I 

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. 

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 title may be cited as the ‘‘Cryptocurrency Pro5 tocol Protection and Moratorium Act’’ (also, 

6 ‘‘CryptPMA’’). 

7 SEC. 2. MORATORIUM. 

8 (a) Neither the Federal Government nor any State 

9 or political subdivision thereof shall impose any statutory 

10 restrictions or regulations specifically identifying and govVerDate Sep 11 2014 00:34 Dec 03, 2014 Jkt 049200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5777.IH H5777

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1 erning the creation, use, exploitation, possession or trans2 fer of any algorithmic protocols governing the operation 

3 of any virtual, non-physical, algorithm or computer source 

4 code-based medium for exchange (collectively, ‘‘crypto5 currency’’ as defined herein) for a period beginning June 

6 1, 2015, and extending five years after the enactment of 

7 this Act (such period, the ‘‘moratorium period’’), except 

8 for statutes already enacted and effective prior to the date 

9 of enactment of this Act, and further suspending the en10 actment and effectiveness of any and all pending statutes 

11 and regulations until the end of the aforementioned mora12 torium period, except as otherwise provided in this section. 

13 (b) Nothing in this Act shall prevent, impair or im14 pede the operation of any government agency, authority 

15 or instrumentality, whether of the Federal Government or 

16 of any State or political subdivision thereof, to enforce cur17 rently existing criminal, civil or taxation statutes and reg18 ulations. 

19 SEC. 3. DEFINITIONS. 

20 (a) ‘‘Algorithm’’ is defined as a procedure for solving 

21 a mathematical problem in a finite number of steps per22 formed by a computer. 

23 (b) ‘‘Algorithmic chain’’ is a series or chain of bits 

24 of data comprising a unique string of data which is the 

25 basis for the cryptographic proof of a valid transfer or 


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1 transaction of cryptocurrencies. The algorithmic chain for 

2 a cryptocurrency is commonly referred to as a 

3 ‘‘blockchain’’. 

4 (c) The ‘‘cryptographic proof’’ for each transaction 

5 or transfer is based on one unique algorithmic chain, dis6 tinct from all previously existing algorithms and neither 

7 replicable nor reusable yet sharing with all other units at 

8 least one common source code element in the algorithmic 

9 chain (or ‘‘blockchain’’) in the transferor’s existing bitcoin 

10 or bitcoins. 

11 (d) ‘‘Protocol’’ refers to procedures or guidelines gov12 erning the creation, development and operation of a 

13 cryptocurrency. 

14 (e) ‘‘Service’’ is defined as the Internal Revenue Serv15 ice. 

16 (f) The phrase ‘‘using the Internet or other elec17 tronic, non-physical medium’’ means by placement of ma18 terial in a computer server-based file archive so that it 

19 is publicly accessible, on, through, or over the Internet, 

20 using hypertext transfer protocol, file transfer protocol, or 

21 other similar protocols. 

22 (g) ‘‘Cryptocurrency’’ is a popular term encom23 passing code-based protocols supporting an electronic, 

24 non-physical media for the exchange of value, and for the 

25 sake of both clarity and the avoidance of confusion in the 


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1 mind of the public, based on the prior use of this term 

2 by the Internal Revenue Service in its initial guidance (see 

3 Notice 2014–21, released March 26, 2014) this term is 

4 used herein. However, it is believed ‘‘cryptocurrency’’ en5 compasses the same protocols as those covered by terms 

6 such as ‘‘digital currency’’, ‘‘virtual currency’’ or ‘‘elec7 tronic currency’’. 

8 SEC. 4. DECLARATION OF MORATORIUM. 

9 (a) IN GENERAL.—It is the sense of Congress that 

10 no new statutes, regulations or advisory opinions be 

11 passed, implemented, enforced or issued governing the cre12 ation, use, possession or taxation of cryptocurrencies, the 

13 protocols governing each and the data, codes, algorithms 

14 or other calculations comprising each, until the expiration 

15 of the moratorium as provided in this Act. 

16 (b) PUBLIC INTEREST.—It is further the sense of 

17 Congress that the development and use of any media for 

18 exchange which possesses the characteristic of cryp19 tographic proof of and for a transaction of cryptocurrency 

20 without the need for or reliance upon third-party inter21 mediaries or verification is a circumstance that is likely 

22 to result in economic and other efficiencies for the Amer23 ican people and other participants in the domestic econ24 omy, and as such may be crucial to overall economic 


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1 growth, will enhance the economic well-being of the Amer2 ican people and will otherwise be in the public interest. 

3 SEC. 5. DECLARATION OF NEUTRAL TAX TREATMENT. 

4 (a) IN GENERAL.—It is the sense of Congress that 

5 the production, possession or use of cryptocurrency, 

6 whether in trade, commerce or personal non-commercial 

7 transfers, should not be disfavored or discouraged by the 

8 Federal tax code or other Federal or State statute or regu9 lation. 

10 (b) TAX TREATMENT.—It is the sense of Congress 

11 that the current guidance just promulgated and released 

12 by the Service in its Notice 2014–21 is advisory, subject 

13 to public comment and not in final form pending the expi14 ration of the comment period. As such, Congress believes 

15 that the current guidance is less than optimal for the 

16 American people and economy, and directs the Service to 

17 issue or revise interim regulations consistent with the fol18 lowing. 

19 (c) TREATMENT AS CURRENCY.—It is the sense of 

20 Congress that virtual currencies should be treated as cur21 rency instead of property in order to foster an equitable 

22 tax treatment and prevent a tax treatment that would dis23 courage the use of any cryptocurrency. Tax treatment of 

24 cryptocurrency as property does not account for the sub25 stantial illiquidity and highly limited acceptance and use 


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1 of cryptocurrency, and substantially and unfairly discour2 ages taxpayers engaging in a trade or business from using 

3 cryptocurrency in commerce. This circumstance is likely 

4 to discourage economic activity and stifle innovation and 

5 growth. At present, a taxpayer accepting cryptocurrency 

6 for goods or services will be taxed on the fair market value 

7 of the cryptocurrency despite the fact that exchange rates 

8 (from cryptocurrency to conventional currency) are both 

9 highly volatile and published or available only on a small 

10 number of proto-exchanges in the early stages of develop11 ment, acceptance and awareness by cryptocurrency users. 

12 As a result, current tax treatment will measure income 

13 on the basis of an illiquid and likely inaccurate fair market 

14 value that exceeds the taxpayer’s true fair market value 

15 and hence income, resulting in the risk of a consistent 

16 overtaxation or overpayment that will act as a strong de17 terrent to or penalty for accepting cryptocurrency in pay18 ment. Such tax treatment is inconsistent with the tax 

19 treatment of secured notes for payment in trade or com20 merce, which recognizes a discount from the face value 

21 of the note due to the illiquid nature of the payment. 

22 (Note: See IRS Pub. 525 at 4.) 

23 (d) REVENUE IN TRADE OR BUSINESS; TAXATION

24 UPON MONETIZING EVENT.—It is the sense of Congress 

25 that taxpayers accepting cryptocurrency in trade or comVerDate Sep 11 2014 21:43 Dec 03, 2014 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5777.IH H5777

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1 merce should be deemed to realize actual income only 

2 when cryptocurrency is monetized through conversion or 

3 exchange into dollars or any official government currency, 

4 and that fair market value should be calculated as net pro5 ceeds from the conversion. (Note: This treatment seeks to 

6 achieve the most accurate and fair measure of actual in7 come received, as distinguished from theoretical income in 

8 the form of cryptocurrency which, until its conversion to 

9 dollars, remains under substantial risk of diminution from 

10 illiquidity or other conversion risks or inefficiencies. This 

11 treatment is consistent with tax treatment of statutory 

12 stock options where the taxable event is not the receipt 

13 or exercise of the option, but the sale of the underlying 

14 stock for proceeds in cash. The goal here is to have income 

15 taxed when the income is actual instead of theoretical and 

16 subject to substantial if not total risk of loss through li17 quidity problems, exchange problems or other barriers to 

18 monetization.) Accordingly, as it is the further sense of 

19 Congress that income on cryptocurrency received in trade 

20 or business should be defined as the net proceeds from 

21 conversion of the received cryptocurrency into dollars, the 

22 Service is hereby directed to revise or issue interim regula23 tions consistent herewith. 

24 (e) REVENUE FROM MINING OR CREATION OF

25 CRYPTOCURRENCY.—It is the sense of Congress that the 


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1 Service’s guidance that taxpayers should have the fair 

2 market value of the cryptocurrency they successfully 

3 ‘‘mine’’ or produce included in gross income is inequitable, 

4 overstates actual income by overstating fair market value 

5 by not accounting for the liquidity risk or the risk that 

6 substantial effort may yield no production, and strongly 

7 and unfairly penalizes or discourages such income pro8 ducing efforts and deters economic growth, activity and 

9 innovation. Accordingly, as it is the further sense of Con10 gress that mined produced cryptocurrency should be taxed 

11 as income only when actual income is realized by a trans12 fer and conversion of proceeds into dollars, the Service is 

13 hereby directed to revise or issue interim regulations con14 sistent herewith. 

15 SEC. 6. SEVERABILITY. 

16 If any provision of this title, or any amendment made 

17 by this title, or the application of that provision to any 

18 person or circumstance, is held by a court of competent 

19 jurisdiction to violate any provision of the Constitution of 

20 the United States, then the other provisions of that title, 

21 and the application of that provision to other persons and 

22 circumstances, shall not be affected. 

Æ 


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