The State of Montana has been added to the list of crypto-friendly regions; the recognition of utility tokens indicates the fact. Until recently those were considered illegal as securities under local laws.

The new bill entitled “AN ACT RELATING TO CRYPTOCURRENCY; AMENDING EXEMPT TRANSACTIONS FROM CERTAIN SECURITIES LAW; ALLOWING CERTAIN DIGITAL TRANSACTIONS; AMENDING SECTION 30-10-105, MCA; AND PROVIDING AN EFFECTIVE DATE” is to be enacted by the legislature of the State of Montana.

According to the bill a utility token transaction will be considered valid if it meets specific requirements. Earlier in April 2019, Montana adopted new regulations for crypto mining. The law addressed the potential effects of crypto mining on global warming and electronic waste. The miners are now required to use only renewable energy to keep the environment green.

The aim was to protect the public health and general welfare of the county residents. According to the regulation, miners can operate in the light and heavy industrial areas only after getting reviewed and approved. In other words, crypto mining is now under a proper guideline and miners can do their job safely and legally.

Utility token transactions need to meet specific requirements

The latest law, which is also called the Montana House Bill 584, has given detailed instruction on usages of utility tokens. A utility token transaction must fulfil certain criteria to be valid. For instance, a digital token transaction is allowed provided that it serves a ‘consumptive purpose’, which means to provide or receive goods, services, or content including access to products, services, or content.

The initial buyer has to provide a knowing and clear acknowledgement in this regard. The token must not be used for investment or speculative purpose. Another requirement of the law is that utility tokens for the purpose mentioned above should be available within 180 days after the time of sale or transfer. It is not legal for the initial buyer to resell or transfer the token until the consumptive purpose is served.

The issuer of the token will have to file a notice of selling intent with the securities commissioner in a prescribed form. Not only this, if the information in the notice becomes inappropriate or inaccurate in any respect for any reason, the issuer will file an amendment to the notice in writing with the securities commissioner within 30 days.

The securities commissioner may enter into agreements with federal, state, or foreign regulators to allow utility tokens in this state to be issued, purchased, sold, or transferred in another jurisdiction, and any utility tokens issued, bought, sold, or transferred in another jurisdiction to be issued, purchased, sold, or transferred in this state.

The bill defines Utility Tokens in the following way:

  • A digital unit that is 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 network that allows for the creation of digital tokens or other units; or using any combination of the methods specified in the next sections.
  • 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. With this bill, the State of Montana joins Wyoming and Colorado when it comes to cryptocurrency regulation. The bill was initiated by State Representative Shane Morigeau and passed with 31-15 votes. The State Governor Steve Bullock signed the bill on May 8, 2019, which is supposed to be effective from July 1.