According to recent updates to a law amending the California Securities Law, which was introduced on May 5 in the state legislature, the largest business and technology center in the United States, They can offer new clarity to cryptocurrency owners.
Formalizing the Howey test for cryptocurrencies?
Updates to the definition of a value include: “Investment contract, except that a digital asset that meets one of the following criteria is not likely to be an investment contract.”
The criteria mentioned are more or less a linear reading of the Howey test – The federal metric for assessing whether an asset qualifies as an investment contract – translated for digital assets. Howey’s test says:
“For the purposes of the Securities Act, a (legally indefinite) investment contract means a contract, transaction, or system by which a person invests their money in a joint venture and expects promoters or a third party only from the company’s efforts.”
By defining what distinguishes a digital asset from the last qualification of a third party’s work, the new California law says:
“All changes to the software code underlying this asset can be made by network participants. Voting rights for the operation of the network are granted to every owner of the asset.”
The history of the bill and the possible impact
The bill came from the majority leader of the California Assembly, Ian Calderón. Calderón first submitted its draft law to update the Securities Act in February. However, the new updates focus on the role of cryptocurrencies.
While the Federal Securities and Exchange Commission has been very active in monitoring cryptocurrencies, Industry players have consistently refused to have little basis to confirm whether or not their tokens are securities.
A SEC office issued guidelines on the subject last year, but has not changed any laws. Although some federal lawmakers have tried to clarify the cryptocurrency securities regulation, none have been approved.
The SEC has influence at the national level. While the United States sees California as a critical test bed for a new technology policy, digital assets are quickly jumping across national borders. A revolutionary range of coins that does not go beyond the borders of California is hard to imagine. However, such updates may indicate how the current SEC guidelines will ultimately be reflected in federal laws.
Cointelegraph contacted Calderón employees for comment, but received no response at the time of printing. This article will be updated with new information when it arrives.