The bill would have exempted certain digital currencies from being regulated as securities under the Colorado Securities Act.
Colorado’s blockchain bill, House Bill 1426, would have also been a boon for innovation in the state was making its way through the State Assembly but got derailed abruptly on Wednesday in a vote.
HB 1426 was all but on its way to the governor’s desk after seemingly passing both the House and Senate votes. But the approval of the bill by the Senate was overturned when in a final vote a couple of state senators had a change of heart. The final tally in the third reading of the bill was 17 yea votes and 18 nay votes.
At the heart of the bill, and seemingly the chief point of contention, was the open blockchain token, which is defined as a “digital unit” that is “capable of being traded or transferred between persons without an intermediary or custodian of value.” An open blockchain token would not have met the criteria as a security if its issuers didn’t promote it as an investment, it wasn’t exchanged for goods or services and, it “had not been entered into a repurchase agreement.”
If a digital currency didn’t qualify as an open blockchain token, it would be deemed a security and would have been required to register as such. In hindsight, the bill was a risky proposition given that SEC Chairman Jay Clayton has made it clear that he has yet to see an ICO token that doesn’t fit the description as a security.
Architect Calls Colorado Blockchain Bill an ‘Epic Fail’
Despite its controversy, the bill would have rolled out the welcome mat for more innovation in the state and given blockchain startups looking to ICO more regulatory clarity than what they’re receiving from the Wall Street watchdog, the SEC.
The failure of the bill seemingly took the wind out of the sails of Senator Tim Neville, a Republican and one of the bill’s architects who reportedly called the result an “epic fail.” The points of failure as it pertains to the bill were reportedly the Colorado Attorney General Cynthia Coffman and the Colorado Department of Regulatory Affairs. Attorney General Cynthia Coffman told the Denver Post:
“The language in HB14-26 that would have carved out open blockchain tokens from the definition of a security under the Colorado Securities Act was overly broad and vague. The language would have created immunity from criminal liability for someone who commits securities fraud in that context, putting Colorado consumers at risk. That is why my office opposed the bill.”
Senators Lucia Guzman and Daniel Kagan both voted no in the final count after previously supporting the bill, and the Attorney General’s reluctance was a deciding factor, at least in the case of Guzman.
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