The debate over whether cryptocurrencies are utilities or securities has been raging for quite some time. Finally, Rhode Island has gotten fed up with the controversy, as a bipartisan group of lawmakers has introduced a bill that will exempt certain tokens from securities laws. Under the new bill, brokers dealing in such tokens will not be defined as dealing in securities – should they register with the secretary of state. This places Rhode Island as the next state after Colorado and Wyoming to introduce laws that clearly define the cryptocurrency world.
Meet Bill 5595
Bill 5595 is the bill that has cast Rhode Island into the history books as one of the most crypto-friendly states in America. Under Bill 5595, tokens that are issued for a consumptive purpose – such as interacting with a blockchain network – will be classified as utility tokens and therefore exempt from securities law. However, Bill 5595 doesn’t end there. It goes on to detail regulations for tokens that don’t meet the standard of a utility.
The bill states:
(C) If the token does not have a consumptive purpose available at the time of sale, the initial buyer of the token is prevented from reselling the token until the token is available for use for a consumptive purpose; or (D)The developer or seller takes other reasonable precautions to prevent buyers from purchasing the token as a financial investment.
Will the New Bill Change Anything?
All you need to know about Bill 5595 is that if you’re holding a utility token, then you’re free to do as you wish with it without the need to conform to securities law. Whereas if your token is deemed a security, then you need to follow appropriate protocol as outlined in the bill. Essentially, you can’t trade out of your security token until it has a purpose in its network.
Wyoming Becoming Crypto Friendly
Out west, Wyoming has been hard at work passing crypto bills of its own. Bills 62 and 57 create a regulatory sandbox for cryptos in the state and define them as personal property. This combination of crypto regulations has put Wyoming on the map for crypto users and blockchain developers. Rhode Island is following the same thinking and is hoping to become a crypto friendly state in its own right.
Fortunately, the US Securities and Exchange Commission (SEC) has already outlined a number of tokens that are or are not securities, meaning you can feel relatively comfortable that you’re abiding by the law. Bitcoin and Ethereum have been deemed utility tokens, so you can carry on trading those as normal. If you’re still unsure, it’s worth reaching out to local legislators to double check and make sure you’re not breaking the law.