The charge to amend securities laws in the US continued yesterday with the reintroduction of the Token Taxonomy Act to Congress by Representative Warren Davidson. Passing the Act would have a number of beneficial consequences for the industry in the US, such as excluding digital tokens that meet certain requirements from US securities laws and adjusting the taxation of virtual currencies.

Paying tax on crypto transactions is currently a nightmare as all those who just recently filed (or should have filed) their taxes can attest. From a tax perspective, some of the highlights of this bill include:

• Crypto-to-cash transactions under $600 being tax-exempt
• Exchanging one cryptocurrency to another would no longer be a taxable event
• Virtual currencies held in individual retirement accounts receive favorable tax changes

Perhaps the most interesting revision in the bill is that, if passed, it would supersede existing state laws around digital tokens if they overlap with the Act. This means that state regulation ranging from the lassaiz-faire (Wyoming, Colorado) to the strict (New York, Texas) would all be affected.

For those catching up, here’s everything you need to to know:

“…the bill would implement the one vital and important change the markets truly need for a full-on comeback, by giving tokens their proper legal classification, and thus allow US citizens once again to have the freedom to fully participle in the markets.

In the US cryptocurrencies are being legally classified ‘securities’ so oversight of them goes to the Securities Exchange Commission (SEC). The Token Taxonomy Act takes this on directly and removes the ‘security’ classification, and the SEC oversight.”

To understand why this is so important, you need to understand how awful the current regulatory situation is:

“Cryptocurrency and blockchain technology are often mentioned alongside Artificial Intelligence and IOT technology as the ‘cutting edge’ tech of our time – but cryptocurrency is the only one being held back by government regulations written in the 1940’s.

While cryptocurrencies are intended to be freely exchanged, the laws surrounding them are so outdated they were written for the stock market at a time when stocks were traded on paper certificates.  In fact, the hot new technology when these regulations were written – color TV.”

Not just something nice for crypto traders – the US has suffered some real economic damage in the meantime:

“Companies involved in the cryptocurrency space that began in the US packed up and left, taking the jobs with them.  When a company leaves – no more tax revenue for the state and federal government either. 

No one wanted to risk building something that could be torn down the next day – even if they conducted honest ethical business. The law meant that a company based around a cryptocurrency could still be shut down – simply for existing as an ‘unlicensed security’.”

It’s always important to note the following, because if there is an attack on the bill it will be from this angle – but it does NOT make things easier for scammers and fraudulent ICOs. Fraud is illegal, lying to investors is illegal – this does not change if cryptocurrencies are no longer classified as a security.

The only change we imagine in this regard is that the CFTC would likely be the agency pressing these fraud charges instead of the SEC – as crypto changes from a security and to a commodity.

Realistically though it’s unlikely we see this pass in the near future. There’s no real mainstream catalyst to quickly push this bill through Congress. It’s also very probable the bill in its current form undergoes more changes before being passed.

The bottom line: This is all a push to make the regulatory environment in the US more favorable to the growing crypto industry. If there’s one thing US politicians can get behind, it’s trying to make the US the world leader in new industries.

Two heavy hitters on regulation, Caitlin Long from the Wyoming Blockchain Task Force and Peter Van Valkenburgh of Coin Center (leading crypto think tank), were sharply divided on the bill and its implications. Check it out.