2018 was a breakout year for legislation on blockchain and cryptocurrency. Over a dozen states considered pieces of legislation that dealt with blockchain/cryptocurrency. “Blockchain” cracked the top 10 search terms on Legiscan this year. While some state results were varied several federal bills have been introduced that will change the way blockchain policy is discussed in the United States.
Three were introduced by Representative Emmer of Minnesota, co-chair of the Congressional Blockchain Caucus:
Resolution Supporting Digital Currencies and Blockchain Technology
Expresses support for the industry and its development in the United States. Like the internet, the federal government should provide a light touch, consistent, and simple legal environment.
Blockchain Regulatory Certainty Act
Affirms that certain blockchain related entities that never take control of consumer funds do not need to register as a money transmitter. Examples of these entities include “miners” that validate network integrity and multisignature providers that provide enhanced asset security to users.
Safe Harbor for Taxpayers with Forked Assets Act
Taxpayers can only comply with the law when the law is clear. This bill will provide a safe harbor for taxpayers with “forked” digital assets. Further it will restrict fines against individuals that attempt to report these assets until the IRS provides any type of guidance regarding the appropriate means of reporting them.
The Resolution does not create specific new policies, simply encourages support for the emerging blockchain industry.
The Blockchain Regulatory Certainty Act and Safe Harbor for Taxpayers with Forked Assets act are comparatively meaty pieces of legislation. By affirming that “no blockchain developer or provider of a blockchain service shall be treated as a money transmitter” under state licensing laws, this the Blockchain Regulatory Certainty Act preempts states’ rights to regulate licensing requirements. This exemption is narrowly targeted in the bill- it applies “unless the developer or provider has, in the regular course of business, control over digital currency to which a user is entitled”. This is a step towards federal preemption that could start to establish more consistency in regulation, and could be met by resistance from states looking to maintain their jurisdictional authority.
The Safe Harbor for Taxpayers with Forked Assets Act threatens to add some teeth to previous congressional requests to the IRS to provide clarity to taxpayers regarding virtual currency. In September Chairman of the House Ways and Means Committee Kevin Brady sent a letter to IRS Commissioner David Kauter requesting “response outlining where the IRS is in its efforts to issue updated virtual currency guidance, what the IRS intends to cover in tllis guidance, and a timeline for its release”. This letter followed one Brady sent requesting clarification in May of 2017, cosigned by Orrin Hatch (Chair of Senate Finance Committee). This bill was immediately referred to House Ways and Means, where Brady can shepard it through. Rep. Emmer sits on House Financial Services Committee, which ensures that every nearly committee this bill is likely to hit has at least one member who has demanded the IRS provide clarity on virtual currency.
The industry will be relying heaving on Republican Committee chairs to carry these bills and should be careful to shore up some bipartisan support before they go to the floor for a vote. A fourth bill, introduced by Rep. Doris Matsui (D-CA) and Congressman Brett Guthrie (R-KY) takes this approach. Both are members of the Members of the Energy and Commerce Subcommittees on Communications and Technology and Digital Commerce and Consumer Protection.
They introduced the “Blockchain Promotion Act of 2018,” which would establish a working group of stakeholders across the federal government and private industry to establish a common definition of blockchain. As states are considering their first pieces of blockchain legislation or establishing working groups, federal guidance on a uniform definition could provide uniformity for the industry.
State working groups, such as the one established by AB 2658 would be wise to keep an eye on these bills as they progress through Congress.
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