Crypto Assets to Be Regulated Differently in the US, Potential Impact on Industry

The United States government could regulate crypto assets and tokens differently than stocks and traditional assets by altering the existing regulatory framework on securities.

When passed, what sort of impact could the bipartisan Token Taxonomy Act have on the cryptocurrency and blockchain sector?

More clarity, exactly what the industry needsIn a statement, the Blockchain Association - a Washington, D.C.-based non-profit trade association that represents many of the biggest companies in the cryptocurrency industry such as Coinbase, Circle and Digital Currency Group - said that the bill provides a definition to crypto assets and digital tokens that exclude them from being recognized as a security.

The vast majority of token sales and ICO projects - apart from a select few like Telegram that have reportedly conducted a private token sale with the approval from the U.S. Securities and Exchange Commission - have disallowed investors in the U.S. to participate in token sales due to the ambiguity in existing securities laws.

"If the network on which the token or coin is to function is sufficiently decentralized - where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts - the assets may not represent an investment contract. Moreover, when the efforts of the third party are no longer a key factor for determining the enterprise's success, material information asymmetries recede."

"Like all legislation in the early stages, we expect this bill isn't perfect yet. However, what excites us is that it was proposed by a bipartisan team, demonstrating a vision for innovation and responsibility that is shared across the aisle. With the new Congress starting in January, we hope digital tokens will be an idea that we can build upon. We want to work together to debate the key issues, ensure adequate consumer protection, and work toward advancing legislation that represents our collective views," the association stated.

Dissimilar to other widely adopted stablecoins like Circle's USDC and Gemini's GUSD, Basis incorporates an algorithm and alters the supply of the token to adjust to the price of other major crypto assets, like Bitcoin and Ethereum.

In an official statement, the Basis team said that, ultimately, the closure of the project came down to the securities law of the U.S."As regulatory guidance started to trickle out over time, our lawyers came to a consensus that there would be no way to avoid securities status for bond and share tokens. Due to their status as unregistered securities, bond and share tokens would be subject to transfer restrictions, with Intangible Labs responsible for limiting token ownership to accredited investors in the US for the first year after issuance and for performing eligibility checks on international users."

Inefficient regulatory frameworks and securities policies that consider crypto assets in the same way as stocks and traditional assets limited the scope of the project.

"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.".