,i #aaeth ,,congress #b;d ,session ,h4 ,r4 #gcef ,,in ,,the ,,house ,,of ,,representatives ,december #bj1 #bjah,mr4 ,davidson 7for himself and ,mr4 ,soto7 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 amend the ,securities ,act of #aicc and the ,securities ,exchange ,act of #aicd to exclude digital tokens from the definition of a security1 to direct the ,securities and ,exchange ,commission to enact certain regulatory changes regarding digital units secured through public key cryptography1 to adjust taxation of virtual currencies held in individual retirement accounts1 to create a tax exemption for exchanges of one virtual currency for another1 to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,token ,taxonomy ,act4 #b4 ,securities ,act of #aicc 7a7 ,definition of digital token ,section #b7;a7 of the ,securities ,act of #aicc 7#ae ,u4,s4,c4 #gg;b7a77 is amended by adding at the end the following3 7#bj7 ,digital token ,the term digital token means a digital unit that-- 7,a7 is created-- 7i7 in response to the verification or collection of proposed transactions2 7ii7 pursuant to rules for the digital unit's creation and supply that cannot be altered by a single person or group of persons under common control2 or 7iii7 as an initial allocation of digital units that will otherwise be created in accordance with clause 7i7 or 7ii72 7,b7 has a transaction history that-- 7i7 is recorded in a distributed1 digital ledger or digital data structure in which consensus is achieved through a mathematically verifiable process2 and 7ii7 after consensus is reached1 cannot be materially altered by a single person or group of persons under common control2 7,c7 is capable of being traded or transferred between persons without an intermediate custodian2 and 7,d7 is not a representation of a financial interest in a company1 including an ownership or debt interest or revenue share4 7#ba7 ,digital unit ,the term digital unit means a representation of economic1 proprietary1 or access rights that is stored in a computer-readable format4 4 7b7 ,definition of security ,section #b7;a77#a7 of the ,securities ,act of #aicc 7#ae ,u4,s4,c4 #gg;b7a77#a77 is amended-- 7#a7 by inserting 7,a7 after 7#a72 and 7#b7 by adding at the end the following3 7,b7 ,such term does not include a digital token4 4 7c7 ,exemption ,section #d7;a7 of the ,securities ,act of #aicc 7#ae ,u4,s4,c4 #gg;d7a77 is amended by adding at the end the following3 7#h7 ,transactions involving the development1 offer1 or sale of a digital unit if-- 7,a7 the person developing1 offering1 or selling the digital unit has a reasonable and good faith belief that such digital unit is a digital token2 and 7,b7 within ninety days following a written notification from the ,commission to such person that such digital unit has been determined by the ,commission to be a security1 posts public notice of such notification and takes reasonable efforts to cease all sales and return all proceeds from any sales of such digital unit1 excluding funds reasonably spent on the development of technology associated with the digital unit4 4 #c4 ,securities ,exchange ,act of #aicd 7a7 ,definition of bank ,section #c7;a77#f77;,c7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a77#f77;,c77 is amended-- 7#a7 by inserting or trust company1 after ,home ,owners' ,loan ,act12 and 7#b7 by striking receiving deposits or exercising fiduciary powers and inserting receiving deposits1 providing custodial services1 or exercising fiduciary powers4 7b7 ,definition of security ,section #c7;a77#aj7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a77#aj77 is amended-- 7#a7 by inserting 7,a7 after 7#a72 and 7#b7 by adding at the end the following3 7,b7 ,such term does not include a digital token4 4 7c7 ,definition of digital token ,section #c7;a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a77 is amended by adding at the end the following3 7#hb7 ,digital token ,the term digital token has the meaning given to it in section #b7;a7 of the ,securities ,act of #aicc4 4 7d7 ,clerical amendments ,section #c7;a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a77 is amended-- 7#a7 by moving paragraph 7#gi7 so as to appear after paragraph 7#gh72 and 7#b7 by redesignating the second paragraph 7#hj7 7relating to ,funding portal7 as paragraph 7#ha74 #d4 ,investment ,advisers ,act of #aidj ,section #bjb7;a77#b77;,c7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#b7;a77#b77;,c77 is amended by striking receiving deposits or exercising fiduciary powers and inserting receiving deposits1 providing custodial services1 or exercising fiduciary powers4 #e4 ,investment ,company ,act of #aidj ,section #b7;a77#e7 of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#b7;a77#e77 is amended by striking receiving deposits or exercising fiduciary powers and inserting receiving deposits1 providing custodial services1 or exercising fiduciary powers4 #f4 ,satisfactory control location requirement ,not later than #ij days after the date of the enactment of this ,act1 the ,commission shall amend section #bdj4ae;c#c-c of title #ag1 ,code of ,federal ,regulations1 to provide that the requirement for a satisfactory control location is fulfilled by protecting a digital unit 7as defined under section #b7;a7 of the ,securities ,act of #aicc7 through public key cryptography and following commercially reasonable cybersecurity practices4 #g4 ,individual retirement account investments in certain virtual currencies not treated as distributions 7a7 ,in general ,section #djh7m7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in paragraph 7#c7-- 7,a7 in the heading of the paragraph1 by striking and bullion and inserting 1 bullion1 and virtual currencies2 7,b7 in subparagraph 7,a77iv71 by striking or2 7,c7 in subparagraph 7,b71 by inserting or after futures contract12 7,d7 by inserting after subparagraph 7,b7 the following3 7,c7 virtual currency4 2 and 7,e7 by striking if such bullion and inserting ,this paragraph shall only apply to bullion which2 and 7#b7 by adding at the end the following3 7#d7 ,virtual currency defined ,for purposes of this subsection1 the term virtual currency means a digital representation of value that is used as a medium of exchange and is not currency 7within the meaning of section #ihh74 4 7b7 ,effective date ,the amendments made by this section shall apply to sales or exchanges on or after ,january #a1 #bjag4 #h4 ,certain exchanges of virtual currency treated as non-taxable exchanges 7a7 ,in general ,section #ajca of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in the heading1 by striking real property and inserting certain property2 7#b7 in subsection 7a71 by adding at the end the follow new paragraph3 7#d7 ,exchange of virtual currency ,an exchange of virtual currency 7as defined under section #djh7m77 shall be treated as if such exchange were an exchange of real property under this section4 4 7b7 ,clerical amendment ,the table of parts for part ,,iii of subchapter ,o of chapter #a of such ,code is amended by striking ,exchange of real property and inserting ,exchange of certain property 4 7c7 ,effective date ,the amendments made by this section shall apply to exchanges made on or after ,january #a1 #bjag4 #i4 ,gain from sale or exchange of virtual currency 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #aci;,f the following new section3 #aci;,g4 ,gain from sale or exchange of virtual currency 7a7 ,in general ,gross income shall not include gain from the sale or exchange of virtual currency 7as defined under section #djh7m77 for other than cash or cash equivalents4 7b7 ,limitation 7#a7 ,in general ,the amount of gain excluded from gross income under subsection 7a7 with respect to a sale or exchange of virtual currency shall not exceed #fjj4 7#b7 ,aggregation rule ,for purposes of this subsection1 all sales or exchanges which are part of the same transaction 7or a series of related transactions7 shall be treated as one sale or exchange4 7c7 ,inflation adjustment ,in the case of any taxable year beginning in a calendar year after #bjah1 the dollar amount in subsection 7b7 shall be increased by an amount equal to-- 7#a7 such dollar amount1 multiplied by 7#b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjag for calendar year #bjaf in subparagraph 7a77ii7 thereof4 ,any increase determined under the preceding sentence shall be rounded to the nearest multiple of #ej4 4 7b7 ,clerical amendment ,the table of sections for part ,,iii of subchapter ,b of chapter #a of such ,code is amended by inserting after the item relating to section #aci;,f the following new item3 ,sec4 #aci;,g4 ,gain from sale or exchange of virtual currency4 4 7c7 ,reporting of gains or losses ,the ,secretary of the ,treasury shall issue regulations providing for information returns on transactions in virtual currency 7as defined under section #djh7m7 of the ,internal ,revenue ,code of #aihf7 for which gain or loss is recognized4 7d7 ,effective date ,the amendments made by this section shall apply with respect to transactions entered into on or after ,january #a1 #bjag4