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In one of the most dramatic endings during the last legislative session, a bill aimed at putting Colorado at the forefront of blockchain politics has passed with just one vote. But a few moments later it failed after some legislators changed their minds.
The words blockchain and cryptocurrency often cause eye glaze and confusion in abundance. And this new technology was not helped by the values of fraud and cryptocurrency that skyrocketed and then collapsed. But for the proponents, this technology – aimed at building a safer Internet – is still worth understanding. That's why the introduction of a law renewed by one of the co-sponsors themselves, Senator Jack Tate, R-Centennial, is expected.
"We took a broad approach last year without any input from stakeholders," said Tate, who has spent the last six months studying from blockchains and local finance companies, listening to state regulators and collaborating with politicians from both set off. issues such as liquor and marijuana laws.
"What is different from having the programmatic approach is that it is a restricted and nascent technology against the established industry like alcohol, all the big players were there, and it was more as a showdown to Gucci Gulch, "said Tate. "Here, (blockchain) is a nascent technology that deals with a framework intended for other things." How do we update the regulatory framework now that we know that there is innovation out there? We do not want to stifle innovation ".
The Digital Token Act proposal creates a guideline to determine whether digital tokens – such as those modeled after cryptocurrency bitcoins or cartoon cats like CryptoKitties – are an investment in securities, which require regulation. This is a topic still being defined at national level by the US Securities and Trade Commission, although Wyoming has ruled that some tokens are not securities last March.
But this time, the creation of the Colorado law has been touched by many who have opposed this, including regulators of the banking divisions and state securities. The law sets more limits so that not only every new digital token can renounce the security classification.
The process of deciding whether Colorado ever needed a blockchain law began shortly after the last failed bill. In June, Governor John Hickenlooper created the Council for the Advance of Blockchain Technology, putting people like the first bitcoin entrepreneur Erik Voorhees in the same room with Rep. Tracy Kraft-Tharp, D-Arvada and Hannah Parsons, CEO of & # 39; technology accelerator Exponential impact in Colorado Springs.
"Last year's legislation was introduced by people outside of Colorado It created a frenzy, which is why this (advice) process was so good," said Parsons, whose accelerator graduated two startups blockchain the last year. "People wanted to go beyond Wyoming, but laws do not translate between states – there are undesirable consequences if we move too fast."
The council met regularly, posed priority issues, divided into working groups, collaborated on documents publicly, used a slack channel and received input from citizens and state agencies, including the secretary of state office, the department of revenue and the department of higher education.
before: Are you "curious cryptic?" A blockchain event for beginners wants to help Coloradans prepare for the next big technology
"The process was incredibly useful to order the necessary legislation and what needed to be clarified through the guide," said Stephanie Copeland, outgoing executive director of the Office for International Economic Development and Trade in Colorado. "The way we arrived was sorting the job into the main statements about the problems the community felt were the biggest inhibitors. … This bill was one of the few we felt we had to go on ".
Everything that has worked in the last six months may have led to only one potential bill. (One second is not ready yet). But councilor Eric Kintner, a lawyer specializing in digital currency at Snell & Wilmer in Denver, said the group got a lot more without new laws.
"I was really heartened by how much good faith everyone put in the process and how the regulators were willing to meet and express their concerns, but at the same time, find solutions," Kintner said. "Many times, in my private experience, you are dealing with a government that says," No, you can not do it. "But this was" We want to help you ".
Not everything has been questioned. Creating a sandbox in which financial technology startups could play and not worry about licenses, fees and rules was nixed. But an important topic for the blockchain-business community – how money is digitally transferred – has received feedback from the state's banking division.
"The council commented that the banking community did not give directions, so they did through the attorney general and the banking division They said that here is how we see the Money Transmitter Act, and these are the companies that fall under the crypt. It was great, "said Kintner. "It is a formal guide, but not in the form of a formal rule or a law, it allows flexibility, and if (later on) the guide goes too far, they can pull it in. But this also tells us that you are in the market. You're okay. "
To read draft of the Colorado Digital Token Act (provided by Senator Jack Tate)
The proposed Digital Token Act, co-sponsored by Democratic Senator Stephen Fenberg, attempts to clarify the uncertainty for crypto-economic companies in Colorado. The law exempts tokens from the securities law if the token is used primarily for "consumption purposes" or assets, contents and services. If a token does not qualify under the safe harbor of Colorado, however, this does not mean it is a security. It would then be analyzed according to the typical securities law, or the so-called Howey Test, which identifies investment contracts and adds disclosure and registration requirements.
"We need it because, at the moment, we have a regulatory uncertainty in terms of blockchain technology, and where there is uncertainty, there is an ambivalence in making capital investments and corporate investments" , said Tate. "In addition, the companies that have taken the big step have had excessive legal costs trying to solve uncertainty.The overall goal is to make sure that the innovative spirit of Colorado remains in place."
All the effort of the council, however, does not mean that the bill will pass or remain intact.
During the last council meeting, the co-promoter of the bill to the House, Tracy Kraft-Tharp, asked for a simple document of a sheet to explain this to his fellow legislators. Reached this week, Kraft-Tharp said he does not feel fluent on the bill but has a better understanding of the blockchain.
"I'm really struggling with what it is about, I think it's good, because it really keeps me in touch with people because people do not understand it, that's what happened last year," he said Kraft-Tharp, who educated herself by listening to blockchain podcasts as "Unchained Crypto 101".
He is manipulating other invoices on which he is a lead sponsor, including one on sales and taxes. When the bill on the blockchain reaches the House, Kraft-Tharp said he will do his job: she will know the bill and make sure that the experts are in place to testify.
"It's like being in school and we have a test on March 13. I'm learning everything about what's going to be on the test and by March 13 I'll be an expert," he said. "It's not like" Oh, my God, the legislator, they can only read in a second choice language. "Really funny, but I know how to get an invoice. I do not have to be an expert on the subject because we will bring the experts. "
This would include people like Kintner, whom Kraft-Tharp thinks he will ask to testify.
"It was a very consensus-driven process to date, and I'm always open to new ideas to address issues we have not seen right away," Kintner said. "To be honest, we do not know if many companies will use this or they will think it's the biggest thing. … But this is an important step that shows the state is open to new ideas and new technologies and, at the very least, c & # 39; is a very good thought leadership to help other states that might look to change their laws and guidelines. "
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