Article By Jeremy Wall
A new bipartisan bill called the Token Taxonomy Act is being reintroduced to Congress after being revised since the bill’s last filing late last year.
According to Warren Davidson, a US Congressman serving Ohio’s 8th District, the Token Taxonomy Act will be reintroduced soon, as it is a much-needed bill for light-touch regulatory certainty.
Davidson took to Twitter, sharing his excitement for the bill and thanking all who shared input for its revisions:
#TokenTaxonomyAct Thanks to all who have shared input. @RepDarrenSoto & I are excited about the revisions and look forward to reintroducing this bipartisan bill soon. We continue to inform our colleagues about the urgent need for light-touch regulatory certainty. #blockchain
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The Token Taxonomy Act
The bipartisan bill cosponsored by Davidson is attempting to update the Securities Act of 1933 and the Securities Exchange Act of 1934 to specifically exclude digital tokens from being defined as securities.
These securities acts are decades old and in need of revisions to accommodate the ever-evolving financial landscape and advent of the new asset class, digital currencies. In order to regulate the crypto industry, digital assets must be defined to give entrepreneurs and investors clarity for the industry to thrive and grow.
According to Davidson, US regulators must properly define digital currencies so that the United States can compete with Singapore, Switzerland, and others who are aggressively growing their blockchain economies.
Adding to this, Davidson reportedly said:
“Early attempts to regulate digital currencies have frustrated entrepreneur’s dreams with complex regulation and costly compliance.”
To solve this complexity and better appease regulators and industry participants, the Congressman described the Token Taxonomy Act as a simple but clear “light-touch” approach to regulation. He says it seeks to protect consumers, advance free-market solutions, and define a safe environment for ICO markets.
The Bill Seeks to Exempt Digital Tokens From Securities Law and Taxes
The decades-old Securities Act of 1933 has a broad definition for what constitutes a security, for which it employs the Howey Test, which has 4 main criteria:
- It must be an investment of money or assets
- Profits are expected
- The investment goes into a “common enterprise”
- Profit is the result of the efforts of a third party or promoter
It’s evident that most cryptocurrencies would apply, which is why Davidson and the Token Taxonomy Act seek to exempt digital tokens from the securities definition, which would prevent cryptos from being over-regulated so that innovation and adoption of the nascent assets can be given a fair chance.
Moreover, the Token Taxonomy Act also seeks to modify the IRS code to exclude the trading and acquisition of virtual currencies from taxable gains. This would put cryptos in the same category as property, and is much more preferred by investors and crypto enthusiasts.