Token Taxonomy Act: What American Crypto Users Have Been Waiting For
Two congressman have introduced the Token Taxonomy Act to the U.S. House of Representatives. If eventually passed, the bill would domestically exclude cryptocurrencies from being regulated as securities, offer a specific definition of tokens, and treat crypto trades as like-kind exchanges.
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Token Taxonomy Act Likely to Be Popular Among U.S. Crypto Traders
When it comes to cryptocurrencies in the U.S., top regulators have had many interpretations: the IRS has seen “property,” the CFTC has seen “commodities,” and the SEC has seen “securities.” Now, if two congressman have their way, clarity is coming and regulators can simply see tokens.
Toward that formal domestic embrace of cryptocurrencies as a new stand-alone asset class, Representative Darren Soto (D-FL) and Representative Warren Davidson (R-OH) introduced their Token Taxonomy Act to the House floor on December 20th.
— Drew Hinkes (@propelforward) December 20, 2018
Notably, the draft bill would specifically “exclude digital tokens from the definition of a security” as detailed in the Securities Act of 1933 and the subsequent Securities Exchange Act if voted into law.
The draft bill, whose purview would reach retroactively to January 2017, intends to offer numerous other legislative clarifications that many U.S. cryptocurrency traders have been clamoring for the likes of in recent years, such as tax exemptions for like-kind, crypto-to-crypto trades; a $600 de minimis taxation exemption for gains; and a specification that multi-step trades can be considered as single exchanges.
“Our intent is to achieve a similar win for America’s economy and for American leadership in this innovative space,” Rep. Davidson noted on the bill’s introduction.
A Step Forward for America?
As an aside, the bill’s introduction comes days after the New York Times published an op-ed titled “America Could Lead the Transition to a Digital Currency Reserve.”
In that piece, author Brian Brooks argued the U.S. could maintain its economic influence if the nation more fully embraced the cryptocurrency arena.
"America must maintain its leadership role by leading the way on research and development of cryptocurrency technologies — just as it did in the early days of the internet — rather than stifling it." https://t.co/HcULOnAfd5
— Balaji S. Srinivasan (@balajis) December 18, 2018
“The United States should not fight against the forces of globalization that challenge the dollar’s reserve-currency status,” Brooks said.
“Instead, it must seize the opportunity to incubate technologies that will enable future digital currencies, which could go on to power a transnational currency — perhaps the best next option for a future global reserve.”
Of course, Rep. Soto’s and Rep. Davidson’s Token Taxonomy Act is a far cry from anything resembling America creating a global reserve cryptocurrency for now.
But, in kind, the U.S. will likely never become a leading player in the cryptoverse unless it puts further clarifying legislation in place first. The Token Taxonomy Act could be a step in that direction, though it remains to be seen where the bill goes from here.
SEC Sets Its Own Priorities for 2019
The draft bill has a section that specifies a safe harbor process for token deployers who are hit by the SEC with securities law infractions but had a “good faith belief” their asset was a token.
If the bill ends up passing, it’s not clear how that safe harbor dynamic would affect the SEC’s enforcement activities both going forward and with regard to their actions since January 2017.
Whatever happens, the agency isn’t waiting around to find out.
This week, the Commission published its Examination and Compliance priorities for 2019, and digital assets were specified as being one of the agency’s six top priorities for the new year.
1/ The SEC just announced its Examination & Compliance priorities for the next year. On the list of six priorities, "digital assets" were listed as a category, and defined as "cryptocurrencies, coins, and tokens."
Here is what it means to be on the priority list ⬇️ https://t.co/voAD8qUXyl
— Katherine Wu (@katherineykwu) December 20, 2018
So unless the Token Taxonomy Act gets passed any time soon, look for the SEC to continue their increasingly proactive approach to the fledgling cryptoeconomy.
What’s your take on the Token Taxonomy Act? Is it a step in the right direction for the United States? Let us know in the comments section below.
Images via Pixabay