I 
113TH CONGRESS 
2D SESSION 
H. R. 5892 
To protect cryptocurrencies. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 2, 2015 
Mr. STOCKMAN introduced the following bill; which was referred to the Com-
mittee on Financial Services, and in addition to the Committees on Ways 
and Means and Agriculture, 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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Online Market Protec-
tion Act of 2014’’. 
SEC. 2. MORATORIUM. 
(a) Neither the Federal Government nor any State 
or political subdivision thereof shall impose any statutory 
restrictions or regulations specifically identifying and gov-
erning the creation, use, exploitation, possession or trans-
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fer 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 enact-
ment 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 aforemen-
tioned moratorium period, except as otherwise provided in 
this section. 
(b) During the moratorium period, the Federal Gov-
ernment and all State governments and political subdivi-
sions thereof shall not impose any further statutory re-
strictions or regulations affecting Smart Contract plat-
forms such as cryptographic escrow services, multi-signa-
ture transactions, and oracles, so as to allow for the 
growth and facilitation of these important facets of 
cryptological technology. 
(c) Federal and State Agencies shall consider 
cryptocurrencies ‘‘exempt commodities’’ akin to gold and 
silver, rather than ‘‘excluded commodities’’ such as na-
tional fiat currencies. The Bitcoin cryptological protocol 
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is not strictly a currency, but is a broad multifaceted pro-
tocol which allows for myriad novel applications. 
(d) Federal and State Agencies shall have no jurisdic-
tion over Cryptocurrency Economy Transactions or 
Bitcoin Economy Transactions. The financial regulations 
authorizing these agencies are designed to protect users 
of financial instruments from fraud, manipulation, and 
other types of misconduct that result in real economic 
losses; not virtual losses solely within a cryptographic net-
work. 
(e) Nothing in this Act shall prevent, impair or im-
pede the operation of any government agency, authority 
or instrumentality, whether of the Federal Government or 
of any State or political subdivision thereof, to enforce cur-
rently existing criminal, civil or taxation statutes and reg-
ulations. 
SEC. 3. DEFINITIONS. 
(a) ‘‘Algorithm’’ is defined as a procedure for solving 
a mathematical problem in a finite number of steps per-
formed 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 
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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, dis-
tinct 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 gov-
erning the creation, development and operation of a 
cryptocurrency. 
(e) ‘‘Service’’ is defined as the Internal Revenue Serv-
ice. 
(f) The phrase ‘‘using the Internet or other elec-
tronic, non-physical medium’’ means by placement of ma-
terial 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 encom-
passing 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 
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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’’ en-
compasses the same protocols as those covered by terms 
such as ‘‘digital currency’’, ‘‘virtual currency’’ or ‘‘elec-
tronic currency’’. 
(h) ‘‘Agencies’’ is defined as the regulatory bodies of 
the Federal Government and the State governments or po-
litical subdivision thereof, including but not limited to the 
Commodity and Futures Trading Committee (‘‘CFTC’’), 
the Securities and Exchange Commission (‘‘SEC’’), the 
Board of Governors of the Federal Reserve, the Financial 
Crimes Enforcement Network (‘‘FinCEN’’), and the New 
York 
State 
Department 
of 
Financial 
Services 
(‘‘NYSDFS’’). 
(i) ‘‘Smart Contracts’’ are cryptographically encoded 
agreements, often utilizing multi-signature technology, 
which allow for automatic or multi-party execution and 
public recording of transactions or property transfers 
when certain predetermined parameters are met. 
(j) ‘‘Multi-Signature Transactions’’ are cryptographic 
contracts encoded in the blockchain, often involving third- 
party arbitrators or oracles, which are finalized when a 
pre-set number of involved parties sign off. In a three- 
party multi-signature transaction involving an arbitrator, 
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the transaction may be finalized only when two (2) out 
of the three (3) parties—a buyer, a seller, and/or the arbi-
trator—sign off on the transaction. 
(k) ‘‘Cryptographic Escrow Services’’ are services 
that allow for fund transfers subject to the authorization 
of an arbitrator or other intermediary. These transactions 
can utilize multi-signature technology, allowing for the 
possibility of arbitration without requiring any actual 
transfer of funds through the intermediary. 
(l) ‘‘Oracles’’ are automated programs or algorithms 
acting as signatories to multi-signature transactions. Uti-
lizing databases and information amalgamators, an oracle 
automatically executes its signature when predetermined 
threshold is met. 
(m) ‘‘Cryptocurrency Economy Transactions’’ or 
‘‘Bitcoin Economy Transactions’’ are transactions involv-
ing financial instruments denominated in Bitcoin or an-
other cryptocurrency underlying a transaction which is 
also denominated in Bitcoin or another cryptocurrency. A 
Bitcoin-denominated credit default swap that references a 
Bitcoin-denominated loan would be a Bitcoin Economy 
Transaction. 
SEC. 4. DECLARATION OF MORATORIUM. 
(a) IN GENERAL.—It is the public policy of the 
United States that no new statutes, regulations or advi-
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sory 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 public pol-
icy of the United States that the development and use of 
any medium of exchange which utilizes cryptographic 
proof of and for a transaction of cryptocurrency without 
the need for or reliance upon third-party intermediaries 
or verification will enhance the economic well-being of the 
American people and result in significant economic 
growth. Given the blockchain’s capacity to serve as a pub-
lic ledger, software developers are creating mechanisms for 
‘‘smart’’ technologies that will eliminate the need for many 
forms of costly intermediation ranging from third-party 
arbitration in legal disputes to key-exchanges in car and 
hotel rentals. The capacity for publicly recorded multi-sig-
nature transactions will allow for the seamless property 
transfers that are certifiable, public and secure without 
the use of an intermediary. These and other uses increase 
market efficiency and facilitate economic activity and 
growth. Moreover, these advances promote the autonomy 
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and liberty of individuals and small businesses at the ex-
pense of needless bureaucracy. 
SEC. 5. DECLARATION OF NEUTRAL TAX TREATMENT. 
(a) IN GENERAL.—It is the public policy of the 
United States that the production, possession or use of 
cryptocurrency, whether in trade, commerce or personal 
non-commercial transfers, should not be disfavored or dis-
couraged by the Federal tax code or other Federal or 
State statute or regulation. 
(b) TAX TREATMENT.—It is the public policy of the 
United States that the current guidance just promulgated 
and released by the Service in its Notice 2014–21 is advi-
sory, 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 public pol-
icy of the United States 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 
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and use of cryptocurrency, and substantially and unfairly 
discourages taxpayers engaging in a trade or business 
from using cryptocurrency in commerce. This cir-
cumstance is likely to discourage economic activity and sti-
fle innovation and growth. At present, a taxpayer accept-
ing 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 conven-
tional 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 treat-
ment will measure income on the basis of an illiquid and 
likely inaccurate fair market value that exceeds the tax-
payer’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 accept-
ing cryptocurrency in payment. Such tax treatment is in-
consistent with the tax treatment of secured notes for pay-
ment 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 public policy of the 
United States that taxpayers accepting cryptocurrency in 
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trade or commerce should be deemed to realize actual in-
come only when cryptocurrency is monetized through con-
version 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 treat-
ment seeks to achieve the most accurate and fair measure 
of actual income received, as distinguished from theo-
retical 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 treat-
ment 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 public policy of the United States that income on 
cryptocurrency received in trade or business should be de-
fined 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 public policy of the United 
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States that the Service’s guidance that taxpayers should 
have the fair market value of the cryptocurrency they suc-
cessfully ‘‘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, ac-
tivity and innovation. Accordingly, as it is the further pub-
lic policy of the United States that mined produced 
cryptocurrency should be taxed as income only when ac-
tual a transfer and conversion of proceeds into dollars re-
alize income, the Service is hereby directed to revise or 
issue interim regulations consistent herewith. 
SEC. 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. 
Æ 
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