The bill would implement the a vital and important change - giving tokens their proper legal classification and pulling them out of the legal 'grey area' we hear about so often.
Perhaps you visited a crypto exchange or projects over the last year, but instantly it detected your US based IP address, and kicked you off with a message like 'Unfortunately citizens of the United States cannot currently participate' - well, this is why.
International crypto projects banned US citizens from investing, US based crypto projects left the country, and the theory is - there's billions of dollars sitting on the sidelines as crypto has the attention of large investors who are only waiting for these simple issues to be resolved.
First, You Need To Understand The Problem...
Cryptocurrencies and blockchain are often mentioned alongside Artificial Intelligence and IOT technology as the 'cutting edge' tech of our time - but cryptocurrency is the only one being held back by government regulations written in the 1940's.
While cryptocurrencies are intended to be freely exchanged, the laws surrounding them are so outdated they were written for the stock market at a time when stocks were traded on paper certificates.
In fact, the hottest new tech at the time these laws were written - color TV!
In the US cryptocurrencies are being legally classified as 'securities' (something people buy only because of the belief it will go up in value) so oversight of them goes to the Securities and Exchange Commission (SEC). But those laws were written for the stock market, and transactions between a corporation and investor. Most crypto transaction are one person to another (P2P) and even many business transactions are only a simple transfer of value.
Basically - a huge amount of crypto transactions are not people making investments, so can the same digital token be a security one minute, and seconds later be nothing more than the $20 your friend owes from dinner last week when he forgot his wallet?
This is why the heavy hand of the SEC simply doesn't belong here - a number of SEC staff have publicly shared this viewpoint as well. This bill rightfully removes them from oversight of cryptocurrencies.
Won't that leave investors/traders less protected from scammers?
No at all! Firstly, no arrests of those running crypto based scam operations saw the accused charged with being an unlicensed security.
Secondly - fraud has been illegal even before crypto, just like lying to investors is as well - security or not. If it's a scam, there generally will be a variety of felonies for law enforcement to choose from.
The only difference would be that the CFTC would likely be the agency pressing these charges.
There's no downplaying the self-inflicted damage already caused...
As companies in the cryptocurrency space that began in the US packed up and left, they also took hundreds of jobs with them.
These companies still exist in their new locations, because they always were legitimate businesses - now they just don't pay taxes to the US government, and employ less US citizens.
No one wanted to risk continuing with building something that could be torn down the next day - even if they conducted honest ethical business. The law meant that a company based around a cryptocurrency could still be shut down - simply for existing as an 'unlicensed security'.
For some perspective, just in the first half of this month (Jan 1st-Jan 15th 2019) cryptocurrency startups raised $160 million. Look at where those funds went - Canadian based companies brought in a hefty $80 million, the Netherlands $10 million, the UK around $5 million... but the USA? Bottom of the list with an embarrassing $100k. Remember, that's just half of 1 month - imagine a full year.
That's not the only downside for the United States and it's citizens. Even if a startup in the cryptocurrency space isn't located in US, doing business with someone in the US means they must follow US regulations as well. Not wanting to deal with it, they've ignored the country entirely.
Even with other countries competing to take in the companies the US was losing, lawmakers failed to see this as a red flag...
I'll never understand how US leaders did not find it odd that companies leaving the US were immediately met with open arms by other developed nations. Switzerland among the most aggressive encouraged them to choose an area of their country being called 'Crypto Valley' because of the amount of companies that have accepted the invitation.
It's one thing to watch your Nation's elderly leadership simply not understand what was happening or why it mattered, it's another thing to then see one getting it right.
Once the birthplace of countless breakthrough technologies, the United States now finds itself being abandoned, and ignored.
Light at the end of the tunnel...
The Token Taxonomy Act is on the verge of being introduced in the House, where it will soon begin the process of becoming law. The bill's original authors, Congressmen Warren Davidson (Republican, Ohio) along with Darren Soto (Democrat, Florida) are working together to give it a bipartisan introduction.
Speaking directly with Michael Hiles, Congressman Davidson's adviser on the issue and CEO of blockchain solutions company 10XTS, I was able to confirm a target date of February 14th (Valentines day) for the bill to be officially introduced.
The objectives as explained by Congressman Davidson are:
“This bill clarifies a 1946 court case that the SEC has been using to determine what a security is and effectively makes it clear that the finished product (cryptocurrency token) is no longer a security." he's also fully aware of the issues causing the US to fall behind, adding "This bill provides the certainty American markets need to compete with Singapore, Switzerland, and others who are aggressively growing their blockchain economies. To be certain, there will be other regulatory initiatives at some point, but this legislation is an essential first step to keeping this market alive in the United States."
There's a number of reasons to believe these efforts will be successful. With members of both political parties presenting it, assistance from newly launched cryptocurrency advocate groups in Washington DC, and a US President who currently has a cryptocurrency fan as his Chief Of Staff in the Whitehouse. I go into detail in another article i've written "Why the new pro-cryptocurrency bill WILL PASS in 2019..." read that here.
But just because the odds seem in our favor, the cryptocurrency community should't just relax and hope for the best.
Tweet, e-mail, and post on the Facebook pages of your representatives! Click here to find your Congressional representative by zip code - and feel free to take any of the points made in this article and use them in your message.
Michael Hiles tells me the bill is currently getting it's final touches, they're 'adjusting the language based on feedback' - then it's ready to go!
We have several reporters assigned to following it's progress, we'll have updates as soon as they're available.
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Light at the end of the tunnel...
The Token Taxonomy Act is on the verge of being introduced in the House, where it will soon begin the process of becoming law. The bill's original authors, Congressmen Warren Davidson (Republican, Ohio) along with Darren Soto (Democrat, Florida) are working together to give it a bipartisan introduction.
Speaking directly with Michael Hiles, Congressman Davidson's adviser on the issue and CEO of blockchain solutions company 10XTS, I was able to confirm a target date of February 14th (Valentines day) for the bill to be officially introduced.
The objectives as explained by Congressman Davidson are:
“This bill clarifies a 1946 court case that the SEC has been using to determine what a security is and effectively makes it clear that the finished product (cryptocurrency token) is no longer a security." he's also fully aware of the issues causing the US to fall behind, adding "This bill provides the certainty American markets need to compete with Singapore, Switzerland, and others who are aggressively growing their blockchain economies. To be certain, there will be other regulatory initiatives at some point, but this legislation is an essential first step to keeping this market alive in the United States."
There's a number of reasons to believe these efforts will be successful. With members of both political parties presenting it, assistance from newly launched cryptocurrency advocate groups in Washington DC, and a US President who currently has a cryptocurrency fan as his Chief Of Staff in the Whitehouse. I go into detail in another article i've written "Why the new pro-cryptocurrency bill WILL PASS in 2019..." read that here.
But just because the odds seem in our favor, the cryptocurrency community should't just relax and hope for the best.
Tweet, e-mail, and post on the Facebook pages of your representatives! Click here to find your Congressional representative by zip code - and feel free to take any of the points made in this article and use them in your message.
Michael Hiles tells me the bill is currently getting it's final touches, they're 'adjusting the language based on feedback' - then it's ready to go!
We have several reporters assigned to following it's progress, we'll have updates as soon as they're available.
Author: Ross Davis
E-Mail: Ross@GlobalCryptoPress.com Twitter:@RossFM
San Francisco News Desk
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