Lawmakers Want Cryptos Exempt From Securities Laws
It has been an ongoing battle of whether or not cryptocurrencies should be exempted from securities law. While many believe otherwise, two lawmakers from the U.S. state of Colorado have introduced legislation which seeks to exempt digital currencies – including some digital tokens – from securities laws.
The Colorado Digital Token Act
Just recently, senators Stephen Fenberg (Democrat) and Jack Tate (Republican) combined forces to file a bill which they call the “Colorado Digital Token Act.” The latter proposes the idea that digital tokens with a “primarily consumptive” purpose must be exempted from all securities laws. However, this will only be made possible as long as these cryptos are not marketed solely for “speculative or investment” purposes.
The aforementioned lawmakers also implied that this move hopes to eliminate “regulatory uncertainty,” which is something that could hold back companies offering marketplaces for digital currencies in hopes of fundraising using digital assets.
By creating the Colorado Digital Token Act, the lawmakers believe that it “will enable Colorado businesses that use cryptoeconomic systems to obtain growth capital to help grow and expand their businesses.” The bill further proposes: “Thereby promoting the formation and growth of local companies and the accompanying job creation and helping make colorado a hub for companies that are building new forms of decentralized ‘Web 3.0″ platforms and applications.’”.
Exemption Qualification Process
It is worth noting that digital tokens have a consumptive purpose, which is “to provide or receive goods, services, or content, including access to goods, services, or content.” This is based on the documents the two lawmakers submitted.
In order for digital assets to qualify for exemption, the consumptive purpose for them must be available within 180 days of its sale or transfer. Also, the initial buyer should not be able to resellt or transfer the cryptocurrency until the consumptive purpose is made available.
Furthermore, the bill suggests: “The initial buyer provides a knowing and clear acknowledgment that the initial buyer is purchasing the digital token with the primary intent to use the digital token for a consumptive purpose and not for a speculative or investment purpose.”
For an exemption, an issuer should file a notice of intent and this must coexists with the state’s securities commissioner. In what seems to be similar development last month, there were two members of the U.S. House of Representatives who also filed the “Token Taxonomy Act,” which is a proposal that seek to exclude digital currencies from being defined as securities.