The bill would have given particular digital currencies a reprieve from being regulated as securities under the Colorado Securities Act.
Colorado’s blockchain bill, House Bill 1426, would have also been a great spark for innovation in the state but got stopped in its tracks in a vote.
HB 1426 was on its way to the governor’s desk after passing both the House and Senate votes. But the ratification of the bill by the Senate was dashed when in a final vote, several state Senators changed their respective tunes with the final tally in the third reading ending up, 17-18.
At the core of the bill, and apparently, its primary point of contention, was the open blockchain token, which is characterized 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 fulfilled the criteria as a security if its issuers didn’t endorse 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 considered a security and would have been mandated to register as such. Looking back, the bill was already risky proposal given that SEC Chairman Jay Clayton has made it painfully obvious that he has not seen an ICO token that did not fit the description as a security.
Despite its debate, the bill would have embraced more innovation in the state and given blockchain startups that were seeking to put up an ICO more regulatory clarity than what they’re receiving from the Wall Street watchdog, the SEC.
The failure of the bill took the momentum out from Senator Tim Neville, a Republican and one of the bill’s architects who called the result an “epic fail.”
The points of failure as it relates 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 backing the bill.
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