Economic Questions:
Is it too early to define crypto-asset tokens?
Do entrepreneurs need regulatory clarity? Should Article III courts apply the Howey test of the Securities Act to actual facts and cases? Or should Congress define whether a digital currency is a security?
There are many types of digital assets. Can Congress define a security better than the Howey test and case law in the common law?
Summary:
Introduced by Reps. Warren Davidson (R-OH) and Darren Soto (D-FL). TTA amends the Securities Act of 1933 and Securities Exchange Act of 1934, defining criteria for when a digital currency (or cryptocurrency) is a security. It also provides clarity on when and how the SEC is able to enforce securities laws pertaining to cryptocurrencies. If a digital currency meets an exemption requirement, the SEC does not act as the regulatory enforcement body. Exemptions from listing a cryptocurrency as a security are:
The platform the token runs on has already launched,
The token’s supply can’t be controlled by a single person or group of people,
Transactions cannot be altered once completed,
And the token does not represent financial ownership of a company, debt interest, or revenue share.
Supporters of the bill believe that removing doubt about how a digital currency will be cast and regulated opens the space for new innovation and investment in America. TTA was inspired by the amount of growth in stable digital currency markets with light-touch regulation, such as Sweden and Singapore.
Objections to the bill include concern fraudulent activity during initial coin offerings (ICOs) may increase, and potential limitations to innovation. ICOs are currently viewed as a security exchange and regulated by the SEC, even if the currencies themselves are not viewed as securities. TTA leaves ICOs unregulated. Secondly, the bill provides a kind of definition for a concept that hasn’t isn’t well defined. Placing a “box” around what can be done on blockchains may limit innovation.
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