Colorado has established itself as a breeding ground and safe haven for blockchain based companies. The newly appointed crypto-friendly governor, Jared Polis, signed the Digital Token Act on March 6, 2019 providing clarity on the often murky U.S. crypto regulations. The bill excludes certain digital tokens from securities laws and provides a clear definition as to what it considers a digital token. The definition is as follows:
A digital unit that is:
1. created by deploying computer code to a blockchain network and/or in response to verification or collection of transactions relating to a digital ledger or blockchain;
2. recorded in a digital ledger or database that is chronological, consensus-based, decentralized, and mathematically verified in nature; and
3. capable of being traded or transferred between persons without an intermediary or custodian of value.
In addition, this bill outlines a regulatory framework regarding digital token sales or an ICO. These guidelines are as follows:
1. the offer or sale occurs after the Securities Commissioner promulgates rules to implement the Digital Token Act;
2. the offer or sale complies with the registration exemption requirements and any rules promulgated to implement the Digital Token Act;
3. the issuer files a notice of intent with the Securities Commissioner prior to an offer;
4. the primary purpose of the digital token is a consumptive purpose;
5. the issuer markets the digital token for consumptive purposes and not investment purposes; and either:
a. the consumptive purpose can be realized at the time of sale; or,
b. all of the following are met:
i. the consumptive purpose will be available within 180 days of sale or transfer of the digital token;
ii. the initial buyer is prohibited from reselling or transferring the digital token until the consumptive purpose of the digital token is available; and
iii. the initial buyer provides a clear acknowledgement that the primary intent of its purchase is to use the digital token for a consumptive purpose.
These regulatory guidelines finally give businesses and individuals clarity as to what exactly falls under the classification of a cryptocurrency and what laws they pertain to.
Jared Polis has long been a blockchain advocate. He formed the Congressional Blockchain Caucus along with South Carolina republican Mick Mulvaney in 2016. Polis was also the first member of congress to accept Bitcoin campaign donations way back in 2014.
“The blockchain has boundless potential. From cryptocurrencies to supply chains to banking to property titling, blockchain-based solutions have the ability to decentralize cybersecurity and revolutionize many industries. It’s vital for Americans, businesses, and members of Congress to learn about blockchain technology so the U.S. can continue to secure its stance as the global leader of ingenuity. The Blockchain Caucus will focus on raising awareness, advancing ideas that foster growth, and safeguarding consumers. I’m excited to work alongside Rep. Mulvaney, and I look forward to all that we’ll accomplish.”
It is extremely refreshing to know that there are blockchain and crypto-friendly government officials working to advance this nascent industry. Due to the complete lack of clarity given to the crypto-sphere by the SEC, many states are taking action to provide guidelines.
Not only is Colorado providing crypto regulations, they have expressed interest in utilizing blockchain for water rights management. Senator Jack Tate and legislators Jeni Arndt and Marc Catlin filed a bill giving the Colorado Water Institute the right to explore blockchain technology for managing the water rights database. Their vision is to:
“Connect all of Colorado’s higher education expertise to the research and education needs of Colorado water managers and users.”
And Colorado is not the only state. Wyoming, Utah, Ohio and California have taken steps to provide regulatory clarity as well as cryptocurrency use cases. For example, in Ohio you can pay taxes in bitcoin. California has passed 2 bills which provide a clear definition of blockchain technology and legal guidelines for using blockchain in some use cases. Utah is enacting a bill to exclude blockchain-based companies from being money transmitters. Wyoming has also passed bills providing regulatory clarity.
I don’t know about you, but I see exactly where this space is going. The regulatory advancement, degree of global acceptance and integration of blockchain taking place paints a clear picture as to the direction this industry is going in.