Lawmakers In The US Want To Change SEC’s Securities Definition To Adapt To The Crypto World

The cryptocurrency market in the United States could soon improve its legal framework and provide clearer rules and regulatory clarity. There are two congressmen that introduced a bill on Thursday that would exclude virtual currencies from the definition of a security that the U.S. SEC currently uses.

This change in this definition is quite important since it will provide a clearer framework for virtual currencies. The 72-year-old securities definition will now be adapted to the new technologies related to virtual currencies.

The new ‘Token Taxonomy Act’ has been proposed by Warren Davidson and Darren Soto. They provide a digital token definition that

In a recent statement, Mr. Davidson commented about this issue:

“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.”

Back in 2017, a bull run in the cryptocurrency space pushed Bitcoin price to new highs, reaching $20,000. Most of the users investing in digital assets were retail investors. The U.S. Securities and Exchange Commission (SEC) has expressed its concerns about these individuals investing in the space. Since Bitcoin is a very volatile asset, it lost around 85% of its value during 2018.

The SEC is currently using the ‘Howey Test’ to determine whether an asset is a security or not. According to previous reports, this regulatory agency informed that Initial Coin Offering (ICO) tokens can be considered as illegal securities. Most of these ICOs did not follow securities laws in the United States.

There are some experts such as Kristin Smith, head of the Blockchain Association, a lobby group that pushes for adoption of distributed ledger technology (DLT), that believe that current decentralized networks do not fit to the existing regulatory structure.

The SEC Chairman Jay Clayton explained that all the ICOs that he has seen this year can be considered a security. At the moment, there are only two virtual currencies that cannot be considered securities: Bitcoin (BTC) and Ether (ETH). These two assets are not securities because they are decentralized, compared to other ICO projects that have a centralized company working in order to create a specific project.

With the new bill, the intention is to amend the Securities Act of 1933 and the Securities Exchange Act of 1934. Now, the intention is to add a new definition for digital tokens. Additionally, there is also an interest in exempting virtual currencies from different taxes.

There were more than 50 different industry participants that include experts from Fidelity, Nasdaq and many other companies in the space. The main intention is for all of them to provide their point of view on the matter and create a proper regulatory framework regarding virtual currencies and digital assets.

This decision is very positive for the space that is searching for clearer regulations and a better regulatory environment.

A few weeks ago, the SEC announced enforcement actions against two ICOs: Paragon and Airfox. Both of them will have to pay $250,000 as a fine for selling unregistered securities. Furthermore, they will have to give back to investors the funds they placed on these two ICOs.

In February, the SEC will also have to take a decision regarding the application of a Bitcoin ETF. If the application is approved, institutions and other traditional investors could take the decision to enter the market.

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