Two members of the U.S. House of Representatives, Warren Davidson and Darren Soto, introduced the “Token Taxonomy Act”, on Thursday, seeking to exclude “digital tokens” from being defined as securities, amending both the Securities Act of 1933 and the Securities Exchange Act of 1934. This move comes only a few months after a roundtable in Washington, D.C., where regulatory mechanisms for digital currencies were discussed.
The bill defines “digital tokens” as “digital units created… in response to the verification or collection of proposed transactions” (mining, basically) or “as an initial allocation of digital units that will otherwise be created” (as in a pre-mine). These tokens are to be governed by “rules for the digital unit’s creation and supply that cannot be altered by a single person or group of persons under common control.” The bill also states that the digital token has a transactional history that gets recorded on a distributed, digital ledger or digital data structure in which consensus is achieved through a mathematically verifiable process. It is not a “representation of a financial interest in a company, including an ownership or debt interest or revenue share.”
Davidson in a statement mentioned that this bill will be providing the certainty which had been lacking in America but is of utmost importance in order to compete with counties who are aggressively developing their blockchain economies. He said:
“To be certain, there will be other regulatory initiatives at some point, but this legislation is an essential first step to keeping this market alive in the United States.”
The bill also talks about other crypto-friendly measures with parts that focus on the tax implications of any form of crypto transactions. They also elaborate on the regulatory measures for the other cryptocurrency.
The bill also proposes making the exchange of one cryptocurrency to another a tax-exempt activity as well as to create an additional exemption for individual retirement accounts (IRAs) with those that exist for gold bullion and other precious metal coins.
The bill’s submission marks a very active year with regards to the discussion about cryptocurrencies, as has been done more than once, in both the chambers of the house. Soto said,
“While this legislation is a great first step, we are looking for feedback. The Federal Trade Commission (FTC) has a history of policing web services, while the Commodities Futures Trading Commission (CFTC) has authority over commodity derivatives… To what extent does the jurisdiction of the FTC apply to digital tokens? Can we address this issue in this legislation or will we need subsequent legislation to effectively regulate this emerging sector?”