Colorado Governor and avowed bitcoin fan Jared Polis signed the Digital Token Act on March 8, exempting cryptocurrencies from state securities laws under certain conditions.
The new legislation also exempts crypto broker-dealers and salespeople from state licensing requirements under limited circumstances.
Colorado Crypto Law Takes Effect on August 2
Theresa Szczurek, Colorado’s chief information officer, tweeted a photo of Governor Polis as he signed the Digital Token Act into law. Polis was surrounded by several of his cabinet members and the state attorney general.
“Exciting day for blockchain technology,” Szczurek tweeted.
Colorado Aspires to Be Blockchain Hub
The Digital Token Act takes effect on August 2. The pro-bitcoin law is part of a move to elevate Colorado into a tech hub for decentralized “Web 3.0” platforms by making it easier for entrepreneurs to launch blockchain and crypto-centric businesses.
Lawmakers hope this will bolster Colorado’s economy by creating new jobs and luring venture capitalists, developers, and investors to the state.
“Creating a Colorado Digital Token Act with limitations to protect consumers will enable Colorado businesses that use crypto-economic systems to obtain growth capital to help expand their businesses.”
“The costs and complexities of state securities registration can outweigh the benefits to Colorado businesses using crypto-economic systems that seek to raise growth capital and create new decentralized internet platforms.”
Crypto is Exempt if Used for ‘Consumptive Purpose’
Under the Digital Token Act, cryptocurrencies are exempt from state securities laws if the “primary purpose of the digital token is a consumptive purpose.”
However, a digital token is not exempt if it’s used for a “speculative or investment purpose.”
Operation Crypto Sweep Targets Sham ICOs
This pro-bitcoin law was passed against the background of Colorado’s sweeping crackdowns on sham ICOs. In November 2018, the Colorado Securities Commissioner filed 20 cases against allegedly fraudulent initial coin offerings.
The enforcement orders were the result of investigations by an ICO Task Force that launched in May 2018. The task force investigated ICOs that allegedly defrauded investors with bogus promises of financial windfalls through sham cryptocurrency investments.
Colorado’s crackdown on scam ICOs was presumably part of Operation Crypto Sweep. In May 2018, U.S. and Canadian regulators jointly opened more than 70 investigations into cryptocurrency scams and fraudulent ICOs as part of a wide-ranging, coordinated crackdown.
Report: 81% of ICOs Are Scams
At the time, the North American Securities Administrators Association (NASAA) said it had sent cease-and-desist letters to operators of crooked crypto companies in more than 40 jurisdictions across the United States and Canada.
“Crypto-criminals need to know that state and provincial securities regulators are taking swift and effective action to protect investors from their schemes and scams,” NASAA president Joseph Borg said.
Operation Crypto Sweep came shortly after a finding that fraud was alarmingly widespread among crypto investment promoters, according to a report by the Texas State Securities Board. Texas leads the United States in cryptocurrency crackdowns.
Similarly, research from ICO advisory company the Satis Group showed that a whopping 81 percent of ICOs launched since 2017 were scams. Regulatory scrutiny is heating up around the world at the same time that bitcoin and the crypto industry are gaining traction.