[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1628 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 1628
To amend the Securities Act of 1933 and the Securities Exchange Act of
1934 to exclude digital tokens from the definition of a security, to
direct the Securities and Exchange Commission to enact certain
regulatory changes regarding digital units secured through public key
cryptography, to adjust taxation of virtual currencies held in
individual retirement accounts, to create a tax exemption for exchanges
of one virtual currency for another, to create a de minimis exemption
from taxation for gains realized from the sale or exchange of virtual
currency for other than cash, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 8, 2021
Mr. Davidson (for himself, Mr. Soto, Mr. Budd, Mr. Gottheimer, and Mr.
Perry) 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 amend the Securities Act of 1933 and the Securities Exchange Act of
1934 to exclude digital tokens from the definition of a security, to
direct the Securities and Exchange Commission to enact certain
regulatory changes regarding digital units secured through public key
cryptography, to adjust taxation of virtual currencies held in
individual retirement accounts, to create a tax exemption for exchanges
of one virtual currency for another, to create a de minimis exemption
from taxation for gains realized from the sale or exchange of virtual
currency for other than cash, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Token Taxonomy Act of 2021''.
SEC. 2. SECURITIES ACT OF 1933.
(a) Definition of Digital Token.--Section 2(a) of the Securities
Act of 1933 (15 U.S.C. 77b(a)) is amended by adding at the end the
following:
``(20) Digital token.--The term `digital token' means a
digital unit--
``(A) that is created--
``(i) in response to the verification or
collection of proposed transactions;
``(ii) pursuant to rules for the digital
unit's creation and supply that cannot be
altered by any single person or persons under
common control; or
``(iii) as an initial allocation of digital
units that will otherwise be created in
accordance with clause (i) or (ii);
``(B) that has a transaction history that--
``(i) is recorded in a distributed, digital
ledger or digital data structure in which
consensus is achieved through a mathematically
verifiable process; and
``(ii) after consensus is reached, resists
modification or tampering by any single person
or group of persons under common control;
``(C) that is capable of being transferred between
persons without an intermediate custodian; and
``(D) that is not a representation of a financial
interest in a company or partnership, including an
ownership interest or revenue share.
``(21) Digital unit.--The term `digital unit' means a
representation of economic, proprietary, or access rights that
is stored in a computer-readable format.''.
(b) Definition of Security.--Section 2(a)(1) of the Securities Act
of 1933 (15 U.S.C. 77b(a)(1)) is amended--
(1) by inserting ``(A)'' after ``(1)''; and
(2) by adding at the end the following:
``(B) Such term does not include a digital token.''.
(c) Exemption.--Section 4(a) of the Securities Act of 1933 (15
U.S.C. 77d(a)) is amended by adding at the end the following:
``(8) Transactions involving the offer, promotion, or sale
of a digital unit if--
``(A) the person offering, promoting, or selling
the digital unit has a reasonable and good faith belief
that such digital unit is a digital token; and
``(B) 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 security, posts public notice of such
notification and takes reasonable efforts to cease all
sales and return all proceeds from any sales of such
digital unit, excluding funds reasonably spent on the
development of technology associated with the digital
unit.''.
(d) Preemption of State Law.--Section 18 of the Securities Act of
1933 (15 U.S.C. 77r) is amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following:
``(d) Digital Tokens.--
``(1) In general.--No law, rule, regulation, or order, or
other administrative action of any State or any political
subdivision thereof--
``(A) requiring, or with respect to, registration
or qualification of securities, or registration or
qualification of securities transactions, shall
directly or indirectly apply to a digital token;
``(B) shall directly or indirectly prohibit, limit,
or impose any conditions upon the use of--
``(i) with respect to a digital token, any
disclosure document concerning an offer or sale
of a digital token that is prepared by or on
behalf of a person developing, offering, or
selling a digital token; or
``(ii) any proxy statement, report to
digital token-holders, or other disclosure
document relating to a digital token or a
person developing, offering, or selling a
digital token;
``(C) shall directly or indirectly prohibit, limit,
or impose conditions, based on the merits of a digital
token offering or a person developing, offering, or
selling a digital token, upon the offer or sale of any
digital token; or
``(D) shall directly or indirectly require the
filing of any notices or other documents, or the
assessment of any fees, with respect to digital tokens
or digital token transactions.
``(2) Preservation of fraud authority.--States and
political subdivisions thereof shall retain jurisdiction under
the laws of such State to investigate and bring enforcement
actions with respect to fraud or deceit, or unlawful conduct by
any person, in connection with digital tokens or digital token
transactions.''.
SEC. 3. SECURITIES EXCHANGE ACT OF 1934.
(a) Definition of Bank.--Section 3(a)(6)(C) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(6)(C)) is amended--
(1) by inserting ``or trust company,'' after ``Home Owners'
Loan Act,''; and
(2) by striking ``receiving deposits or exercising
fiduciary powers'' and inserting ``receiving deposits,
providing custodial services, or exercising fiduciary powers''.
(b) Definition of Security.--Section 3(a)(10) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(10)) is amended--
(1) by inserting ``(A)'' after ``(1)''; and
(2) by adding at the end the following:
``(B) Such term does not include a digital token.''.
(c) Definition of Digital Token.--Section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end
the following:
``(82) Digital token.--The term `digital token' has the
meaning given to it in section 2(a) of the Securities Act of
1933.''.
(d) Clerical Amendments.--Section 3(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)) is amended--
(1) by moving paragraph (79) so as to appear after
paragraph (78); and
(2) by redesignating the second paragraph (80) (relating to
``Funding portal'') as paragraph (81).
SEC. 4. INVESTMENT ADVISERS ACT OF 1940.
(a) Definition of Digital Token.--Section 202(a) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended--
(1) by redesignating the second paragraph (29) as paragraph
(31); and
(2) by adding at the end the following:
``(32) The term `digital token' has the meaning given to it
in section 2(a) of the Securities Act of 1933.''.
(b) Definition of Security.--Section 202(a)(18) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(18)) is amended--
(1) by inserting ``(A)'' after ``(18)''; and
(2) by adding at the end the following:
``(B) Such term does not include a digital token.''.
(c) Definition of Bank.--Section 202(a)(2)(C) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(2)(C)) is amended by striking
``receiving deposits or exercising fiduciary powers'' and inserting
``receiving deposits, providing custodial services, or exercising
fiduciary powers''.
SEC. 5. INVESTMENT COMPANY ACT OF 1940.
(a) Definition of Digital Token.--Section 202(a) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2(a)) is amended by adding at the
end the following:
``(55) The term `digital token' has the meaning given to it
in section 2(a) of the Securities Act of 1933.''.
(b) Definition of Security.--Section 202(a)(36) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2(a)(36)) is amended--
(1) by inserting ``(A)'' after ``(36)''; and
(2) by adding at the end the following:
``(B) Such term does not include a digital token.''.
(c) Definition of Bank.--Section 2(a)(5) of the Investment Company
Act of 1940 (15 U.S.C. 80a-2(a)(5)) is amended by striking ``receiving
deposits or exercising fiduciary powers'' and inserting ``receiving
deposits, providing custodial services, or exercising fiduciary
powers''.
SEC. 6. RULE OF CONSTRUCTION WITH RESPECT TO CFTC AND FTC.
Nothing in this Act or the amendments made by this Act shall be
construed to limit the application of the Commodity Exchange Act or the
Federal Trade Commission Act.
SEC. 7. SATISFACTORY CONTROL LOCATION REQUIREMENT.
Not later than 90 days after the date of the enactment of this Act,
the Commission shall amend section 240.15c3-3 of title 17, Code of
Federal Regulations, to provide that the requirement for a satisfactory
control location for any digital unit (as defined under section 2(a) of
the Securities Act of 1933) that is a security is fulfilled by
protecting the digital unit using public key cryptography and by
following commercially reasonable cybersecurity practices to maintain
the privacy and accessibility of sufficient private key material to
solely be able to sign on behalf of such digital unit.
SEC. 8. INDIVIDUAL RETIREMENT ACCOUNT INVESTMENTS IN CERTAIN VIRTUAL
CURRENCIES NOT TREATED AS DISTRIBUTIONS.
(a) In General.--Section 408(m) of the Internal Revenue Code of
1986 is amended--
(1) in paragraph (3)--
(A) in the heading of the paragraph, by striking
``and bullion'' and inserting ``, bullion, and virtual
currencies'';
(B) in subparagraph (A)(iv), by striking ``or'';
(C) in subparagraph (B), by inserting ``or'' after
``futures contract,'';
(D) by inserting after subparagraph (B) the
following:
``(C) virtual currency.''; and
(E) by striking ``if such bullion'' and inserting
``This paragraph shall only apply to bullion which'';
and
(2) by adding at the end the following:
``(4) Virtual currency defined.--For purposes of this
subsection, the term `virtual currency' means a digital
representation of value that is used as a medium of exchange
and is not currency (within the meaning of section 988).''.
(b) Effective Date.--The amendments made by this section shall
apply to sales or exchanges on or after January 1, 2021.
SEC. 9. CERTAIN EXCHANGES OF VIRTUAL CURRENCY TREATED AS NON-TAXABLE
EXCHANGES.
(a) In General.--Section 1031 of the Internal Revenue Code of 1986
is amended--
(1) in the heading, by striking ``real property'' and
inserting ``certain property''; and
(2) in subsection (a), by adding at the end the following
new paragraph:
``(4) Exchange of virtual currency.--An exchange of virtual
currency (as defined under section 408(m)) shall be treated as
if such exchange were an exchange of real property under this
section.''.
(b) Clerical Amendment.--The table of parts for part III of
subchapter O of chapter 1 of such Code is amended by striking
``Exchange of real property'' and inserting ``Exchange of certain
property''.
(c) Effective Date.--The amendments made by this section shall
apply to exchanges made on or after January 1, 2021.
SEC. 10. GAIN FROM SALE OR EXCHANGE OF VIRTUAL CURRENCY.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139H the following new section:
``SEC. 139I. GAIN FROM SALE OR EXCHANGE OF VIRTUAL CURRENCY.
``(a) In General.--Gross income shall not include gain from the
sale or exchange of virtual currency (as defined under section 408(m))
for other than cash or cash equivalents.
``(b) Limitation.--
``(1) In general.--The amount of gain excluded from gross
income under subsection (a) with respect to a sale or exchange
of virtual currency shall not exceed $600.
``(2) Aggregation rule.--For purposes of this subsection,
all sales or exchanges which are part of the same transaction
(or a series of related transactions) shall be treated as one
sale or exchange.
``(c) Inflation Adjustment.--In the case of any taxable year
beginning in a calendar year after 2022, the dollar amount in
subsection (b) shall be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, determined by substituting `calendar year 2022' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded
to the nearest multiple of $50.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139H the following new item:
``Sec. 139I. Gain from sale or exchange of virtual currency.''.
(c) Reporting of Gains or Losses.--The Secretary of the Treasury
shall issue regulations providing for information returns on
transactions in virtual currency (as defined under section 408(m) of
the Internal Revenue Code of 1986) for which gain or loss is
recognized.
(d) Effective Date.--The amendments made by this section shall
apply with respect to transactions entered into on or after January 1,
2021.
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