Bill Introduced to Exempt “digital tokens” from the Federal Securities Laws; Change Tax Treatment of Virtual Currencies

December 28, 2018

Representatives Warren Davidson (R-OH 8th District) and Darren Soto (D-FL 9th District) introduced1 legislation on December 20, 2018 that is intended to create a bright line test for when a digital asset is or is not a security.2 If enacted, the bill, referred to as the “Token Taxonomy Act,” would define “digital token” under the federal securities laws and clarify that such tokens are not securities, and it would create a temporary safe harbor for offers and sales of digital assets that are later deemed to be securities by the Securities and Exchange Commission (SEC). The bill would also clarify the tax treatment under the Internal Revenue Code of 1986 (IRC) for investments in virtual currencies made by individual retirement accounts, exchanges of virtual currency and capital gains from virtual currency sales.

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