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Offline Stan

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Cryptocurrency Protocol Protection and Moratorium Act
« on: December 12, 2014, 06:34:22 PM »

I
113th CONGRESS
2d Session
H. R. 5777

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.

1. Short title
This title may be cited as the Cryptocurrency Protocol Protection and Moratorium Act (also, CryptPMA).

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.

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.

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.

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.

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.
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline CryptoPrometheus

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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #1 on: December 12, 2014, 06:42:57 PM »
Hmmm. All I keep thinking is "what's the catch?"
This seems way too altruistic to be true.

We know that legislation is often enacted ahead of time in order to "cover their tracks" as they implement their longer term plans so.... maybe the banksters are about to begin launching their own cryptos?
« Last Edit: December 12, 2014, 06:46:16 PM by crypto_prometheus_81 »
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Offline cn-members

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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #2 on: December 12, 2014, 06:44:31 PM »
Stockman is existing the congress  :-\
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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #3 on: December 12, 2014, 06:45:24 PM »
Hmmm. All I keep thinking is "what's the catch?"
This seems way too altruistic to be true......

The catch is that a bill is not a law , just something to discuss ....
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Offline CryptoPrometheus

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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #4 on: December 12, 2014, 06:48:19 PM »
Hmmm. All I keep thinking is "what's the catch?"
This seems way too altruistic to be true......

The catch is that a bill is not a law , just something to discuss ....

True, but don't kid yourself into believing that bills are ever proposed with "altruistic" intent; there is always an agenda, my friend.
"Power and law are not synonymous. In fact, they are often in opposition and irreconcilable."
- Cicero

Offline cn-members

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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #5 on: December 12, 2014, 06:50:42 PM »
Hmmm. All I keep thinking is "what's the catch?"
This seems way too altruistic to be true......

The catch is that a bill is not a law , just something to discuss ....

True, but don't kid yourself into believing that bills are ever proposed with "altruistic" intent; there is always an agenda, my friend.

the guy who proposed it is bugging out from the congress .....I'm not sure he can see it though ....
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Offline matt608

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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #6 on: December 12, 2014, 06:56:37 PM »
Shouldn't this be front page r/bitcoin news? (not necessarily with bitsharestalk as the source)  I'd have thought this is a bill for the whole crypto community to rally around, to get US citizens on the phone/writing letters/petitioning to congress to have this bill approved. 

Offline CryptoPrometheus

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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #7 on: December 12, 2014, 07:05:41 PM »
Shouldn't this be front page r/bitcoin news? (not necessarily with bitsharestalk as the source)  I'd have thought this is a bill for the whole crypto community to rally around, to get US citizens on the phone/writing letters/petitioning to congress to have this bill approved.

True. I can't really see how this could be anything but good for crypto in general. If it allows banks to enter the space, which they are already moving towards (German Fed mtg. on crypto: https://bitsharestalk.org/index.php?topic=11939.msg157454#msg157454), they will be nevertheless unable to fully dominate like they do with the current system, and furthermore their participation will help validate the legitimacy of the blockchain in the minds of the public. "Wow, if banks are using it than it must be secure."
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Offline roadscape

Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #8 on: December 12, 2014, 07:21:49 PM »
Shouldn't this be front page r/bitcoin news? (not necessarily with bitsharestalk as the source)  I'd have thought this is a bill for the whole crypto community to rally around, to get US citizens on the phone/writing letters/petitioning to congress to have this bill approved.

Echoing this.. If it was introduced 11 days ago, how is this the first I've heard about it?

From congress.gov's website I can't immediately tell its status or any significant upcoming dates.
http://cryptofresh.com  |  witness: roadscape

Offline bytemaster

Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #9 on: December 12, 2014, 07:48:38 PM »
Good bill!  Much needed!  Would solve so many of our problems.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline cn-members

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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #10 on: December 12, 2014, 07:57:44 PM »
Shouldn't this be front page r/bitcoin news? (not necessarily with bitsharestalk as the source)  I'd have thought this is a bill for the whole crypto community to rally around, to get US citizens on the phone/writing letters/petitioning to congress to have this bill approved.

Echoing this.. If it was introduced 11 days ago, how is this the first I've heard about it?

From congress.gov's website I can't immediately tell its status or any significant upcoming dates.

Chinese news reported 1 week ago
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Offline roadscape

Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #11 on: December 12, 2014, 08:03:04 PM »
    (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.

So what's the chance that blockchains get legally screwed within the next 6 months, and stuck that way for 5 years?
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Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #12 on: December 12, 2014, 10:02:59 PM »

Too good to be true (i.e. to pass and become law). But we are better off with it than without it. Even as a proposal only!

If I were a betting man, I would have thanked my favorite turtle for it!  (CP/big O)

Offline luckybit

Re: Cryptocurrency Protocol Protection and Moratorium Act
« Reply #13 on: December 12, 2014, 10:31:32 PM »
Hmmm. All I keep thinking is "what's the catch?"
This seems way too altruistic to be true.

We know that legislation is often enacted ahead of time in order to "cover their tracks" as they implement their longer term plans so.... maybe the banksters are about to begin launching their own cryptos?
Better would be to make crypto tax exempt like they did with the Internet. We still have to pay all sorts of taxes.
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