United States Representative Steve Stockman (R-Texas) kept his promise and recently introduced a bill in Congress that would not only extend substantial protections to cryptocurrencies, but would also require that cryptocurrencies be classified as a “currency.”
The bill, entitled the Cryptocurrency Protocol Protection and Moratorium Act (CryptPMA), begins by placing a five-year moratorium on any new legislation concerning cryptocurrencies.
Stockman has supported virtual currencies for a long time. In 2013, he was interviewed by Nick Spanos, founder of the Bitcoin Center in New York City, when he said:
“I believe that Bitcoin is all about freedom: The freedom to keep your money without other people making decisions for you.”
Stockman’s main concern is that governments are printing fiat currencies at such a high rate that eventually they will be worthless. He believes that Bitcoin, like gold, cannot be influenced in such a manner and therefore could provide a relief valve for most citizens.
This legislation is the complete opposite of New York State’s proposed BitLicense, which members of the virtual-currency community have harshly criticized. Cointelegraph’s William Suberg reported today that recent comments about the BitLicense revealed a hidden agenda promoted by competitors seeking to throttle Bitcoin in its crib.
The new bill, H.R. 5777, will immediately prevent the use of such legislation to stop innovations in cryptocurrency, and it will protect both users and developers within the industry by putting the brakes on new attempts similar to those in New York. The bill covers not only the currencies themselves but also extends protection to algorithmic protocols, i.e., the blockchain, beginning on June 1, 2015. Stockman makes it clear that this bill will not prevent the application of currently existing “criminal, civil or taxation statutes and regulations.”
Definition of Currency and Revision of the Tax Code
Stockman firmly believes that the success of virtual currencies lies in the interest of the public because transactions can be made without the need for third party intermediaries. The wording of the bill makes this clear in the following statement, which says that:
“[The development of these currencies] is a circumstance that is likely to result in economic and other efficiencies for the American people and other participants in the domestic economy, and as such may be crucial to overall economic growth, will enhance the economic well-being of the American people and will otherwise be in the public interest.”
The public interest also includes defining cryptocurrencies as actual currencies under the tax code, instead of as “property.” The bill states that the production, possession or use of cryptocurrencies should not be disfavored or discouraged by the tax code, which the current code under Notice 2014-21 apparently does. The bill states that the current plans, which are still awaiting public comments, are “less than optimal for the American people and economy” and it orders the Internal Revenue Service to “issue or revise interim regulations.” This does two things:
It treats cryptocurrencies as currency rather than property.
It treats cryptocurrencies as neutral until they are converted to fiat currencies.
This inclusion in the bill would be groundbreaking news for both individuals and investment communities. If Bitcoin, or any cryptocurrencies, can be isolated until they are monetized, it would be an unprecedented move by a government, allowing value to be stored without penalty. Stockman’s reasoning is simple. He believes that cryptocurrencies should not be taxed as income until they actually become income because, until they are converted, their volatile price puts investors under substantial risk.
The bill applies the same standard to profits from currency mining. Mining is a risky venture and miners can put in substantial effort without realizing profit. Stockman believes that coins that are newly mined should also be free from tax, until they are converted to fiat currency, so that miners are not taxed unfairly, which would stifle both mining and the community as a whole.
The cryptocurrency protection bill is one of the most important pieces of legislation issued so far by any government. It still has a long way to go before passage and it will certainly be resisted by competitors who can lobby legislators to vote against it. The fight will be an uphill battle, which means that all members of the cryptocurrency community should make their feelings known to Congress.
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