In our excessive partying times, any bill that includes patrons on either side of the aisle is noteworthy. There are expectations at the moment, which is especially important in the field of cryptography. March 8, 2021, 1628, Code Classification Act 2021, introduced by actor Warren Davidson. Sponsored by actors Ted Bode, Darren Soto, Scott Perry and Josh Gotheimer.
Terms of the Symbol Classification Act 2021
Among other things, the bill would free “digital codes” from defining security, in addition to preventing inconsistent government regulation. Crypto assets must meet certain requirements to be considered “digital tokens” under this procedure:
First, the interest must be created either in response to validation of proposed transactions, or according to creation rules that cannot be changed by one person or persons under common control, or as “an initial distribution of digital devices otherwise constructed according to“ one of the first two options. ”
Second, the assets should have a transaction history recorded in the distributed digital ledger or data structure, where consensus is reached through a mathematically verifiable process.
Third, once consensus is reached, the transaction log must resist change by one person or persons under common control.
Fourth, the interest must be transferred in peer-to-peer transactions, and fifth, it cannot be a representation of a normal economic interest in a company or partnership.
Davidson explained that the purpose of the bill was to improve regulatory clarity. Additionally, in an interview, he indicated that if the law had been passed in previous years, “it could have prevented enforcement actions such as the Security and Exchange Commission (SEC) case v. Ripple Labs.” This comment takes a closer look at how law affects certain forms of cryptocurrency.
How will Bitcoin live?
As everyone in the crypto field knows, Bitcoin (BTC) is issued exclusively in mining transactions. In other words, it is created as a “response to validation of proposed transactions” and meets the first requirement to be a digital token. In addition, a record of the transaction is kept on the blockchain and meets the second requirements mentioned above.
The entire process is set to resist change or change in the absence of consensus among a large and decentralized community. The Bitcoin network was built entirely for a peer-to-peer network, although there are now many exchanges to facilitate transfers as well. Finally, Bitcoin is not associated with any company or partnership and does not represent an ownership interest or a right to a share of the income.
Given these facts, Bitcoin is clearly going to be a digital token. Thus, according to the proposed new definition in the law, Bitcoin will be excluded from the definition of security. In addition, according to Article 2 (d) of the law, government securities regulations for registration or restrictions on the use of an asset will be prohibited from applying for Bitcoin with the only caveat that states maintain the authority to regulate and enforce. Based on fraud or deception.
Since the US Securities and Exchange Commission already excludes Bitcoin from the purview of federal securities laws, this will not be a change to federal requirements. However, this would create a unified government system in which Bitcoin is excluded from regulation as collateral, except in cases of fraud.
Will the Ripples XRP be a “digital code”?
However, it is incorrect to assume that all cryptocurrencies will be considered digital tokens according to the law. Think Ripple’s XRP (and the SEC’s ongoing actions against the company and its top management). For those not familiar with Ripple and XRP, the XRP ledger was completed by Ripple in December 2012, and the computer code has created a steady supply of 100 billion XRP. At launch, 80 billion of these tokens were transferred to Ripple, and the remaining 20 billion XRP went to the founders’ pool.
According to the SEC’s complaint, from 2013 to 2014, Ripple attempted to create a marketplace for XRP by distributing around $ 12.5 billion through bonus programs that compensated programmers for reporting problems in the XRP ledger code. From 2014 to the third quarter of 2020, the company sold approximately $ 8.8 billion of XRP in the market and through institutional sales, and raised $ 1.38 billion to fund operations. There also occurred during this time, including the resale of XRP previously distributed to the founders of the company.