I 

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 


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for gains realized from the sale or exchange of virtual 

currency for other than cash, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Token Taxonomy Act 

5 of 2021’’. 

6 SEC. 2. SECURITIES ACT OF 1933. 

7 (a) DEFINITION OF DIGITAL TOKEN.—Section 2(a) 

8 of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amend9 ed by adding at the end the following: 

10 ‘‘(20) DIGITAL TOKEN.—The term ‘digital 

11 token’ means a digital unit— 

12 ‘‘(A) that is created— 

13 ‘‘(i) in response to the verification or 

14 collection of proposed transactions; 

15 ‘‘(ii) pursuant to rules for the digital 

16 unit’s creation and supply that cannot be 

17 altered by any single person or persons 

18 under common control; or 

19 ‘‘(iii) as an initial allocation of digital 

20 units that will otherwise be created in ac21 cordance with clause (i) or (ii); 

22 ‘‘(B) that has a transaction history that— 

23 ‘‘(i) is recorded in a distributed, dig24 ital ledger or digital data structure in 


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1 which consensus is achieved through a 

2 mathematically verifiable process; and 

3 ‘‘(ii) after consensus is reached, re4 sists modification or tampering by any sin5 gle person or group of persons under com6 mon control; 

7 ‘‘(C) that is capable of being transferred 

8 between persons without an intermediate custo9 dian; and 

10 ‘‘(D) that is not a representation of a fi11 nancial interest in a company or partnership, 

12 including an ownership interest or revenue 

13 share. 

14 ‘‘(21) DIGITAL UNIT.—The term ‘digital unit’ 

15 means a representation of economic, proprietary, or 

16 access rights that is stored in a computer-readable 

17 format.’’. 

18 (b) DEFINITION OF SECURITY.—Section 2(a)(1) of 

19 the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) is 

20 amended— 

21 (1) by inserting ‘‘(A)’’ after ‘‘(1)’’; and 

22 (2) by adding at the end the following: 

23 ‘‘(B) Such term does not include a digital 

24 token.’’. 


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1 (c) EXEMPTION.—Section 4(a) of the Securities Act 

2 of 1933 (15 U.S.C. 77d(a)) is amended by adding at the 

3 end the following: 

4 ‘‘(8) Transactions involving the offer, pro5 motion, or sale of a digital unit if— 

6 ‘‘(A) the person offering, promoting, or 

7 selling the digital unit has a reasonable and 

8 good faith belief that such digital unit is a dig9 ital token; and 

10 ‘‘(B) within ninety days following a written 

11 notification from the Commission to such per12 son that such digital unit has been determined 

13 by the Commission to be a security, posts pub14 lic notice of such notification and takes reason15 able efforts to cease all sales and return all pro16 ceeds from any sales of such digital unit, ex17 cluding funds reasonably spent on the develop18 ment of technology associated with the digital 

19 unit.’’. 

20 (d) PREEMPTION OF STATE LAW.—Section 18 of the 

21 Securities Act of 1933 (15 U.S.C. 77r) is amended— 

22 (1) by redesignating subsection (d) as sub23 section (e); and 

24 (2) by inserting after subsection (c) the fol25 lowing: 


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1 ‘‘(d) DIGITAL TOKENS.— 

2 ‘‘(1) IN GENERAL.—No law, rule, regulation, or 

3 order, or other administrative action of any State or 

4 any political subdivision thereof— 

5 ‘‘(A) requiring, or with respect to, registra6 tion or qualification of securities, or registration 

7 or qualification of securities transactions, shall 

8 directly or indirectly apply to a digital token; 

9 ‘‘(B) shall directly or indirectly prohibit, 

10 limit, or impose any conditions upon the use 

11 of— 

12 ‘‘(i) with respect to a digital token, 

13 any disclosure document concerning an 

14 offer or sale of a digital token that is pre15 pared by or on behalf of a person devel16 oping, offering, or selling a digital token; 

17 or 

18 ‘‘(ii) any proxy statement, report to 

19 digital token-holders, or other disclosure 

20 document relating to a digital token or a 

21 person developing, offering, or selling a 

22 digital token; 

23 ‘‘(C) shall directly or indirectly prohibit, 

24 limit, or impose conditions, based on the merits 

25 of a digital token offering or a person develVerDate Sep 11 2014 04:53 Apr 30, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1628.IH H1628

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1 oping, offering, or selling a digital token, upon 

2 the offer or sale of any digital token; or 

3 ‘‘(D) shall directly or indirectly require the 

4 filing of any notices or other documents, or the 

5 assessment of any fees, with respect to digital 

6 tokens or digital token transactions. 

7 ‘‘(2) PRESERVATION OF FRAUD AUTHORITY.— 

8 States and political subdivisions thereof shall retain 

9 jurisdiction under the laws of such State to inves10 tigate and bring enforcement actions with respect to 

11 fraud or deceit, or unlawful conduct by any person, 

12 in connection with digital tokens or digital token 

13 transactions.’’. 

14 SEC. 3. SECURITIES EXCHANGE ACT OF 1934. 

15 (a) DEFINITION OF BANK.—Section 3(a)(6)(C) of 

16 the Securities Exchange Act of 1934 (15 U.S.C. 

17 78c(a)(6)(C)) is amended— 

18 (1) by inserting ‘‘or trust company,’’ after 

19 ‘‘Home Owners’ Loan Act,’’; and 

20 (2) by striking ‘‘receiving deposits or exercising 

21 fiduciary powers’’ and inserting ‘‘receiving deposits, 

22 providing custodial services, or exercising fiduciary 

23 powers’’. 


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1 (b) DEFINITION OF SECURITY.—Section 3(a)(10) of 

2 the Securities Exchange Act of 1934 (15 U.S.C. 

3 78c(a)(10)) is amended— 

4 (1) by inserting ‘‘(A)’’ after ‘‘(1)’’; and 

5 (2) by adding at the end the following: 

6 ‘‘(B) Such term does not include a digital 

7 token.’’. 

8 (c) DEFINITION OF DIGITAL TOKEN.—Section 3(a) 

9 of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) 

10 is amended by adding at the end the following: 

11 ‘‘(82) DIGITAL TOKEN.—The term ‘digital 

12 token’ has the meaning given to it in section 2(a) of 

13 the Securities Act of 1933.’’. 

14 (d) CLERICAL AMENDMENTS.—Section 3(a) of the 

15 Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is 

16 amended— 

17 (1) by moving paragraph (79) so as to appear 

18 after paragraph (78); and 

19 (2) by redesignating the second paragraph (80) 

20 (relating to ‘‘Funding portal’’) as paragraph (81). 

21 SEC. 4. INVESTMENT ADVISERS ACT OF 1940. 

22 (a) DEFINITION OF DIGITAL TOKEN.—Section 

23 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 

24 80b–2(a)) is amended— 


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1 (1) by redesignating the second paragraph (29) 

2 as paragraph (31); and 

3 (2) by adding at the end the following: 

4 ‘‘(32) The term ‘digital token’ has the meaning 

5 given to it in section 2(a) of the Securities Act of 

6 1933.’’. 

7 (b) DEFINITION OF SECURITY.—Section 202(a)(18) 

8 of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

9 2(a)(18)) is amended— 

10 (1) by inserting ‘‘(A)’’ after ‘‘(18)’’; and 

11 (2) by adding at the end the following: 

12 ‘‘(B) Such term does not include a digital 

13 token.’’. 

14 (c) DEFINITION OF BANK.—Section 202(a)(2)(C) of 

15 the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

16 2(a)(2)(C)) is amended by striking ‘‘receiving deposits or 

17 exercising fiduciary powers’’ and inserting ‘‘receiving de18 posits, providing custodial services, or exercising fiduciary 

19 powers’’. 

20 SEC. 5. INVESTMENT COMPANY ACT OF 1940. 

21 (a) DEFINITION OF DIGITAL TOKEN.—Section 

22 202(a) of the Investment Company Act of 1940 (15 

23 U.S.C. 80a–2(a)) is amended by adding at the end the 

24 following: 


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1 ‘‘(55) The term ‘digital token’ has the meaning 

2 given to it in section 2(a) of the Securities Act of 

3 1933.’’. 

4 (b) DEFINITION OF SECURITY.—Section 202(a)(36) 

5 of the Investment Company Act of 1940 (15 U.S.C. 80a– 

6 2(a)(36)) is amended— 

7 (1) by inserting ‘‘(A)’’ after ‘‘(36)’’; and 

8 (2) by adding at the end the following: 

9 ‘‘(B) Such term does not include a digital 

10 token.’’. 

11 (c) DEFINITION OF BANK.—Section 2(a)(5) of the 

12 Investment Company Act of 1940 (15 U.S.C. 80a– 

13 2(a)(5)) is amended by striking ‘‘receiving deposits or ex14 ercising fiduciary powers’’ and inserting ‘‘receiving depos15 its, providing custodial services, or exercising fiduciary 

16 powers’’. 

17 SEC. 6. RULE OF CONSTRUCTION WITH RESPECT TO CFTC 

18 AND FTC. 

19 Nothing in this Act or the amendments made by this 

20 Act shall be construed to limit the application of the Com21 modity Exchange Act or the Federal Trade Commission 

22 Act. 


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1 SEC. 7. SATISFACTORY CONTROL LOCATION REQUIRE2 MENT. 

3 Not later than 90 days after the date of the enact4 ment of this Act, the Commission shall amend section 

5 240.15c3–3 of title 17, Code of Federal Regulations, to 

6 provide that the requirement for a satisfactory control lo7 cation for any digital unit (as defined under section 2(a) 

8 of the Securities Act of 1933) that is a security is fulfilled 

9 by protecting the digital unit using public key cryptog10 raphy and by following commercially reasonable cybersecu11 rity practices to maintain the privacy and accessibility of 

12 sufficient private key material to solely be able to sign on 

13 behalf of such digital unit. 

14 SEC. 8. INDIVIDUAL RETIREMENT ACCOUNT INVESTMENTS 

15 IN CERTAIN VIRTUAL CURRENCIES NOT 

16 TREATED AS DISTRIBUTIONS. 

17 (a) IN GENERAL.—Section 408(m) of the Internal 

18 Revenue Code of 1986 is amended— 

19 (1) in paragraph (3)— 

20 (A) in the heading of the paragraph, by 

21 striking ‘‘AND BULLION’’ and inserting ‘‘, BUL22 LION, AND VIRTUAL CURRENCIES’’; 

23 (B) in subparagraph (A)(iv), by striking 

24 ‘‘or’’; 

25 (C) in subparagraph (B), by inserting ‘‘or’’ 

26 after ‘‘futures contract,’’; 


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1 (D) by inserting after subparagraph (B) 

2 the following: 

3 ‘‘(C) virtual currency.’’; and 

4 (E) by striking ‘‘if such bullion’’ and in5 serting ‘‘This paragraph shall only apply to bul6 lion which’’; and 

7 (2) by adding at the end the following: 

8 ‘‘(4) VIRTUAL CURRENCY DEFINED.—For pur9 poses of this subsection, the term ‘virtual currency’ 

10 means a digital representation of value that is used 

11 as a medium of exchange and is not currency (with12 in the meaning of section 988).’’. 

13 (b) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to sales or exchanges on or after 

15 January 1, 2021. 

16 SEC. 9. CERTAIN EXCHANGES OF VIRTUAL CURRENCY 

17 TREATED AS NON-TAXABLE EXCHANGES. 

18 (a) IN GENERAL.—Section 1031 of the Internal Rev19 enue Code of 1986 is amended— 

20 (1) in the heading, by striking ‘‘REAL PROP21 ERTY’’ and inserting ‘‘CERTAIN PROPERTY’’; and 

22 (2) in subsection (a), by adding at the end the 

23 following new paragraph: 

24 ‘‘(4) EXCHANGE OF VIRTUAL CURRENCY.—An 

25 exchange of virtual currency (as defined under secVerDate Sep 11 2014 01:50 May 05, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1628.IH H1628

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1 tion 408(m)) shall be treated as if such exchange 

2 were an exchange of real property under this sec3 tion.’’. 

4 (b) CLERICAL AMENDMENT.—The table of parts for 

5 part III of subchapter O of chapter 1 of such Code is 

6 amended by striking ‘‘Exchange of real property’’ and in7 serting ‘‘Exchange of certain property’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to exchanges made on or after Jan10 uary 1, 2021. 

11 SEC. 10. GAIN FROM SALE OR EXCHANGE OF VIRTUAL CUR12 RENCY. 

13 (a) IN GENERAL.—Part III of subchapter B of chap14 ter 1 of the Internal Revenue Code of 1986 is amended 

15 by inserting after section 139H the following new section: 

16 ‘‘SEC. 139I. GAIN FROM SALE OR EXCHANGE OF VIRTUAL 

17 CURRENCY. 

18 ‘‘(a) IN GENERAL.—Gross income shall not include 

19 gain from the sale or exchange of virtual currency (as de20 fined under section 408(m)) for other than cash or cash 

21 equivalents. 

22 ‘‘(b) LIMITATION.— 

23 ‘‘(1) IN GENERAL.—The amount of gain ex24 cluded from gross income under subsection (a) with 


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1 respect to a sale or exchange of virtual currency 

2 shall not exceed $600. 

3 ‘‘(2) AGGREGATION RULE.—For purposes of 

4 this subsection, all sales or exchanges which are part 

5 of the same transaction (or a series of related trans6 actions) shall be treated as one sale or exchange. 

7 ‘‘(c) INFLATION ADJUSTMENT.—In the case of any 

8 taxable year beginning in a calendar year after 2022, the 

9 dollar amount in subsection (b) shall be increased by an 

10 amount equal to— 

11 ‘‘(1) such dollar amount, multiplied by 

12 ‘‘(2) the cost-of-living adjustment determined 

13 under section 1(f)(3) for the calendar year in which 

14 the taxable year begins, determined by substituting 

15 ‘calendar year 2022’ for ‘calendar year 2016’ in sub16 paragraph (A)(ii) thereof. 

17 Any increase determined under the preceding sentence 

18 shall be rounded to the nearest multiple of $50.’’. 

19 (b) CLERICAL AMENDMENT.—The table of sections 

20 for part III of subchapter B of chapter 1 of such Code 

21 is amended by inserting after the item relating to section 

22 139H the following new item: 

‘‘Sec. 139I. Gain from sale or exchange of virtual currency.’’. 

23 (c) REPORTING OF GAINS OR LOSSES.—The Sec24 retary of the Treasury shall issue regulations providing for 

25 information returns on transactions in virtual currency (as 


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1 defined under section 408(m) of the Internal Revenue 

2 Code of 1986) for which gain or loss is recognized. 

3 (d) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply with respect to transactions en5 tered into on or after January 1, 2021. 

Æ 


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