U.S. Congress reintroduces crypto clarifying Token Taxonomy Act

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It is a fact of life that various arms of a government very rarely act in a coordinated fashion, especially when it comes to financial matters and innovation. The economy and general public tend to be the victims when the system appears in such disarray. It is no wonder then that the crypto revolution has run head on into this maze of contradicting regulations and official edicts that seem at times to be 180 degrees apart.

Examples are not that difficult to find. The SEC feels obliged to protect investors and come down hard on Initial Coin Offerings, while specifying that Bitcoin and Ethereum are exceptions to its rules, which incidentally were adopted in 1933. The CFTC regards cryptos as commodities and welcomes innovations in the derivatives market, a good thing. On another positive note, the Congress has now reintroduced its Token Taxonomy Act (TTA) in the spirit of fair play that they hope will “send a powerful message” to innovators that “the U.S. is the best destination for blockchain technology.”

On the face of it, the act appears to be a pretty clear shot across the bow of the SEC, which has been doing its level best to stifle innovation in the crypto space. Its actions have sent Initial Coin Offering (ICO) promotions overseas to more receptive jurisdictions, along with the jobs and economic growth that would undoubtedly accompany these crypto development efforts. There is actually a global competition in process where several countries have moved quickly on the legislative front to open their doors wide in hopes of attracting the crypto innovation wave to their respective shores.

All is not perfect in these competing locales across the globe. From Switzerland to Malta, and from Singapore to even the State of Wyoming in the U.S., there is one issue that lawmakers still have difficulty accepting. It is quite easy to pontificate that Fintech is welcome, but the fine print usually limits the welcoming arms to blockchain technology projects period. There is no desire to deal with cryptocurrencies, ICOs, or even crypto exchanges, primarily because of the enormous losses that have occurred due to shady operators, professional hacking gangs, and outright scams.

According to one report:

The bill, first introduced last year by Reps. Davidson and Darren Soto, seeks to exempt certain cryptocurrencies and other digital assets from federal securities laws, allowing individuals to more easily trade or transact with select coins. The act would amend the Securities Act of 1933 and the Securities Exchange Act of 1940, granting regulators such as the U.S. Securities and Exchange Commission (SEC) clarity on how they may enforce securities laws surrounding cryptocurrencies.

The new TTA proposal is similar to the bill that was introduced in late 2018. It unfortunately was caught up in the yearend logjam that occurs before the session ends and never came to the floor for a vote. The new bill has gained more supporters and has also been tweaked a bit in the interim to enhance a few of its features. One change is a “clearer definition of digital tokens that will be more inclusive of changing technology.” Another piece of the legislation strengthens protections afforded to consumers, while another specifically preempts any attempts by the states to institute conflicting statutes.

For the crypto community, this legislation could not come at a more propitious time. The SEC, under pressure from crypto focused law firms that have demanded more clarity in the application of previous securities legislation, recently published new guidelines entitled “Framework for ‘Investment Contract’ Analysis of Digital Assets” in which it re-emphasized its use of outdated tests to determine if a token must comply with strict registration and disclosure requirements or face stiff penalties, fines and possibly incarceration. The TTA would hopefully overrule these guidelines in several areas.

What is the reaction from the crypto community regarding the revised TTA? Kristin Smith, acting head of Blockchain Association, remarked to reporters that her lobbying group is “pleased to support the re-introduction of the Token Taxonomy Act.”

She added further that:

In light of the recent SEC staff guidance, the open blockchain industry needs regulatory clarity more than ever. We believe that blockchain technology has tremendous potential and that we need smart, simple, and supportive legislation to make sure that the United States continues to be a leader in this ecosystem. We are grateful for the bill’s sponsors for their continued support for this vital technology.

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