Congressmen Introduce Bill to Change Securities Definition to Exclude Cryptocurrency

Two congressmen are introducing a bill that would exclude digital currencies from securities classification and substantially improve the tax treatment for cryptocurrencies.

Today, CNBC reported that a bipartisan bill, the "Token Taxonomy Act" would clarify how cryptocurrencies fit within the U.S. Securities and Exchange Commission's regulatory framework.

The new law would more precisely define a "Digital token" and clarifies that securities laws would not apply to a cryptocurrency once it becomes a "Fully functioning network," as stated by CNBC. The bill would also introduce more favorable tax treatments for cryptocurrencies.

The basis for current U.S. securities laws stem from the Securities Act of 1933, and the Securities Exchange Act of 1934.

"Issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies."

"Securities exchanges providing for trading in these securities must register unless they are exempt."

Although these statements-along with the SEC's enforcement actions-indicate the Commission will take action against those who do not comply with securities regulations, the SEC has also offered projects some leeway.

"These orders provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws," said Steven Peikin, Co-Director of the SEC's Enforcement Division.

These are only a few statements from the SEC which indicate the Commission intends to regulate and enforce securities laws, even for companies that take advantage of distributed ledger technology.

"The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value. And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions."