California lawmakers suggest excluding digital assets from securities definition

One member of the California State Assembly has proposed eliminating certain types ofdigital assets from the definition of corporate securities.

Proposal as amended byLegislation introduced by House Majority Leader Ian Calderon will deduce “digital assets,” which “presumably do not constitute an investment contract,” from the definition of a security and all regulatory rules for this type of asset.

The question is whether digital assets representsecurities, has long been discussed by regulators. Legislative uncertainty has already led to several lawsuits in which regulators accuse companies of unregistered placement of digital assets, which, in their opinion, are securities. The most high-profile court cases in this area were the SEC's allegations of Telegram and Kik.

As Calderon’s assistant Michael Magee points out, a bill introduced in the lower house of the California legislature should put an end to such proceedings.

“The bill addresses one of the mostcommon cases of ambiguous interpretation of cryptocurrencies in the law: whether a digital asset constitutes an investment contract and, therefore, whether it is subject to securities laws, — Magee said.

If passed, Calderon’s billestablish clear rules for determining whether digital assets are considered investment contracts, at least at the state level. In accordance with the bill, the asset should not be acquired in exchange for payment, fiat currencies or otherwise. It should be used in a "fully operational network" for "consumer purposes," and its value "does not depend on managerial or other efforts."

The last paragraph of the bill emphasizesthe need for a decentralized consensus as evidence that the digital asset is independent of the “identifiable person, project team or management organization” that otherwise could contribute to “management efforts”. The network should initiate software changes, as well as implement voting through the proof-of-stake mechanism.

Last summer, the California SocietyCertified Public Accountants (CPA) insisted on clarifying the rules for accounting and disclosure of information about cryptocurrencies due to the lack of legislation in this area.

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