SEC Commissioner's first remarks on the Token Taxonomy Act - the bill that would remove SEC oversight from most tokens, soon to be introduced in Congress...

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We've been closely following the Token Taxonomy Act, a bill that would free most cryptocurrency tokens from being labeled a "security" - which would also then remove the Securities And Exchange Commission's authority over them.  Read about that here.

In a speech given Friday at the University of Missouri School of Law, SEC commissioner Hester M. Peirce mentioned the bill for the first time - and to my surprise, she doesn't seem against it - even going as far as to cite several examples against classifying them as securities.

"Congress may resolve the ambiguities engendered by Howey by simply requiring that at least some digital assets be treated as a separate asset class. Congressmen Warren Davidson and Darren Soto recently introduced a bill in the House intended to amend the federal securities laws to do just that, provided that the token truly operated in a decentralized network.

Such an approach would facilitate more tailored disclosure. Indeed there are others who have argued that, whether ICOs can fit within the definition of a securities offering does not answer the question of whether that is how we should regulate them. In a forthcoming paper, Georgetown Law professor Chris Brummer and his co-authors argue that ICOs have certain features that make the regulatory framework applicable to IPOs inappropriate. For example, changes to the blockchain may have outsized effects on certain tokens that depend on it. An investor may need to understand, for example, how the blockchain can be changed, and how those changes would affect the relevant token before she could fully appreciate the risks of investing in that crypto asset."

If you listened to her speech you may not have immediately made the connection, that 'recently introduced bill' is the Token Taxonomy Act, this was made clear when the speech was published on the official SEC website with citations and mentioned by name in the footnotes.

Evaluating the nature of her statements it seems she actually shares in the same frustrations as everyone else - if you're in America and dealing in cryptocurrency as a business, trader, or regulator - you're sick of the uncertainty and confusion the current legal framework provides.

An initial concern of mine was that opposition to the bill would come from the SEC with the intent of influencing the votes of Congress and that the SEC was viewing the Token Taxonomy Act as an attack on the work they've done so far.

But instead, she acknowledged  'the ambiguities' that come with applying the Howey test, the standard method used to answer the question of 'is this a security?'.

Congressman Warren Davidson calls current regulations 'sloppy'.

The author of the bill, U.S. Rep. Warren Davidson began seeking this clarification in a letter written by him and co-signed by a total of 11 fellow congressmen, Republican and Democrat, in that letter he stated:

"We believe the SEC could do more to clarify its position. Additionally, we are concerned about the use of enforcement actions alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught."

It seems the SEC would like that clarification too - which is probably why they've struggled to provide it. When the government body in charge of enforcement seeks clarification, providing it becomes the duty of lawmakers.

Another factor worth noting that I haven't touched on in previous articles -  the rise of actual security tokens!

It seems like there's a new 'STO' project announced every day that planning to release a token that also represents some kind of equity in the company behind it. That's going to be more than enough to keep the SEC busy, and even under the Token Taxonomy Act these will remain classified as securities.

It's clear as can be - from traders to regulators, the time to bring everyone the regulatory clarity they need is now. Add all this to my list of reasons I believe this bill will pass - I wrote an in-depth look at why I think it will be met with approval each step of the way here.

The SEC Commissioner's speech can be read in full here.

Author: Ross Davis
E-Mail: Twitter:@RossFM
San Francisco News Desk

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