Regulation is Coming
Day by day, the regulatory picture within the U.S. becomes clearer, as various states outline their stances on cryptocurrencies and digital securities. Here are a few of the states leading the way in recent months, with regards to blockchain regulations.
On January 4th, the Colorado Senate brought forth the ‘Colorado Digital Token Act’. This has since been approved, and is expected to come into effect on August 2nd, 2019.
This Digital Token Act brings clarity to the industry by both defining ‘Digital Assets’, and exempting them from existing securities laws under specific circumstances.
For a deeper look at what these circumstances are, check out the ‘Colorado Digital Token Act’.
Possibly the most active of any state, Wyoming has already passed multiple bills pertaining to cryptocurrencies.
The first was passed in January, doling out new categories, defining tokens/coins. These were digital securities, digital assets, and cryptocurrencies.
Beyond this first bill, Wyoming has gone on to pass multiple others – each providing clarity into various aspects of the blockchain industry. Here is a brief look at two of those which have been passed.
Bill 185 – ‘An Act relating to corporate shares and distributions; authorizing corporations to issue certificate tokens in lieu of stock certificates as specified; making conforming amendments; and providing for an effective date.’
Bill 74 – ‘An Act relating to banking; making legislative findings; creating special purpose depository institutions as a new financial institution; providing that special purpose depository institutions shall be corporations…’
Although Rhode Island has only recently joined the party, they remain ahead of many states by doing so. As of February 27th, 2019, the State was provided with a proposed amendment to the existing ‘Rhode Island Uniform Securities Act’.
If passed, these amendments will outline the various scenarios in which a digital asset would be designated as a security. In doing so, we are now provided with scenarios in which they are exempt from this designation.
For a deeper look at these proposed amendments, check out Bill 5595.
An example of a situation that could have been avoided, if the aforementioned bills existed years ago, is the one that XRP is currently dealing with. Despite being adamant that their tokens were not securities that were illegally distributed, there remain many who believe otherwise. It is only through clarity being provided by new amendments, as discussed above, that situations like these can be avoided.
Days after Coinbase finally added XRP to their lineup, the embattled coin has found itself back in the news. This time XRP received news that their on-going lawsuit will stay in federal court. This comes a few short months after the XRP team fought to have their lawsuit moved from State to Federal courts. To achieve this, they argued that their case affected people beyond the borders of any one state, and that the case should be tried under the purview of a federal judge.
This case continues to be important, as the case stands to effect the future actions of many within the industry. With XRP being the 3rd largest cryptocurrency, all eyes are on the result of the trial.
Putting it into Perspective
The regulatory uncertainty, and lawsuits discussed here today simply point to the importance of the infrastructure being developed behind digital securities. The companies developing digital securities platforms want, and try, to adhere to regulations. That is the whole point of the sector. With these new bills, growth can continue
While XRP, and similar companies, may one day win their battle, the fact of the matter remains – The Security laws of today stand true. This simple fact emphasizes the point that no one is above the law. Whether current rules are appropriate is irrelevant. Yes, they need updated to better reflect modern finance, but they stand, regardless.