified.”
The amended bill, if passed into law, would be beneficial for the nascent industry. Crypto firms offering tokens not classified as securities do not need to comply with expensive reporting requirements which could preclude smaller crypto businesses from launching their own tokens.
A token not deemed securities also means a more open pool of investors because the sale of securities is a highly regulated affair which has minimum requirements for investing.
Prior to Ian’s amended legislation, different lawmakers have proposed laws seeking to exclude cryptocurrencies from securities laws. The Token Taxonomy Act before the U.S. Congress introduced by Congressman David Warren along with five Representative members proposes that virtual currencies be exempt from securities laws.
Lack of Clear-cut Cryptocurrency Regulations Still Prevalent in the US
Lack of clear-cut regulatory framework for the cryptocurrency industry has raised concerns for the crypto community in the United States. While the Securities and Exchange Commission (SEC) sees digital currency tokens as securities, the Commodity Futures Trading Commission (CFTC) regards tokens as commodities.
Consequently, ambiguous crypto regulations have caused businesses to pay fines for violating SEC laws and also resulted in court battles. A U.S. Representative Paul Gosar back in March 2020 introduced the Cryptocurrency Act of 2020, classifying crypto tokens into securities, commodities, and currency.
By dividing the crypto assets, it becomes clear which crypto class falls under the purview of the various U.S. federal agencies.
Hester Pierce, the SEC Commissioner and notable crypto advocate proposed a plan that would see virtual currency firms sell crypto tokens for three years without regulatory oversight.
