PoS Alliance issued a white paper on the legal aspects of liquidity pledge

On February 22, the non-profit industry alliance PoS Alliance (POSA) released two white papers to study the status of deposit tokens in the securities and tax laws of the United States. These documents were written by representatives of more than 10 industry organizations. According to the accompanying statement, these documents are intended to provide “a framework for meaningful legislative codification or clarification”. They also aim to provide a basis for self-regulatory standards.

Interpretation of this information:

PoS Alliance (POSA), a non-profit industry alliance, has released two white papers to study the status of deposit tokens in the securities and tax laws of the United States. These documents have been prepared by representatives of over 10 industry organizations and are intended to provide a framework for meaningful legislative codification or clarification. The white papers also plan to provide a basis for self-regulatory standards.

Deposit tokens have become an essential part of the digital asset landscape. They supplement fiat currency deposits and aim to offer high liquidity and stability to investors. The need for clarity on the regulatory status of deposit tokens increases with their growing importance.

The first white paper constitutes a comprehensive analysis of the regulatory landscape, market practices, and challenges facing deposit token issuers and users in the United States. It aims to provide clarity on the classification of deposit tokens as securities under the 1946 Supreme Court decision known as Howey Test. It also details the regulatory actions taken by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The first paper concludes that deposit tokens are not securities as they are issued for their utility and not for the primary purpose of investment.

The second white paper analyzes the implications of the tax rules governing deposit tokens for issuers and users. Understanding the tax regulations applicable to deposit tokens is crucial for issuers and users to avoid non-compliance and tax risks. The paper discusses how deposit tokens should be categorized for tax purposes, including capital gains tax and sales tax. It also examines the withholding tax and other regulatory tax implications for issuers of deposit tokens.

The release of these white papers is a critical step towards providing clarity for deposit tokens’ regulatory framework. It will enable businesses to assess implications, reduce uncertainty and build sound business models. The papers also raise the value of self-regulation for this emerging asset class.