Insights
Publications

Token Taxonomy Act Seeks to Provide Regulatory Clarity to Crypto Industry

1/11/2019 Blog

Two United States congressmen introduced legislation in late December that would exclude certain digital currencies from being defined as securities – a bill that, if enacted, may finally provide the cryptocurrency industry with regulatory clarity regarding when the offer and sale of digital tokens must comply with federal securities laws.

The Token Taxonomy Act of 2018 – introduced on December 20, 2018 by Reps. Warren Davidson (R-Ohio) and Darren Soto (D-Florida) – would, among other things, amend the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude "digital tokens from the definition of a security,” as well as exempt digital tokens from the registration and reporting requirements of Section 5 of the 1933 Act. The bill effectively defines “digital tokens” as tokens created through the operation of the blockchain process and that are not “a representation of a financial interest in a company, including an ownership or debt interest or revenue share.” The definition explicitly includes such tokens issued through an initial coin offering (ICO, or the process of raising capital in exchange for tokens).

The bill leaves room for the SEC to deem certain “digital units” as securities – an umbrella term meant to represent any “economic, proprietary, or access rights that [are] stored in a computer-readable format” – if such units fall outside the definition of “digital tokens” and are actually meant to serve as equity. And when a party has a “reasonable and good-faith belief” that it is selling a token (versus a security) and the SEC disagrees, the bill grants that party a 90-day safe harbor period wherein it can avoid penalty by halting the sale of all tokens and returning all proceeds.

Read the full blog post, here.

Firm Highlights

Publication

INSIGHT: Are Your Employees Using Messaging Apps for Business Communications? Understanding Compliance Implications

Employees are using ephemeral messaging apps—where messages “disappear"—but do they? Farella Braun + Martel attorneys lay out legal pitfalls and compliance issues and the digital minefield that arises when employees don’t use company-sanctioned email...

Read More
Publication

How a Robot Named 'Tappy' Could Cripple Huawei

In the ongoing confrontation between the U.S. government and Chinese telecom giant Huawei, a civil trade secret dispute between two companies that might have resolved without much fanfare in previous years has grown into...

Read More
Publication

The Huawei Trade Secrets Prosecution and What It Means for Business

by Jessica K. Nall and Janice W. Reicher [1] As the world watches the political and legal battles between the U.S. government and Chinese telecom giant Huawei unfold in the headlines, many are asking...

Read More
News

Benchmark Litigation Honors Farella’s Doug Young With Hall of Fame Award

Farella Braun + Martel’s Douglas R. Young was honored with Benchmark Litigation ’s Hall of Fame award at its annual awards ceremony on March 5th at the St. Regis in San Francisco. According to...

Read More
News

Gov't Drops IP Theft Charges Against Ex-Jawbone Workers

Law360 reported that the U.S. Attorney’s Office for the Northern District of California in San Jose moved to dismiss all trade-secret-theft charges against the remaining four defendants in what was originally a six-defendant case...

Read More
Publication

Going it Alone: How to Manage Cybercrime Response With Less Government Help

By: Jessica K. Nall, Chair, White Collar Defense and Corporate Investigations practice and Aviva J. Gilbert, Senior Associate, White Collar Defense and Corporate Investigations practice, Farella Braun + Martel [1] Several years ago when...

Read More
Publication

Individual Accountability in the Huawei Trade Secrets Prosecution

In the ongoing legal battle over the alleged theft of American trade secrets by Chinese telecom giant Huawei, one curious aspect is the lack of charges filed against any individual Huawei employees. On February...

Read More