Bipartisan House Bill Says Digital Tokens Are Not Securities

Matt Hougan, founder and chief investment officer of Bitwise Asset Management, applauded the bill as "exactly the kind of change that's needed if we are going to have a vibrant and better-regulated crypto ecosystem. Its impact would be to help unleash the full innovative potential of crypto while also providing clear guardrails and bright lines that projects can't cross."

The bill distinguishes between digital assets sold or transferred under an investment contract and the investment contract itself, noting that "among the ways that participants in the  digital asset industry have raised capital and earned revenue is through arrangements in which investors provide funds for the development of blockchain- based protocols in exchange for digital assets or the future delivery of digital assets to be used in those protocols."

The bill would amend the Securities Act of 1933 by adding language that ''the term 'security' does not include an investment contract asset.''

Ric Edelman, founder of the Digital Assets Council of Financial Professionals (formerly RIADAC), said, "The bill resolves an important open question in tax law … Many elements of digital assets have unclear tax treatment, and the confusion is hindering innovation and investment adoption. Congress must resolve these questions, and the sooner it does, the better it will be for investors and the economy."