I 
117TH CONGRESS 
1ST SESSION H. R. 5496 
To amend the Securities Act of 1933 to provide a safe harbor for transactions 
in certain tokens, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 5, 2021 
Mr. MCHENRY (for himself, Mr. DAVIDSON, and Mr. BUDD) introduced the 
following bill; which was referred to the Committee on Financial Services 
A BILL 
To amend the Securities Act of 1933 to provide a safe 
harbor for transactions in certain tokens, and for other 
purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Clarity for Digital To-
kens Act of 2021’’. 
SEC. 2. TOKEN SAFE HARBOR. 
(a) IN GENERAL.—The Securities Act of 1933 (15 
U.S.C. 77d) is amended by inserting after section 4A the 
following: 
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‘‘SEC. 4B. TOKEN SAFE HARBOR. 
‘‘(a) IN GENERAL.—Except as provided under sub-
section (d), this title does not apply to any offer, sale, or 
other transaction involving a token if the following condi-
tions are satisfied by the initial development team of such 
token: 
‘‘(1) The initial development team intends for 
the network on which the token functions to reach 
network maturity not later than the later of— 
‘‘(A) the date that is three years after the 
first sale of such token; or 
‘‘(B) the date that is three years after the 
effective date of this section. 
‘‘(2) The token is offered and sold for the pur-
pose of facilitating access to, participation on, or the 
development of the network. 
‘‘(3) The initial development team complies 
with— 
‘‘(A) the disclosure requirements under 
subsection (b); 
‘‘(B) the notice of reliance on the safe har-
bor filing requirements under subsection (c); 
and 
‘‘(C) the exit report filing requirements 
under subsection (f). 
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‘‘(b) DISCLOSURE REQUIREMENTS.—The initial de-
velopment team shall disclose the following information on 
a freely accessible public website: 
‘‘(1) INITIAL DISCLOSURES.—Prior to filing a 
notice of reliance under subsection (c), and with 
such information updated as soon as practicable 
after any material change: 
‘‘(A) SOURCE
CODE.—A text listing of 
commands to be compiled or assembled into an 
executable computer program used by network 
participants to access the network, and confirm 
transactions. 
‘‘(B) TRANSACTION HISTORY.—A narrative 
description of the steps necessary to independ-
ently access, search, and verify the transaction 
history of the network. 
‘‘(C) TOKEN ECONOMICS.—A narrative de-
scription of the purpose of the network, the 
protocol, and its operation, including— 
‘‘(i) information explaining the launch 
and supply process, including the number 
of tokens to be issued in an initial alloca-
tion, the total number of tokens to be cre-
ated, the release schedule for the tokens, 
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and the total number of tokens out-
standing; 
‘‘(ii) information detailing any appli-
cable consensus mechanism or process for 
validating transactions, method of gener-
ating or mining tokens, and any process 
for burning or destroying tokens on the 
network; 
‘‘(iii) an explanation of governance 
mechanisms for implementing changes to 
the network or protocol; and 
‘‘(iv) sufficient information for a third 
party to create a tool for verifying the 
transaction history of the token. 
‘‘(D) PLAN OF DEVELOPMENT.—The cur-
rent state and timeline for the development of 
the network to show how and when the initial 
development team intends to achieve network 
maturity. 
‘‘(E) PRIOR
TOKEN
SALES.—For token 
sales completed prior to filing a notice of reli-
ance under subsection (c), the date of sale, 
number of tokens sold, number of token pur-
chasers, any limitations or restrictions on the 
transferability of tokens sold, price per token, 
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and the type and amount of consideration re-
ceived. 
‘‘(F) INITIAL
DEVELOPMENT
TEAM
AND 
CERTAIN TOKEN HOLDERS.— 
‘‘(i) The names and relevant experi-
ence, qualifications, attributes, and skills 
of each person who is a member of the ini-
tial development team. 
‘‘(ii) The number of tokens or rights 
to tokens owned by each member of the 
initial development team and a description 
of any limitations or restrictions on the 
transferability of tokens held by such per-
sons. 
‘‘(iii) If any member of the initial de-
velopment team or related person has a 
right to obtain tokens in the future, in a 
manner that is distinct from how any third 
party could obtain tokens, the identity of 
such person and a description of how such 
tokens may be obtained. 
‘‘(G) TRADING PLATFORMS.—The name of 
any secondary trading platforms on which the 
token trades, to the extent known. 
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‘‘(H) RELATED PERSON TRANSACTIONS.— 
A description of any material transaction, or 
any proposed material transaction, in which the 
initial development team is a participant and in 
which one or more related persons participate 
and had or will have a direct or indirect mate-
rial interest. The description shall identify the 
nature of the transaction, the related persons, 
the basis on which the persons are related per-
sons, and the approximate value of the amount 
involved in the transaction. 
‘‘(I) WARNING TO TOKEN PURCHASERS.— 
A statement that the purchase of tokens in-
volves a high degree of risk and the potential 
loss of money. 
‘‘(2) SEMIANNUAL DISCLOSURES.— 
‘‘(A) IN GENERAL.—Every six months, an 
updated plan of development described under 
paragraph (1)(D). 
‘‘(B) TIMING OF DISCLOSURES.—Each dis-
closure required under subparagraph (A) shall 
be made— 
‘‘(i) within 30 calendar days after the 
end of the applicable semiannual period; 
and 
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‘‘(ii) until the earlier of— 
‘‘(I) the safe harbor end date; or 
‘‘(II) the date on which the ini-
tial development team determines that 
network maturity has been reached. 
‘‘(3) 
POST-FILING
TOKEN
SALE
DISCLO-
SURES.—For token sales completed after filing a no-
tice of reliance under subsection (c), the date of sale, 
number of tokens sold, number of token purchasers, 
any limitations or restrictions on the transferability 
of tokens sold, price per token, and the type and 
amount of consideration received. 
‘‘(4) ONGOING DISCLOSURES WITH RESPECT TO 
SALES
OF
TOKENS
BY
INITIAL
DEVELOPMENT 
TEAM.—Each time a member of the initial develop-
ment team sells at least five percent of the member’s 
tokens that were disclosed pursuant to paragraph 
(1)(F)(ii) over any period of time before the safe 
harbor end date, a disclosure of the date of the sale, 
the number of tokens sold, and the identity of the 
seller. 
‘‘(c) NOTICE OF RELIANCE ON SAFE HARBOR FIL-
ING REQUIREMENTS.— 
‘‘(1) IN
GENERAL.—The initial development 
team shall file with the Commission a notice of reli-
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ance on the safe harbor provided under this section 
prior to the date of the first token sold in reliance 
on the safe harbor, except as expressly provided 
under subsection (h) with respect to tokens sold be-
fore the date on which this section takes effect. 
‘‘(2) CONTENTS.—The notice described under 
paragraph (1) shall contain the following informa-
tion: 
‘‘(A) The name of each person on the ini-
tial development team. 
‘‘(B) An attestation by a person duly au-
thorized by the initial development team that 
the initial development team have complied with 
the requirements of this section. 
‘‘(C) The website where disclosure required 
under subsection (b) may be accessed. 
‘‘(D) An email address at which the initial 
development team can be contacted. 
‘‘(d) LIMITATION.—This section shall have no effect 
on the application of section 12(a)(2) or 17. 
‘‘(e) DURATION OF EXEMPTION.—With respect to to-
kens, the relief provided by this section shall expire on 
the later of— 
‘‘(1) the date that is three years after the date 
of the first sale of the tokens; or 
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‘‘(2) the date that is three years after the effec-
tive date of this section. 
‘‘(f) EXIT REPORT FILING REQUIREMENTS.—On or 
before the safe harbor end date, the initial development 
team shall file an exit report with the Commission con-
taining the following: 
‘‘(1) DECENTRALIZED NETWORKS.—If the ini-
tial development team determines that network ma-
turity has been reached for a decentralized network, 
a legal analysis that includes— 
‘‘(A) a description of the extent to which 
decentralization has been reached across a 
number of dimensions, including voting power, 
development efforts, and network participation 
and, if applicable— 
‘‘(i) examples of material engagement 
on network development and governance 
matters by parties unaffiliated with the ini-
tial development team; and 
‘‘(ii) 
explanations 
of 
quantitative 
measurements of decentralization; and 
‘‘(B) an explanation of how the initial de-
velopment team’s pre-network maturity activi-
ties are distinguishable from the team’s ongoing 
involvement with the network, including— 
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‘‘(i) a discussion of the extent to 
which the initial development team’s con-
tinuing activities are more limited in na-
ture and cannot reasonably be expected 
uniquely to drive an increase in the value 
of the tokens; 
‘‘(ii) a confirmation that the initial 
development team has no material infor-
mation about the network that is not pub-
licly available; and 
‘‘(iii) a description of the steps taken 
to communicate to the network the nature 
and scope of the initial development team’s 
continuing activities. 
‘‘(2) FUNCTIONAL
NETWORKS.—If the initial 
development team determines that network maturity 
has been reached for a functional network, a legal 
analysis that includes— 
‘‘(A) a description of the holders’ use of to-
kens— 
‘‘(i) for the transmission and storage 
of value on the network; 
‘‘(ii) for the participation in an appli-
cation running on the network; or 
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‘‘(iii) otherwise in a manner consistent 
with the utility of the network; and 
‘‘(B) an explanation of how the initial de-
velopment team’s pre-network maturity mar-
keting efforts and the team’s ongoing efforts 
will continue to be focused on the token’s con-
sumptive use, and not on token price apprecia-
tion. 
‘‘(3) NO NETWORK MATURITY.—If the initial 
development team determines that network maturity 
has not been reached— 
‘‘(A) a description of the status of the 
project network and the next steps the initial 
development team intends to take; 
‘‘(B) contact information for the initial de-
velopment team that can be used by holders to 
communicate with the initial development team; 
and 
‘‘(C) a statement acknowledging that the 
initial development team will register the tokens 
as a class of securities under section 12(g) of 
the Securities Exchange Act of 1934 within 120 
days of the filing of the report under this sub-
section. 
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‘‘(g) TRANSITION PERIOD
FOR TRADING PLAT-
FORMS.—No trading platform shall be subject to the re-
quirements of section 6 of the Securities Exchange Act 
of 1934 due to activity related to the trading of tokens 
subject to a determination described under subsection 
(f)(3), if the trading platform prohibits such trading with-
in six months of such determination. 
‘‘(h) TOKENS PREVIOUSLY SOLD.—If, before the 
date on which this section takes effect, an initial develop-
ment team sold tokens (including such tokens sold pursu-
ant to a valid exemption from registration or in violation 
of section 5 (as determined in a Commission order pursu-
ant to section 8A that does not identify any other viola-
tions of the Federal securities laws)), the initial develop-
ment team may make use of the safe harbor provided 
under this section, if the initial development team files the 
notice of reliance described under subsection (c) as soon 
as practicable. 
‘‘(i) DEFINITION OF QUALIFIED PURCHASER.—For 
purposes of section 18(b)(3), a ‘qualified purchaser’ in-
cludes any person to whom tokens are offered or sold in 
reliance on this section. 
‘‘(j) DISQUALIFICATIONS.—This section shall not 
apply to tokens if the initial development team, or any in-
dividual member of the initial development team, would 
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be subject to disqualification under Rule 506(d) (17 
C.F.R. 230.506(d)). 
‘‘(k) DEFINITIONS.—In this subsection: 
‘‘(1) INITIAL DEVELOPMENT TEAM.—The term 
‘initial development team’ means each person, group 
of persons, or entity that provides the essential man-
agerial efforts for the development of a network 
prior to reaching network maturity. 
‘‘(2) NETWORK.—The term ‘network’ means a 
system of devices connected to each other to create 
and validate a ledger of transactions occurring with-
in the system, including a system of devices access-
ing and operating a protocol that utilizes an existing 
network for transaction creation and validation. 
‘‘(3) NETWORK MATURITY.—The term ‘network 
maturity’ means the status of a decentralized or 
functional network that is achieved when the net-
work meets either of the following: 
‘‘(A) CONTROL.—The network is not eco-
nomically or operationally controlled and is not 
reasonably likely to be economically or oper-
ationally controlled or unilaterally changed by 
any single person, entity, or group of persons or 
entities under common control. A network with 
respect to which the initial development team 
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owns more than 20 percent of tokens or owns 
more than 20 percent of the means of deter-
mining network consensus does not meet the re-
quirements of this subparagraph. 
‘‘(B) FUNCTIONAL.—The network is func-
tional, as demonstrated by the use of the tokens 
by token holders for the transmission and stor-
age of value on the network, the participation 
in an application running on the network, or 
otherwise in a manner consistent with the util-
ity of the network. 
‘‘(4) RELATED
PERSON.—The term ‘related 
person’ means— 
‘‘(A) the initial development team; 
‘‘(B) directors or advisors to the initial de-
velopment team; and 
‘‘(C) immediate family members of the in-
dividuals described under subparagraph (A) or 
(B). 
‘‘(5) SAFE HARBOR END DATE.—The term ‘safe 
harbor end date’ means the date that is the end of 
the 3-year period described under subsection (e). 
‘‘(6) TOKEN.—The term ‘token’ means a digital 
representation of value or rights that— 
‘‘(A) has a transaction history that— 
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