,i #aacth ,,congress #b;d ,session ,h4 ,r4 #eggg ,,in ,,the ,,house ,,of ,,representatives ,december #a1 #bjad ,mr4 ,stockman introduced the following bill2 which was referred to the ,committee on ,financial ,services1 and in addition to the ,committee on ,ways and ,means1 for a period to be subsequently determined by the ,speaker1 in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned ,a ,,bill ,to protect cryptocurrencies4 #a4 ,short title ,this title may be cited as the ,cryptocurrency ,protocol ,protection and ,moratorium ,act 7also1 ,crypt,p,m,a74 #b4 ,moratorium 7a7 ,neither the ,federal ,government nor any ,state or political subdivision thereof shall impose any statutory restrictions or regulations specifically identifying and governing the creation1 use1 exploitation1 possession or transfer of any algorithmic protocols governing the operation of any virtual1 non-physical1 algorithm or computer source code-based medium for exchange 7collectively1 cryptocurrency as defined herein7 for a period beginning ,june #a1 #bjae1 and extending five years after the enactment of this ,act 7such period1 the moratorium period71 except for statutes already enacted and effective prior to the date of enactment of this ,act1 and further suspending the enactment and effectiveness of any and all pending statutes and regulations until the end of the aforementioned moratorium period1 except as otherwise provided in this section4 7b7 ,nothing in this ,act shall prevent1 impair or impede the operation of any government agency1 authority or instrumentality1 whether of the ,federal ,government or of any ,state or political subdivision thereof1 to enforce currently existing criminal1 civil or taxation statutes and regulations4 #c4 ,definitions 7a7 ,algorithm is defined as a procedure for solving a mathematical problem in a finite number of steps performed by a computer4 7b7 ,algorithmic chain is a series or chain of bits of data comprising a unique string of data which is the basis for the cryptographic proof of a valid transfer or transaction of cryptocurrencies4 ,the algorithmic chain for a cryptocurrency is commonly referred to as a blockchain4 7c7 ,the cryptographic proof for each transaction or transfer is based on one unique algorithmic chain1 distinct from all previously existing algorithms and neither replicable nor reusable yet sharing with all other units at least one common source code element in the algorithmic chain 7or blockchain7 in the transferor's existing bitcoin or bitcoins4 7d7 ,protocol refers to procedures or guidelines governing the creation1 development and operation of a cryptocurrency4 7e7 ,service is defined as the ,internal ,revenue ,service4 7f7 ,the phrase using the ,internet or other electronic1 non-physical medium means by placement of material in a computer server-based file archive so that it is publicly accessible1 on1 through1 or over the ,internet1 using hypertext transfer protocol1 file transfer protocol1 or other similar protocols4 7g7 ,cryptocurrency is a popular term encompassing code-based protocols supporting an electronic1 non-physical media for the exchange of value1 and for the sake of both clarity and the avoidance of confusion in the mind of the public1 based on the prior use of this term by the ,internal ,revenue ,service in its initial guidance 7see ,notice #bjad-ba1 released ,march #bf1 #bjad7 this term is used herein4 ,however1 it is believed cryptocurrency encompasses the same protocols as those covered by terms such as digital currency1 virtual currency or electronic currency4 #d4 ,declaration of moratorium 7a7 ,in general ,it is the sense of ,congress that no new statutes1 regulations or advisory opinions be passed1 implemented1 enforced or issued governing the creation1 use1 possession or taxation of cryptocurrencies1 the protocols governing each and the data1 codes1 algorithms or other calculations comprising each1 until the expiration of the moratorium as provided in this ,act4 7b7 ,public interest ,it is further the sense of ,congress that the development and use of any media for exchange which possesses the characteristic of cryptographic proof of and for a transaction of cryptocurrency without the need for or reliance upon third-party intermediaries or verification is a circumstance that is likely to result in economic and other efficiencies for the ,american people and other participants in the domestic economy1 and as such may be crucial to overall economic growth1 will enhance the economic well-being of the ,american people and will otherwise be in the public interest4 #e4 ,declaration of neutral tax treatment 7a7 ,in general ,it is the sense of ,congress that the production1 possession or use of cryptocurrency1 whether in trade1 commerce or personal non-commercial transfers1 should not be disfavored or discouraged by the ,federal tax code or other ,federal or ,state statute or regulation4 7b7 ,tax treatment ,it is the sense of ,congress that the current guidance just promulgated and released by the ,service in its ,notice #bjad-ba is advisory1 subject to public comment and not in final form pending the expiration of the comment period4 ,as such1 ,congress believes that the current guidance is less than optimal for the ,american people and economy1 and directs the ,service to issue or revise interim regulations consistent with the following4 7c7 ,treatment as currency ,it is the sense of ,congress that virtual currencies should be treated as currency instead of property in order to foster an equitable tax treatment and prevent a tax treatment that would discourage the use of any cryptocurrency4 ,tax treatment of cryptocurrency as property does not account for the substantial illiquidity and highly limited acceptance and use of cryptocurrency1 and substantially and unfairly discourages taxpayers engaging in a trade or business from using cryptocurrency in commerce4 ,this circumstance is likely to discourage economic activity and stifle innovation and growth4 ,at present1 a taxpayer accepting cryptocurrency for goods or services will be taxed on the fair market value of the cryptocurrency despite the fact that exchange rates 7from cryptocurrency to conventional currency7 are both highly volatile and published or available only on a small number of proto-exchanges in the early stages of development1 acceptance and awareness by cryptocurrency users4 ,as a result1 current tax treatment will measure income on the basis of an illiquid and likely inaccurate fair market value that exceeds the taxpayer's true fair market value and hence income1 resulting in the risk of a consistent overtaxation or overpayment that will act as a strong deterrent to or penalty for accepting cryptocurrency in payment4 ,such tax treatment is inconsistent with the tax treatment of secured notes for payment in trade or commerce1 which recognizes a discount from the face value of the note due to the illiquid nature of the payment4 7,note3 ,see ,,irs ,pub4 #ebe at #d47 7d7 ,revenue in trade or business2 taxation upon monetizing event ,it is the sense of ,congress that taxpayers accepting cryptocurrency in trade or commerce should be deemed to realize actual income only when cryptocurrency is monetized through conversion or exchange into dollars or any official government currency1 and that fair market value should be calculated as net proceeds from the conversion4 7,note3 ,this treatment seeks to achieve the most accurate and fair measure of actual income received1 as distinguished from theoretical income in the form of cryptocurrency which1 until its conversion to dollars1 remains under substantial risk of diminution from illiquidity or other conversion risks or inefficiencies4 ,this treatment is consistent with tax treatment of statutory stock options where the taxable event is not the receipt or exercise of the option1 but the sale of the underlying stock for proceeds in cash4 ,the goal here is to have income taxed when the income is actual instead of theoretical and subject to substantial if not total risk of loss through liquidity problems1 exchange problems or other barriers to monetization47 ,accordingly1 as it is the further sense of ,congress that income on cryptocurrency received in trade or business should be defined as the net proceeds from conversion of the received cryptocurrency into dollars1 the ,service is hereby directed to revise or issue interim regulations consistent herewith4 7e7 ,revenue from mining or creation of cryptocurrency ,it is the sense of ,congress that the ,service's guidance that taxpayers should have the fair market value of the cryptocurrency they successfully mine or produce included in gross income is inequitable1 overstates actual income by overstating fair market value by not accounting for the liquidity risk or the risk that substantial effort may yield no production1 and strongly and unfairly penalizes or discourages such income producing efforts and deters economic growth1 activity and innovation4 ,accordingly1 as it is the further sense of ,congress that mined produced cryptocurrency should be taxed as income only when actual income is realized by a transfer and conversion of proceeds into dollars1 the ,service is hereby directed to revise or issue interim regulations consistent herewith4 #f4 ,severability ,if any provision of this title1 or any amendment made by this title1 or the application of that provision to any person or circumstance1 is held by a court of competent jurisdiction to violate any provision of the ,constitution of the ,united ,states1 then the other provisions of that title1 and the application of that provision to other persons and circumstances1 shall not be affected4