US Law on securities might be becoming too old.
In recent months, US Lawmakers have been deeply involved in the investigation and reconsideration of many cryptocurrency exchange businesses that do not comply with current security regulations. Regulators seem to be increasingly aware of damages affecting investors and also injustice affecting entrepreneurs who develop new businesses with crypto. As such, it is bringing to light the notion that US Law on securities might be becoming too old.
Congressman Warren Davidson, the Ohio congressman known for having a positive position with reference to Crypto, recently suggested that the US should turn to the Blockchain to raise funds for the famous Trumpâ€™s wall, the wall for border security. CNBC published the words the congressman shared in reference to Crypto:
“In the early days of the internet, Congress passed legislation that provided certainty and resisted the temptation to over-regulate the market. Our intent is to achieve a similar win for Americaâ€™s economy and for American leadership in this innovative space”
A very controversial case in the media has been with regard to Ripple and its currency XRP. It has been subject of whether it should be classified as a security, despite the fact that Ripple continually denies it. The doubts of the regulators and law enforcers regarding XRP seem to have been able to affect the price and adoption of this currency. In the case of Ripple Labs, the company behind Ripple and XRP, they have been very defensive of a class-action lawsuit that was filed against them.
The attitude of the authorities in reference to Crypto has also had an effect of slowing down adoption in general and has brought tension in the development of other financial products, such as the much anticipated Bitcoin ETF. There was also a recent lawsuit against CashBet wherein there were allegations that tokens had apparently been sold breaching US securities law.
The proposal “Token Taxonomy Act” is currently known in Congress. It proposes that cryptocurrencies should be completely eliminated from the classification of securities. This bill proposes that most digital currencies be excluded from the purview of the SEC with respect to what constitutes a security. If this law is approved, the new legal position of cryptocurrencies may enable exchange between coins free of taxation.
The SEC’s current definition of a security is based on the old Howey Test, a test created by the Supreme Court for determining whether certain transactions qualify as “investment contracts.” For a majority of crypto users, it is clear that a cryptocurrency is not an “investment contract” since it does not behave as a “shareâ€. Most cryptocurrencies behave rather as a “utility” or a “commodity”.
Deep inside, however, the intention of the legislators as well as the intentions of the SEC, will be to protect the consumer and protect American families as well as all kinds of investors from unfortunate but infamous ICO scams. It is about creating new laws and new legal frameworks that bring safety for the investor and also greater justice for Blockchain business developers.