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Archive for Lummis- Gillibrand Responsible Financial Innovation Act

Highlights From The Lummis- Gillibrand Responsible Financial Innovation Act (Introduced)

Highlights From The Lummis- Gillibrand Responsible Financial Innovation Act (Introduced)

On June 7, 2022, a bill was introduced in the U.S. Senate that would provide greater clarity regarding the taxation and regulation of digital assets. Here are some of highlights.

Definitions

The bill would provide definitions in connection with digital assets that would be generally applicable in such areas of law as federal income tax, commodities regulation, and securities regulation. Terms that the bill would define would include the following:

  • “Digital asset” would be defined as “natively electronic asset that . . . confers economic, proprietary, or access rights or power . . . and . . . is recorded using cryptographically secured distributed ledger technology.”[1]
  • Distributed ledger technology” would mean “technology that enables the operation and use of a ledger that . . . is shared across a set of distributed nodes that participate in a network and store a complete or partial replica of the ledger; . . . is synchronized between the nodes; [and] . . . has data appended to the ledger by following the specified consensus mechanism of the ledger . . . .”[2]
  • Smart contract” would mean “computer code deployed to a distributed ledger technology network that executes an instruction based on the occurrence or nonoccurence of specified conditions . . . or any similar analogue . . . and . . . may include taking possession of a digital asset and transferring the asset or issuing executable instructions for these actions.”[3]
  • “Virtual currency” would be defined as “a digital asset that . . . is used primarily as a medium of exchange, unit of account, store of value, or any combination of such factors; . . . that is not legal tender . . .; and . . .  does not derive value from or is backed by an underlying financial asset . . . .”[4]

Federal Income Tax

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