U.S. Lawmaker Introduced a Bill to Address Digital Assets Classification

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Key Takeaways:

  • U.S. lawmakers unveiled a bill that, in part by using the newly invented term “investment contract asset,” seeks to explain how digital assets are labeled.
  • If the measure is passed, it will increase regulatory clarity on the types of assets that can be classified as securities.

Congressman Tom Emmer of the United States has submitted a new measure that will define the classification of digital assets and the purview of each regulator.

Emmer highlighted the need to distinguish between digital assets and securities contracts in a tweet on May 18. The congressman contends that token initiatives that raise money to finance development cannot exit the securities framework after the project is decentralized if there is no differentiation between the asset and the securities contract. The bill modifies the Securities Act to cover “investment contracts asset.”

“The Securities Clarity Act inserts a key term, the “investment contract asset,” into existing securities law to enable crypto projects to reach their full potential in a compliant way, allowing the United States to compete globally in this next iteration of the internet.”

If the bill is passed, it will increase regulatory clarity on the types of assets that can be classified as securities. The SEC has categorized several cryptocurrency projects as securities under Gary Gensler, claiming that the existence of an “investment contract” makes them comply with the Howey Test’s definition of the term.

According to U.S. law, an investment contract is a transaction in which a person invests money in a group business with the hope of making money off the work of a third party. Meanwhile, Several cryptocurrency projects have continuously argued that the present Securities Act is insufficient to meet the sector’s demands.

In recent months, the issue of regulatory certainty has become more crucial for the cryptocurrency sector. The Securities and Exchange Commission (SEC) has allegedly targeted numerous companies, and those companies have alleged that the SEC has frequently failed to provide them with clear guidelines prior to taking enforcement action.

The most noteworthy of these businesses is the bitcoin exchange Coinbase, which was sent a Wells notice. Paul Grewal, the business’s CLO, has subsequently claimed that despite contacting the SEC more than a dozen times over the course of nine months, his company could not get a clear response regarding which digital assets the Commission views as securities.

The SEC has urged that Grayscale remove the registration statement for its Filecoin Trust and declared that FIL “meets the definition of a security” as defined by federal law. According to Grayscale, it “cannot predict” if the SEC would accept their rationale, which was stated in the announcement piece. On April 14, the organization had initially submitted a Form 10 application to the government in order to launch a better Filecoin Trust product.

The Texas state legislature of the United States passed a bill last week to include language in the state’s Bill of Rights recognizing people’s freedom to acquire, hold, and utilize digital currencies. 

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Deep Dalal
Deep Dalal

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