,i #aacth ,,congress #b;d ,session ,h4 ,r4 #ehib ,,in ,,the ,,house ,,of ,,representatives ,january #b1 #bjae ,mr4 ,stockman introduced the following bill2 which was referred to the ,committee on ,financial ,services1 and in addition to the ,committees on ,ways and ,means and ,agriculture1 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 ,act may be cited as the ,online ,market ,protection ,act of #bjad4 #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 ,during the moratorium period1 the ,federal ,government and all ,state governments and political subdivisions thereof shall not impose any further statutory restrictions or regulations affecting ,smart ,contract platforms such as cryptographic escrow services1 multi-signature transactions1 and oracles1 so as to allow for the growth and facilitation of these important facets of cryptological technology4 7c7 ,federal and ,state ,agencies shall consider cryptocurrencies exempt commodities akin to gold and silver1 rather than excluded commodities such as national fiat currencies4 ,the ,bitcoin cryptological protocol is not strictly a currency1 but is a broad multifaceted protocol which allows for myriad novel applications4 7d7 ,federal and ,state ,agencies shall have no jurisdiction over ,cryptocurrency ,economy ,transactions or ,bitcoin ,economy ,transactions4 ,the financial regulations authorizing these agencies are designed to protect users of financial instruments from fraud1 manipulation1 and other types of misconduct that result in real economic losses2 not virtual losses solely within a cryptographic network4 7e7 ,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 accessible 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 7h7 ,agencies is defined as the regulatory bodies of the ,federal ,government and the ,state governments or political subdivision thereof1 including but not limited to the ,commodity and ,futures ,trading ,committee 7,,cftc71 the ,securities and ,exchange ,commission 7,,sec71 the ,board of ,governors of the ,federal ,reserve1 the ,financial ,crimes ,enforcement ,network 7,fin,c,e,n71 and the ,new ,york ,state ,department of ,financial ,services 7,,nysdfs74 7i7 ,smart ,contracts are cryptographically encoded agreements1 often utilizing multi-signature technology1 which allow for automatic or multi-party execution and public recording of transactions or property transfers when certain predetermined parameters are met4 7j7 ,multi-,signature ,transactions are cryptographic contracts encoded in the blockchain1 often involving third-party arbitrators or oracles1 which are finalized when a pre-set number of involved parties sign off4 ,in a three-party multi-signature transaction involving an arbitrator1 the transaction may be finalized only when two 7#b7 out of the three 7#c7 parties--a buyer1 a seller1 and_/or the arbitrator--sign off on the transaction4 7k7 ,cryptographic ,escrow ,services are services that allow for fund transfers subject to the authorization of an arbitrator or other intermediary4 ,these transactions can utilize multi-signature technology1 allowing for the possibility of arbitration without requiring any actual transfer of funds through the intermediary4 7l7 ,oracles are automated programs or algorithms acting as signatories to multi-signature transactions4 ,utilizing databases and information amalgamators1 an oracle automatically executes its signature when predetermined threshold is met4 7m7 ,cryptocurrency ,economy ,transactions or ,bitcoin ,economy ,transactions are transactions involving financial instruments denominated in ,bitcoin or another cryptocurrency underlying a transaction which is also denominated in ,bitcoin or another cryptocurrency4 ,a ,bitcoin-denominated credit default swap that references a ,bitcoin-denominated loan would be a ,bitcoin ,economy ,transaction4 #d4 ,declaration of moratorium 7a7 ,in general ,it is the public policy of the ,united ,states 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 public policy of the ,united ,states that the development and use of any medium of exchange which utilizes cryptographic proof of and for a transaction of cryptocurrency without the need for or reliance upon third-party intermediaries or verification will enhance the economic well-being of the ,american people and result in significant economic growth4 ,given the blockchain's capacity to serve as a public ledger1 software developers are creating mechanisms for smart technologies that will eliminate the need for many forms of costly intermediation ranging from third-party arbitration in legal disputes to key-exchanges in car and hotel rentals4 ,the capacity for publicly recorded multi-signature transactions will allow for the seamless property transfers that are certifiable1 public and secure without the use of an intermediary4 ,these and other uses increase market efficiency and facilitate economic activity and growth4 ,moreover1 these advances promote the autonomy and liberty of individuals and small businesses at the expense of needless bureaucracy4 #e4 ,declaration of neutral tax treatment 7a7 ,in general ,it is the public policy of the ,united ,states 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 public policy of the ,united ,states 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 public policy of the ,united ,states 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 public policy of the ,united ,states 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 public policy of the ,united ,states 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 public policy of the ,united ,states 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 public policy of the ,united ,states that mined produced cryptocurrency should be taxed as income only when actual a transfer and conversion of proceeds into dollars realize income1 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