There is good news to the crypto-lovers and online traders. Congressmen in the United States have introduced a bill to change security definitions to exclude cryptos or digital currencies from securities classification. CNBC had reported that a bipartisan bill, “Token Taxonomy Act” will clarify how the virtual currencies will fit in the US Securities and Exchange Commission’s regulatory framework. Now, the digital token would be precisely defined under the new law and the security laws will not be applicable to cryptocurrencies once the law is passed.
According to the Securities Act of 1933, virtual assets also come under security. The “Howey Test” was introduced by the US Supreme Court to set a standard set of rules to decide on whether an asset will come under security. Based on this test, transactions that come under investment contracts can be included in security.
The definition of security has many criteria, everything that revolves around a degree of decentralization and one in which a person or an entity has no control. This definition apparently clears the way for cryptos that do not have a central controlling entity or person to be spared from the securities category.
The decision of the new legislation to exempt cryptocurrencies from securities law will be a blessing for the traders as well as to anyone who are looking forward to using the virtual currencies as a medium of exchange. The new bill will be introducing more friendly tax treatments for the virtual currencies. In the present situation, trading crypto for another will bring about capital gains or losses. It will also produce a huge amount of record-keeping (one that many Americans had not done). Another issue to be dealt with is that when someone will purchase small items with cryptos, the following transaction will lead to the same gains or losses. These issues will be addressed in the proposed bill which would create an exemption for the cryptocurrency exchanges. Also, smaller transactions that are below a specified threshold will also receive an exemption. This will allow many more users to use the cryptocurrencies as a medium of exchange in their everyday life.
The current security laws don’t take into consideration the new digital era. The space is like many other frameworks but it is not exactly the same. It requires its own set of definitions which is slowly being discovered by governments around the world.