I 

115TH CONGRESS 

2D SESSION H. R. 7356 

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 

DECEMBER 20, 2018 

Mr. DAVIDSON (for himself and Mr. SOTO) 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 SEC. 2. SECURITIES ACT OF 1933. 

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

7 of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amend8 ed by adding at the end the following: 

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

10 token’ means a digital unit that— 

11 ‘‘(A) is created— 

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

13 collection of proposed transactions; 

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

15 unit’s creation and supply that cannot be 

16 altered by a single person or group of per17 sons under common control; or 

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

19 units that will otherwise be created in ac20 cordance with clause (i) or (ii); 

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

22 ‘‘(i) is recorded in a distributed, dig23 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, can4 not be materially altered by a single person 

5 or group of persons under common control; 

6 ‘‘(C) is capable of being traded or trans7 ferred between persons without an intermediate 

8 custodian; and 

9 ‘‘(D) is not a representation of a financial 

10 interest in a company, including an ownership 

11 or debt interest or revenue share. 

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

13 means a representation of economic, proprietary, or 

14 access rights that is stored in a computer-readable 

15 format.’’. 

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

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

18 amended— 

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

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

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

22 token.’’. 

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

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

25 end the following: 


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1 ‘‘(8) Transactions involving the development, 

2 offer, or sale of a digital unit if— 

3 ‘‘(A) the person developing, offering, or 

4 selling the digital unit has a reasonable and 

5 good faith belief that such digital unit is a dig6 ital token; and 

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

8 notification from the Commission to such per9 son that such digital unit has been determined 

10 by the Commission to be a security, posts pub11 lic notice of such notification and takes reason12 able efforts to cease all sales and return all pro13 ceeds from any sales of such digital unit, ex14 cluding funds reasonably spent on the develop15 ment of technology associated with the digital 

16 unit.’’. 

17 SEC. 3. SECURITIES EXCHANGE ACT OF 1934. 

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

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

20 78c(a)(6)(C)) is amended— 

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

22 ‘‘Home Owners’ Loan Act,’’; and 

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

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


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1 providing custodial services, or exercising fiduciary 

2 powers’’. 

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

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

5 78c(a)(10)) is amended— 

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

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

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

9 token.’’. 

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

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

12 is amended by adding at the end the following: 

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

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

15 the Securities Act of 1933.’’. 

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

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

18 amended— 

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

20 after paragraph (78); and 

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

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

23 SEC. 4. INVESTMENT ADVISERS ACT OF 1940. 

24 Section 202(a)(2)(C) of the Investment Advisers Act 

25 of 1940 (15 U.S.C. 80b–2(a)(2)(C)) is amended by strikVerDate Sep 11 2014 21:59 Dec 26, 2018 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H7356.IH H7356

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1 ing ‘‘receiving deposits or exercising fiduciary powers’’ and 

2 inserting ‘‘receiving deposits, providing custodial services, 

3 or exercising fiduciary powers’’. 

4 SEC. 5. INVESTMENT COMPANY ACT OF 1940. 

5 Section 2(a)(5) of the Investment Company Act of 

6 1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking ‘‘re7 ceiving deposits or exercising fiduciary powers’’ and in8 serting ‘‘receiving deposits, providing custodial services, or 

9 exercising fiduciary powers’’. 

10 SEC. 6. SATISFACTORY CONTROL LOCATION REQUIRE11 MENT. 

12 Not later than 90 days after the date of the enact13 ment of this Act, the Commission shall amend section 

14 240.15c3–3 of title 17, Code of Federal Regulations, to 

15 provide that the requirement for a satisfactory control lo16 cation is fulfilled by protecting a digital unit (as defined 

17 under section 2(a) of the Securities Act of 1933) through 

18 public key cryptography and following commercially rea19 sonable cybersecurity practices. 

20 SEC. 7. INDIVIDUAL RETIREMENT ACCOUNT INVESTMENTS 

21 IN CERTAIN VIRTUAL CURRENCIES NOT 

22 TREATED AS DISTRIBUTIONS. 

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

24 Revenue Code of 1986 is amended— 

25 (1) in paragraph (3)— 


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

2 striking ‘‘AND BULLION’’ and inserting ‘‘, BUL3 LION, AND VIRTUAL CURRENCIES’’; 

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

5 ‘‘or’’; 

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

7 after ‘‘futures contract,’’; 

8 (D) by inserting after subparagraph (B) 

9 the following: 

10 ‘‘(C) virtual currency.’’; and 

11 (E) by striking ‘‘if such bullion’’ and in12 serting ‘‘This paragraph shall only apply to bul13 lion which’’; and 

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

15 ‘‘(4) VIRTUAL CURRENCY DEFINED.—For pur16 poses of this subsection, the term ‘virtual currency’ 

17 means a digital representation of value that is used 

18 as a medium of exchange and is not currency (with19 in the meaning of section 988).’’. 

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

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

22 January 1, 2017. 


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1 SEC. 8. CERTAIN EXCHANGES OF VIRTUAL CURRENCY 

2 TREATED AS NON-TAXABLE EXCHANGES. 

3 (a) IN GENERAL.—Section 1031 of the Internal Rev4 enue Code of 1986 is amended— 

5 (1) in the heading, by striking ‘‘REAL PROP6 ERTY’’ and inserting ‘‘CERTAIN PROPERTY’’; 

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

8 follow new paragraph: 

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

10 exchange of virtual currency (as defined under sec11 tion 408(m)) shall be treated as if such exchange 

12 were an exchange of real property under this sec13 tion.’’. 

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

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

16 amended by striking ‘‘Exchange of real property’’ and in17 serting ‘‘Exchange of certain property’’. 

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

19 this section shall apply to exchanges made on or after Jan20 uary 1, 2017. 

21 SEC. 9. GAIN FROM SALE OR EXCHANGE OF VIRTUAL CUR22 RENCY. 

23 (a) IN GENERAL.—Part III of subchapter B of chap24 ter 1 of the Internal Revenue Code of 1986 is amended 

25 by inserting after section 139F the following new section: 


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1 ‘‘SEC. 139G. GAIN FROM SALE OR EXCHANGE OF VIRTUAL 

2 CURRENCY. 

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

4 gain from the sale or exchange of virtual currency (as de5 fined under section 408(m)) for other than cash or cash 

6 equivalents. 

7 ‘‘(b) LIMITATION.— 

8 ‘‘(1) IN GENERAL.—The amount of gain ex9 cluded from gross income under subsection (a) with 

10 respect to a sale or exchange of virtual currency 

11 shall not exceed $600. 

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

13 this subsection, all sales or exchanges which are part 

14 of the same transaction (or a series of related trans15 actions) shall be treated as one sale or exchange. 

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

17 taxable year beginning in a calendar year after 2018, the 

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

19 amount equal to— 

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

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

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

23 the taxable year begins, determined by substituting 

24 ‘calendar year 2017’ for ‘calendar year 2016’ in sub25 paragraph (a)(ii) thereof. 


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1 Any increase determined under the preceding sentence 

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

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

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

5 is amended by inserting after the item relating to section 

6 139F the following new item: 

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

7 (c) REPORTING OF GAINS OR LOSSES.—The Sec8 retary of the Treasury shall issue regulations providing for 

9 information returns on transactions in virtual currency (as 

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

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

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

13 this section shall apply with respect to transactions en14 tered into on or after January 1, 2017. 

Æ 


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