Another week and we are one step closer towards a decentralized world, as countries like the United States and Mauritius are taking important decisions in regards to blockchain and crypto mass adoption. Hence why they are the focus in this weekly edition of ActuRegulation
According to recent reports, Warren Davidson, a Republican congressman from Ohio introduced a bill proposal known as the Token Taxonomy Act of 2019. The aim of this newly proposed bill is to institute digital tokens as a different and new digital asset class. If passed, the law will exempt all tokens within the new class from securities laws.
Originally, the bill was introduced to Congress in late 2018, however, it was a shortcoming. But this time around, the Republican representative is more confident in his new and refined bill.
An important aspect of the refined bill deals with the modification of current tax structures in regards to digital assets in the United States
…to adjust taxation of virtual currencies held in individual retirement accounts, to create a tax exemption for exchanges of one virtual currency for another, to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash, and for other purposes.
In general, the Token Taxonomy Act of 2019 will add an amendment to the Securities Act of 1933. Furthermore, an important part of this proceeding is the inclusion of the true definition of “digital Token” as shown by the excerpt below
The term ‘digital token’ means a digital unit—
(A) that is created—
(i) 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 any single person or 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);
(B) that has a transaction history that—
‘‘(i) is recorded in a distributed, digital ledger or digital data structure in which consensus is achieved through a mathematically verifiable process; and
(ii) after consensus is reached, resists modification or tampering by any single person or group of persons under common control;
(C) that is capable of being transferred between persons without an intermediate custodian; and
(D) that is not a representation of financial interest in a company or partnership, including an ownership interest or revenue share.
Moreover, the introduction of this definition will provide the support necessary for the Token Taxonomy Act to succeed and achieve its intended goal, which is to make digital tokens more tradable and law abiding. In general, Digital tokens are often introduced as Utility tokens, which in this case are not under the U.S. Securities and Exchange (SEC) jurisdiction or regulation.
Introduced by Representative Warren Davidson (R) from Ohio, the bill has been gaining some support among Republican and Democrat representatives in the Congress. Additionally, they believe that if passed the bill could strongly benefit the U.S. economy, as they reiterated that some of the current laws are too harsh and could eventually become detrimental to the economy of the Country.
Slowly but surely, the blockchain trend is taking over Africa. As per recent reports, the Mauritius Financial Services Commission (FSC) provided a guidance note for security token offering (STO) regulations.
Throughout the document, Mauritian authorities emphasize the high risk of investing STOs, as they are not protected or backed by any “statutory compensation arrangement” in the African nation. In addition, carrying any type of financial services in the country without the appropriate license is considered as a criminal offense.
More importantly, as stated in the document, security tokens are defined as digitally represented securities in accordance with the country’s securities Act of 2005. Consequently, Security Token Offerings are now regulated under Mauritius strict financial regulations.
In a similar fashion, back in February 2018, the country’s financial regulators released a first guidance note recognizing digital currencies as an assets class for investments.
Although cryptocurrencies are not considered as legal tenders in the East African nation, Mauritian authorities and government are in favor of Fintech related projects in the Country.