In the state of Wyoming, legislators have voted unanimously in favor of a bill that, if made law, would see some cryptocurrencies exempt from being treated as securities.
The ‘open blockchains token exemptions’ bill has flown through the first stage of a process which could see it become the first token specific law to be implemented in the world. Naturally, this is a considerable development in the crypto world as legislators will be looking to Wyoming to see how the rest of the process unfolds. It could also set a benchmark for other legislators at a time when the demand for legislative action is high.
The bill, which flew through to the committee stage, suggests that tokens that are not securities (utility tokens) should be exempt from the regulations imposed by SEC.
SEC chief Jay Clayton: ‘I believe every ICO I’ve seen is a security.’
Though many ICOs do offer security tokens, Clayton’s comment does not consider the complexity of the token economy – in particular, the distinctions between tokens. The vast majority of crypto enthusiasts collect these utility tokens. It is even common now to forgo an ICO altogether and participate in a free airdrop which sidesteps most regulations. These tokens cannot be said to be the same as securities. They are different by definition since they are exchangeable for goods and services and because no repurchase agreement between the issuer and recipient exists.
The bill aims to bring this distinction into focus. The problem for Clayton and the SEC is that legal recognition of such a distinction would change the parameters of their jurisdiction regarding certain ICOs and tokens. It would lessen their control on the crypto ecosystem.
If this bill does indeed become law, (and I predict, with how smoothly it sailed through the first stage, that it will) it will be interesting to see what the authorities will do next. One issue that will be on the agenda will be standardizing token classification. There will undoubtedly be a need for a robust system to classify tokens if they are to be regulated accordingly.
To do this, legislators may look to systems already in place (as in Switzerland) to provide more clarity. If they do, lawmakers will have the chance to begin establishing a consensus regarding crypto, and not just in the USA.
Consensus could help the technology in the long run, as instead of wasting time arguing over what the technology is and hindering innovation with constant squabbles over how to regulate it, the discussion can focus instead on what the technology can do and how it can be put to best use. If we can get to that point, it’s possible that innovators, legislators, and consumers will facilitate an ecosystem where the potential of the most promising technology of our time could be realized.
Michael is an English and Creative writing graduate of Liverpool John Moore’s University, a former editor of several magazines, and a crypto-currency enthusiast. He is mostly interested in crypto-legislation and the potential of decentralized technology to change the world.