Recently the US congressmen announced the “Token Taxonomy Act”; this act focuses mainly on implementing clear regulation for business and startups in the blockchain technology space. The US is moving at a rapid pace to regulate the fast evolving crypto space, separate divisions to monitor, intervention in the ICO and many more, all directed to a safer and much efficient crypto space in the country.
This legislation states the definition of digital tokens and how security laws are applicable to companies working in the blockchain space. The major issue handled by this bill is the court cases used by to determine “security.” This is a great step towards regulating the uncharted space but feedbacks about the system will help a great deal in improving the bill.
Providing this much needed certainly frees the SEC to perform its vital and much-needed consumer protection duties of enforcement on those who have engaged in securities fraud by making false claims or simply attempting to engage in regulatory arbitrage to circumvent securities law.
Looking through the lens
One of the greatest unions of the year, crypto industry and Blockchain association joining hands, the initial look on the bill clearly denote that most of the digital tokens can be excluded from the category of security. What is wanted and what can cost the consumer their savings have been separated by the bill. This step can go a long way in making a proper improvement in the regulatory conditions.
This legislation proposes a definition of “Digital Token”, a new term for cryptocurrencies and other network tokens and explicitly excludes them from the definition of security. Digital tokens promote the open exchange of information and value and decrease the potential for fraud.
This gives clear information on what is what? This can provide the required information for the investors and thus making the system much safer to operate when compared with the current condition.
This bill corresponds with the recent announcement by the SEC, bot the bill and SEC announcement acknowledge that Decentralization is an important factor in determining if the application of the security laws make any sense. The announced bill is yet to be perfected. It was announced by a bipartisan team which means that there is more room for innovation and responsibility. With the new government taking the driver’s seat we can expect a new era to be built upon digital tokens.
The token Taxonomy act would provide exactly the type of regulatory clarity the crypto industry needs. Legislation like this is orders of magnitude more important than non-binding guidance from agencies like the SEC.
The timeline for approval is still not clear but the government is trying to steer the regulatory ship towards clear water. A step in the right direction can help to build a strong foundation that can make the future laws easier to be implemented with errors minimized.