Lawmakers in Colorado Move to Exempt “Consumptive” Crypto Tokens from Securities Laws

The U.S. state of Colorado may be on its way to favorable cryptocurrency laws if a new bi-partisan bill makes its way through the state legislature. Proposed by senators Stephen Fenberg (Democrat) and Jack Tate (Republican), the new bill titled “Colorado Digital Token Act” seeks to exempt certain cryptocurrencies and virtual tokens from the securities laws.

Details of the Colorado Digital Token Act

The summary of the bill read:

“The bill provides limited exemptions from the securities registration and securities broker-dealer and salesperson licensing requirements for persons dealing in digital tokens.”

It defined a Digital token as “a digital unit with specified characteristics, secured through a decentralized ledger or database, exchangeable for goods or services, and capable of being traded or transferred between persons without an intermediary or custodian of value.”

The bill which was introduced on Friday’s session argues that a digital token which is “primarily consumptive” should be exempted from securities laws.

What are Consumptive Digital Tokens?

According to the proposed bill, consumptive purpose means “to provide or receive goods, services, or content, including access to goods, services, or content.” Furthermore, the bill stipulates that the initial buyer of the token must do so with the intention of using it for consumptive purposes and he cannot resell or transfer the token until the consumptive purpose is available.

The bill states:

“The initial buyer provides a knowing and clear acknowledgment that the initial buyer is purchasing the digital token with the primary intent to use the digital token for a

On the other hand, the issuer of such token must file a notice of intent with the state’s securities commissioner beforehand. The bill added, however, that this class of digital tokens that would be eligible for exemption would not be marketed for “speculative” or “investment” purposes.

Cryptocurrency and Regulatory Uncertainty

Regulatory concerns ranks top among the barriers to blockchain and cryptocurrency development in the United States, according to several crypto sentiment surveys. Through the new bill, the lawmakers hope to checkmate this challenge by removing the “costs and complexities” of state securities registrations which can make it unfavorable for crypto-related businesses to raise capital and operate in the state.

The bill (Senate 19-023) stated that the act “will enable Colorado businesses that use cryptoeconomic systems to obtain growth capital to help grow and expand their businesses, thereby promoting the formation and growth of local companies and the accompanying job creation and helping make Colorado a hub for companies that are building new forms of decentralized “Web 3.0″ platforms and applications.”

Federal Lawmakers are proposing Similar Exemptions Too

On the Federal level, a similar bill proposed in the House of Representatives seeks rewrite definitions used by the Securities and Exchange Commission (SEC) so as to exclude cryptocurrencies and ICOs from its supervision. As Smartereum reported, the bi-partisan bill titled “Token Taxonomy Act,” stated that digital token is “not a representation of a financial interest in a company, including an ownership or debt interest or revenue share.”

Last May a bill seeking to designate blockchain utility tokens that would be excluded from state securities law failed in the Senate after it scaled through the House of Representatives in Colorado. It was a close call as the bill (HB 1426) failed in the final vote by 18-17.

Solomon Sunny is the market reporter for Smartereum, one of the global leaders in Ethereum, blockchain and currency news. He produces technical price updates on digital currencies and writes recent developments about blockchain.


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