Cryptocurrency Protocol Protection and Moratorium Act or the CryptPMA - Prohibits, for a five-year moratorium period beginning June 1, 2015, federal, state, and local governments from imposing statutory restrictions or regulations specifically identifying and governing the creation, use, exploitation, possession, or transfer of any algorithmic protocols governing the operation of any virtual, non-physical algorithm or computer source code-based medium for exchange (cryptocurrency).
Defines cryptocurrency as a popular term encompassing code-based protocols supporting an electronic, non-physical medium for the exchange of value.
Expresses the sense of Congress that, until the expiration of the five-year moratorium, no new statutes, regulations or advisory opinions be passed, implemented, enforced, or issued governing the creation, use, possession or taxation of cryptocurrencies, including governing protocols, data, codes, algorithms, or other calculations.
Expresses the sense of Congress further that: (1) development and use of any medium 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 in the public interest; and (2) production, possession or use of cryptocurrency, whether in trade, commerce, or personal non-commercial transfers, should not be disfavored or discouraged by either the federal tax code or other governmental statute or regulation.
Expresses the sense of Congress that: (1) the current guidance released by the IRS in its Notice 2014-21 is advisory, subject to public comment, and not in final form pending the expiration of the comment period; and (2) less than optimal for the American people and economy.
Directs the IRS to issue or revise interim regulations consistent with the sense of Congress that:
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5777 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 5777
To protect cryptocurrencies.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 1, 2014
Mr. Stockman introduced the following bill; which was referred to the
Committee on Financial Services, and in addition to the Committee on
Ways and Means, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To protect cryptocurrencies.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This title may be cited as the ``Cryptocurrency Protocol Protection
and Moratorium Act'' (also, ``CryptPMA'').
SEC. 2. MORATORIUM.
(a) Neither the Federal Government nor any State or political
subdivision thereof shall impose any statutory restrictions or
regulations specifically identifying and governing the creation, use,
exploitation, possession or transfer of any algorithmic protocols
governing the operation of any virtual, non-physical, algorithm or
computer source code-based medium for exchange (collectively,
``cryptocurrency'' as defined herein) for a period beginning June 1,
2015, and extending five years after the enactment of this Act (such
period, the ``moratorium period''), except for statutes already enacted
and effective prior to the date of enactment of this Act, and further
suspending the enactment and effectiveness of any and all pending
statutes and regulations until the end of the aforementioned moratorium
period, except as otherwise provided in this section.
(b) Nothing in this Act shall prevent, impair or impede the
operation of any government agency, authority or instrumentality,
whether of the Federal Government or of any State or political
subdivision thereof, to enforce currently existing criminal, civil or
taxation statutes and regulations.
SEC. 3. DEFINITIONS.
(a) ``Algorithm'' is defined as a procedure for solving a
mathematical problem in a finite number of steps performed by a
computer.
(b) ``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
cryptocurrencies. The algorithmic chain for a cryptocurrency is
commonly referred to as a ``blockchain''.
(c) The ``cryptographic proof'' for each transaction or transfer is
based on one unique algorithmic chain, 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 (or ``blockchain'') in the transferor's existing
bitcoin or bitcoins.
(d) ``Protocol'' refers to procedures or guidelines governing the
creation, development and operation of a cryptocurrency.
(e) ``Service'' is defined as the Internal Revenue Service.
(f) The phrase ``using the Internet or other electronic, non-
physical medium'' means by placement of material in a computer server-
based file archive so that it is publicly accessible, on, through, or
over the Internet, using hypertext transfer protocol, file transfer
protocol, or other similar protocols.
(g) ``Cryptocurrency'' is a popular term encompassing code-based
protocols supporting an electronic, non-physical media for the exchange
of value, and for the sake of both clarity and the avoidance of
confusion in the mind of the public, based on the prior use of this
term by the Internal Revenue Service in its initial guidance (see
Notice 2014-21, released March 26, 2014) this term is used herein.
However, it is believed ``cryptocurrency'' encompasses the same
protocols as those covered by terms such as ``digital currency'',
``virtual currency'' or ``electronic currency''.
SEC. 4. DECLARATION OF MORATORIUM.
(a) In General.--It is the sense of Congress that no new statutes,
regulations or advisory opinions be passed, implemented, enforced or
issued governing the creation, use, possession or taxation of
cryptocurrencies, the protocols governing each and the data, codes,
algorithms or other calculations comprising each, until the expiration
of the moratorium as provided in this Act.
(b) 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 economy, and as such may be crucial
to overall economic growth, will enhance the economic well-being of the
American people and will otherwise be in the public interest.
SEC. 5. DECLARATION OF NEUTRAL TAX TREATMENT.
(a) In General.--It is the sense of Congress that the production,
possession or use of cryptocurrency, whether in trade, commerce or
personal non-commercial transfers, should not be disfavored or
discouraged by the Federal tax code or other Federal or State statute
or regulation.
(b) Tax Treatment.--It is the sense of Congress that the current
guidance just promulgated and released by the Service in its Notice
2014-21 is advisory, subject to public comment and not in final form
pending the expiration of the comment period. As such, Congress
believes that the current guidance is less than optimal for the
American people and economy, and directs the Service to issue or revise
interim regulations consistent with the following.
(c) 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 cryptocurrency. Tax treatment of
cryptocurrency as property does not account for the substantial
illiquidity and highly limited acceptance and use of cryptocurrency,
and substantially and unfairly discourages taxpayers engaging in a
trade or business from using cryptocurrency in commerce. This
circumstance is likely to discourage economic activity and stifle
innovation and growth. At present, 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 (from
cryptocurrency to conventional currency) are both highly volatile and
published or available only on a small number of proto-exchanges in the
early stages of development, acceptance and awareness by cryptocurrency
users. As a result, 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 income,
resulting in the risk of a consistent overtaxation or overpayment that
will act as a strong deterrent to or penalty for accepting
cryptocurrency in payment. Such tax treatment is inconsistent with the
tax treatment of secured notes for payment in trade or commerce, which
recognizes a discount from the face value of the note due to the
illiquid nature of the payment. (Note: See IRS Pub. 525 at 4.)
(d) Revenue in Trade or Business; 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 currency, and that fair market value should
be calculated as net proceeds from the conversion. (Note: This
treatment seeks to achieve the most accurate and fair measure of actual
income received, as distinguished from theoretical income in the form
of cryptocurrency which, until its conversion to dollars, remains under
substantial risk of diminution from illiquidity or other conversion
risks or inefficiencies. This treatment is consistent with tax
treatment of statutory stock options where the taxable event is not the
receipt or exercise of the option, but the sale of the underlying stock
for proceeds in cash. 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 problems, exchange problems or
other barriers to monetization.) Accordingly, 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 dollars, the Service is hereby directed to
revise or issue interim regulations consistent herewith.
(e) 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 inequitable, overstates
actual income by overstating fair market value by not accounting for
the liquidity risk or the risk that substantial effort may yield no
production, and strongly and unfairly penalizes or discourages such
income producing efforts and deters economic growth, activity and
innovation. Accordingly, 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
dollars, the Service is hereby directed to revise or issue interim
regulations consistent herewith.
SEC. 6. SEVERABILITY.
If any provision of this title, or any amendment made by this
title, or the application of that provision to any person or
circumstance, is held by a court of competent jurisdiction to violate
any provision of the Constitution of the United States, then the other
provisions of that title, and the application of that provision to
other persons and circumstances, shall not be affected.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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