Содержание статьи:
- The Token TaxonomyAct Broken Down
- 1. Creation
- 2. Transaction History
- 3. Transactions
- 4. Representations
- How the TokenTaxonomy Act Stands to Revolutionize the Digital Market
- More Freedom
- Entry Point for theCreation of More Cryptocurrencies
- More Profits
- Security
- Greater Certainty
Recent events have indicated the possibility of the Token Taxonomy Act becoming law. According to Warren Davidson, the United States Congressman serving Ohio’s 8th District, there is
Warren Davidson together with Darren Michael Soto, Florida’sDemocratic Representative proposed the bill to the U.S. House of Representativesin late 2018. Even so, it goes back to the 30’s and is an attempt to amend the1933 Act and the 1934 Act.
The Token Taxonomy Act aims to transform the trading andtaxation of cryptocurrencies. By so doing, it shuts out digital tokens whendefining a security. It could change the way cryptocurrencies are traded andtaxed.
It is a common belief that digital tokens constitute a newasset class. When describing the new asset class, people mainly concentrate onwhat it is not likely to be. This is in respect to the Howey Testcourt case of 1946 which implies that a digital token is not a security.
The Token TaxonomyAct Broken Down
The Token Taxonomy Act revolves around 4 principles.
1. Creation
A digital token is:
(i) A unit whose creation is ‘‘in response to the verification or collection of proposed transactions”;
(ii) “pursuant to rules for the digital unit’s creation and supply that cannot be altered by a single person or group of persons under common control”; or
(iii) “as an initial allocation of digital units that will otherwise be created in accordance with clause (i) or (ii).”
For starters, it singles out mined tokens. Additionally, thisprinciple implies a digital token is that whose regulations for creation andsupply cannot be changed by an individual or group of people. Additionally, thereis space for prior sales if they are in line with the stipulated guidelines.
2. Transaction History
The transaction history of a digital token
- “is recorded in a distributed, digital LEDGER ordigital data structure in which consensus is achieved through a mathematicallyverifiable process;” and
- ‘‘after consensus is reached, cannot be materiallyaltered by a single person or group of persons under common control.
This clause describes a spread-out ledger in decentralizedharmony gauged by a crypto.
3. Transactions
A digital token “is capable of being traded or transferredbetween persons without an intermediate custodian.”
This simply means that there is no need for middlemen in tradesinvolving digital currencies.
4. Representations
It is “not a representation of a financial interest in acompany, including an ownership or debt interest or revenue share.”
This principle suggests that a digital token should never beregarded as part of a company’s stock.
How the TokenTaxonomy Act Stands to Revolutionize the Digital Market
The impact the Token Taxonomy Act will have in the digitalmarket cannot be overlooked. The need to regulate the industry to definedigital currencies is essential in tackling growing blockchain economies. Thebill could transform the cryptocurrency world in the following ways:
More Freedom
If passed, this bill grants more freedom to token investorsand creators alike. This is because it provides for the distribution of newtokens provided they are not being produced as a security. As such, the United StatesSecurities and Exchange Commission (SEC) would use it to define and identifytoken securities, bar the trade of those tokens and direct creators to giveback untouched sums to investors.
Entry Point for theCreation of More Cryptocurrencies
Less interference in the digital market means more room for creationof new digital tokens. In fact, there is a possibility that thecryptocurrencies may rise to levels that have never been witnessed before. Theexistence of a robust regulatory framework would be greatly beneficial foremerging digital currencies.
This would in turn protect the different stakeholders in theindustry. It would advance immense market solutions in addition to protectingconsumers. The birthing of stable coinsand Initial Coin Offerings would also be better regulated.
More Profits
As it stands, taxes imposed on cryptos are calculated in thesame way as stocks and other properties. This means losses are not carriedforward into the following year and this often leads to mishandling of cryptocurrencyportfolio.
As a result, huge taxes levied on investors lead to theunpredictability in the value of this asset class notwithstanding. Taxexemptions would therefore result in higher profits.
Security
Legally speaking, the word “security” has many definitions. Thecriteria used by the Token Taxonomy Act to define how and which dealing is asecurity include;
- It should be an investment involving assets or money
- The investment should be directed towards a common enterprise
- Profits are anticipated
- Profits arise from a third party’s work
Greater Certainty
Most digital currencies are in line with these guidelines.And so, this bill strives to exclude digital tokens when defining securities.This would protect cryptocurrencies from being excessively controlled to allowthe adoption of rising assets.
Accordingto Congressman Darren Soto, “Providing this much needed certainty frees theSEC to perform its vital and much needed consumer protection duties ofenforcement on those who have engaged in securities` fraud by making falseclaims or simply attempting to engage in regulatory arbitrage to circumventsecurities law.”
That said, this bill seeks to not only prevent taxation ofcryptos, but also offers protection against fraud.
Conclusively, without a doubt, this bipartisan bill will change the digital market from what it has been known into a new paradigm. The bill might not have all the answers but it sure is a step in the right direction.
Featured image via BigStock.
