The Token Taxonomy Act of 2019 represents a second push on the part of lawmakers to clarify cryptocurrency regulations in the United States. The first Token Taxonomy Act died last year. The new version of the bill may change the entire cryptocurrency landscape in the US if it becomes law.
Limits tax liability for cryptocurrency users. If passed, crypto-for-crypto transactions would not trigger taxable events. In addition, gains of less than $600 would not have to be included with gross income at tax time.
Uniform crypto laws for all states. If passed into law, the bill will supersede all existing US state laws that regulate cryptocurrency. This would make New York’s controversial BitLicense obsolete.
Exempts digital currencies from certain regulations. The bill defines digital currencies and excludes true digital currencies from being treated like securities for tax purposes.
Strengthens anti-fraud authorities. One of the new aspects of this year’s version of the Token Taxonomy Act is that it contains language that it specifically notes that regulatory powers can “investigate and bring enforcement actions with respect to fraud or deceit, or unlawful conduct by any person” involved with cryptocurrency.
The key players. Warren Davidson (R) and Darren Soto (D) are the two legislators that introduced the bill.
CoinTracking.info reached out to various cryptocurrency thought leaders to gauge the reaction to the bill.
New York’s BitLicense has been criticized for placing too big of a compliance burden on cryptocurrency start-ups. How is the 2019 version of the Token Taxonomy Act better in this respect?
“The difference here is it excludes digital tokens from being classified as securities. The act would make the US a much more attractive place for blockchain enthusiasts to make base as NY’s Bit License is overly forceful. The Taxonomy act would bring lots more clarity to the playing field, benefiting all parties.”
– Chris Skordis, Editor in Chief at InsideBitcoins
“The Token Taxomony Act is better then the New York’s BitLicense law because it creates a separate class for digital tokens, and in a way removes them from the financial regulations tied to being classified as a security.”
– Henry Stanley, CEO at ICOAxiom.com
One of the most discussed aspects of the Token Taxonomy Act is that it will make cryptocurrency laws uniform across the United States. How will this benefit US-based cryptocurrency startups?
“As State regulations would be wiped, the path for a equal playing ground would be paved – allowing states to eventually build on this act. There will also be no uncertainty around the law, meaning start ups know exactly what is allowed and what isn’t – allowing them to build correctly from the start. It also will encourage development and research, giving start ups the flexibility and chance to thrive.”
– Chris Skordis Editor in Chief at InsideBitcoins
“When you have uniform laws across the country it makes it easier to comply. Different laws in 50 states require additional resources and manpower to ensure that company is in accordance to those laws. One uniform law across the country would help simplify compliance.”
– Henry Stanley, CEO at ICOAxiom.com
The new version of the bill has some provisions in it that protect consumers from frauds. How will those provisions will work?
“The Token Taxonomy Act of 2019 will permit states to continue anti fraud regulatory control. The Digital Taxonomy Act of 2019 (DTA) will play a more important role in attacking fraud as it will grant the Federal Trade Commision (FTC) $25m to compile reports to make sure fraudulent activities do not arise.”
– Chris Skordis, Editor in Chief at InsideBitcoins
“In the Token Taxomony Act, its grants resources and authority to the Federal Trade Commission (FTC) to combat fraud related to digital assets.”
– Henry Stanley, CEO at ICOAxiom
According to a predictive algorithm developed by Skopos Labs, the Token Taxonomy Act of 2019 has a 5% chance of being enacted. What kinds of legislative hurdles are standing in its way?
“The Token Taxonomy Act is of course still in very early stages, being only introduced to Congress early in April. One worry of it not being passed is because any digital asset that does pass the basic standards would be exempt from securities compliance and therefore the protection for investors. I think 5% is a harsh percentage but as of now I believe the probability of it being passed is still rather low.”
– Chris Skordis, Editor in Chief at InsideBitcoins
“I would say that 5% is an appropriate chance of this law getting passed. Some say that this law doesn’t cover all the issues with digital currencies. Another issue is that congress and the president are focused on other matters and bills like this one are not likely to get that attention they deserve.”
– Henry Stanley, CEO at ICOAxiom
“I’m not sure when if ever this gets passed because federal tax legislation seems frozen for the foreseeable future. This is more likely to happen if the tax parts of this crypto bill are part of a bigger federal future tax technical correction bill.”
– Randy Tarpey, CPA at Sickler, Tarpey and Associates
Defining digital tokens: is the bill still too vague?
Caitlin Long, president of the enterprise blockchain company Simbiont, expressed her frustration with the new version of the Token Taxonomy Act in a series of tweets. Her main issue seemed to be with the way that the bill defined digital tokens:
“The definition of “digital token” got so watered down that there’s not even a “taxonomy” left in the #tokentaxonomyact anymore!”
DayOrg Consulting Group founder Aanchal Thakur expressed worries that the SEC lacks the knowledge needed to classify cryptocurrency projects appropriately:
“In case of a business creating digital tokens that are not even securities token, they can still get notices and they will have to cease all sales and return the funds raised.”
However, other cryptocurrency thought leaders were pleased with the definition. Nash Foster, CEO of Pyrofex, an industrial-scale platform development company, had this to say about the bill:
“I think Long misreads the bill. It’s possible that a more sophisticated taxonomy would be better, but putting together such a taxonomy presumes we know what will matter five years from now. We simply don’t, because the pace of innovation is moving far more rapidly than the pace at which the law and regulations are being updated. Keeping things a bit more general seems like a wise move right now.”
What do you think about the Token Taxonomy Act of 2019? Share your thoughts in the comments section below.
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