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25 October 2020

The Securities Clarity Act Is Simple and Logical (and Bad News for Lawyers Like Me) - CoinDesk

The Securities Clarity Act Is Simple and Logical (and Bad News for Lawyers Like Me) - CoinDesk

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The Securities Clarity Act doesn’t care if your digital asset is on the Bitcoin network, the Ethereum network or any other blockchain network.

(which gave us the HoweyTest, the default way to determine whether something is an “investment contract”) weren’t securities, unless they have special characteristics, any other assets sold or transferred pursuant to “investment contracts” would not be considered securities under the Securities Clarity ActJ

Previous federal legislative and regulatory “blockchain initiatives” (including the Token Taxonomy Act and the Token Safe Harbor) have been far too broad, in my opinion, effectively carving out special exceptions for sales of digital assets that might otherwise be considered securities transactions and asserting that “securities laws don’t apply because … well, blockchain.” These efforts have been further complicated by relying on technical concepts like “distributed digital ledger” and “decentralization” as part of their framework.

It would be, “Does the digital asset itself (separate from the manner in which it was sold) resemble any of the more traditional types of securities listed in the Securities Act?”  If not, then the digital asset will not be a “security.”.

Second, sellers of digital assets would also win because it would be easier to get tokens listed on exchanges (although as the Kik example above shows, just because a seller’s tokens aren’t securities, doesn’t mean that the seller wasn’t still offering investment contracts and – if those offers were made to the general public without registration or an available exemption – then those transactions would violate the Securities Act of 1933).

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