Digital Token Law: what an investor needs to know

Digital token law: the most important points for investors

02 Dec, 2019 Endy Callahan

Montana passed draft law No. 584, which recognized tokens and freed them from the securities market. It was signed by Steve Bullock, who holds the post of governor of Montana. The bill entered into force on July 1, 2019.

The Provisions of the New Law on Tokens

Following the new law, the token acts as a digital unit created and recorded in the blockchain. It can be exchanged and released without the participation of a third party to provide owners with access to a service or product that is supplied by the issuer. In this case, the owner of the asset does not take equity participation and does not have ownership rights in the issuer.

Per the draft law, the token transaction must meet several requirements, and the asset itself must be primarily “consumer”.  The legislative act prohibits their use for investment and speculative purposes. Therefore, lawmakers explained that communal markers must be used to receive and provide services, goods or content.

The Law on Government Bonds is no longer valid for tokens. Their issuers are required to cooperate with the securities commissioner, as well as inform about plans to sell their tokens.

Montana was not the first state to regulate crypto business. Prior to this, the laws of Colorado and Wyoming have already passed such laws. So, the latter at the beginning of 2019 adopted a draft law and recognized cryptographic currencies as money. Colorado later amended the Law on Digital Tokens, removing from it the requirements for obtaining a license for organizations whose activities are related to digital assets.

Attitude of US Regulators to Cryptocurrencies

SEC and CFTF are active in developing legislation and regulating blockchain-based projects. In the article SEC Regulator Review, you can read more about the Securities and Exchange Commission. The following are some points from the Colorado Legislature:

  • Cryptocurrencies are currencies, not assets. This conclusion is justified by the fact that coins are not sold for speculative and investment reasons. Therefore, digital money goes beyond the responsibility of the SEC and CFTC.
  • Avoiding legal uncertainty. Volatility and uncertainty interfere with the dynamic development of the industry.
  • Colorado is a crypto-friendly state. The proposed draft law states that the state of Colorado intends to use digital money in the industry. As a result, the region will become the forefront of the economy, which is based on cryptographic assets. Colorado has every reason to become the Silicon Valley and will not be unrivaled in the world.

As you can see, the laws on digital tokens are actively adopted in various US states. The authorities are increasingly paying attention to regulating the activities of crypto companies and the development of this line of business. Perhaps this will give an impetus to the prosperity of the entire industry. Our crypto portal will continue to actively cover changes in American law, so the most relevant information will be available to you.