The State of Montana Recognizes Utility Tokens and Exempts Them From Certain Securities Laws
The State of Montana passed a landmark Bill (HOUSE BILL NO. 584) titled “AN ACT RELATING TO CRYPTOCURRENCY” which exempts Utility Token transactions from certain Security Laws. The bill amends Section 30-10-105, MCA and attempts to define Utility Tokens and provide a guideline which the Utility Tokens need to follow.
The Bill was signed by the Governor of the U.S. State of Montana, Steve Bullock on the 8th May. Initiated by State Representative Shane Morigeau, the Bill passed with 33-15 votes and will be applicable starting on the 1st of July.
The Bill defines Utility Tokens as
- Created, in response to the verification or collection of a specified number of transactions relating to a digital ledger or database by deploying computer code to a blockchain network that allows for the creation of digital tokens or other units; or using any combination of the methods specified in the next section (requirements)
- Recorded in a digital ledger or database that is chronological, consensus-based, decentralized, and mathematically verified in nature, especially relating to the supply of units and their distribution
- Capable of being exchanged or transferred between persons without an intermediary or custodian and
- Issued to allow the holder of the digital unit access to a good or service delivered by the issuer without vesting the holder with any ownership interest or equity interest in the issuer.
The Bill specifies that a utility token transaction should meet the following requirements:
- The purpose of the utility token is primarily consumptive and should be marketed for the same purpose and not for speculative or investment purpose.
- The issuer of the utility token files a notice of intent to sell utility tokens with the securities commissioner in a form prescribed by the commissioner.
- Either the utility token is available at the time of sale, or all of the following are met:
- The consumptive purpose of the utility token is available within 180 days after the time of sale or transfer of the utility token.
- The initial buyer is prohibited from reselling or transferring the utility token until the consumptive purpose of the utility token is available; and the initial buyer provides a knowing and clear acknowledgment that the initial buyer is purchasing the utility token with the primary intent to use the utility token for a consumptive purpose and not for a speculative or investment purpose.
As Federal rules supersede State level laws, the impacts of the Bill will be restrained within the state as of now, however, this is still an important step forward.
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