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Lumis Highlights-Gillibrand’s Responsible Financial Innovation Act (Introduction)-Fintech




On June 7, 2022, a clearer bill on the taxation and regulation of digital assets was submitted to the US Senate. Here are some highlights.


The bill provides definitions related to digital assets that are commonly applied in legal areas such as federal income tax, commodity regulation, and securities regulation. Terms defined in the bill include:

“Digital Assets” are defined as “native electronic assets recorded using cryptographically protected distributed ledger technology that grants economic, ownership, or access or power.” 1 Distributed Ledger Technology A technology that allows you to work with and use ledgers that are shared across a set of distributed nodes that join the network and store full or partial replicas of the ledger. Synchronized between the nodes. increase. [and] .. .. .. Data is added to the ledger according to the specified consensus mechanism in the ledger. .. .. .. “2” Smart contract “means” computer code deployed in a distributed ledger technology network that executes instructions based on the occurrence or non-occurrence of certain conditions. ” .. .. Or similar analog. .. .. When . .. .. It may include ownership of digital assets and transfer of assets, or issuance of actionable instructions for these actions. 3 “Cryptocurrency” is defined as “digital asset”. .. .. It is primarily used as a medium of exchange, a unit of account, a store of value, or any combination of such elements. .. .. .. It’s not fiat currency. .. .. ; When . .. .. It does not derive or support the value of the underlying financial assets. .. .. .. “4 Federal income tax on mining and staking activities

Under the bill, income related to mining and staking activities will be postponed until the tax year in which there was a disposal (ie, sale or exchange) of assets produced or received in connection with those activities5. Therefore, the bill effectively provides guidance from the Internal Revenue Service (IRS) of Notice 2014-16 that taxpayers must include the fair market value of cryptocurrencies received from mining activities in their total income on the day of receipt. Reverse it. For more information on the current IRS guidance, see this post.

Exclusion of personal transactions

The bill will generate the first 200 dollars (inflation-adjusted) of profits or losses from the disposal of cryptocurrencies in personal transactions for the purchase of goods or services other than the disposal of cryptocurrencies for sale or cash. Exclude from. , Cash equivalents, digital assets, or other securities or commodities. 6IRS is also required to issue restrictions on information returns for cryptocurrency transactions. 7

Effectively connected income

The bill stipulates whether income is effectively related to trade or business when trading digital assets for the taxpayer’s own account or through resident brokers, commission agents, custody and digital asset agents. Provisions that do not constitute a trade or business for the purpose of judgment 8 Determining whether income is effectively related to US trade or business is primarily related to a particular income item for a foreigner. It is related to deciding how to treat federal income tax.

Decentralized Autonomous Organization (DAO)

The bill turns “Decentralized Autonomous Organizations” into “organizations that utilize smart contracts … to achieve collective action of business, commerce, charity, or similar entities …. its governance is predominant. It is defined as “the organization that is being struck.” As a decentralized autonomous organization, co-operative, foundation, or similar organization, it is properly incorporated and organized under the laws of state or foreign jurisdiction. The 10 bills provide for DAO’s default classification. A non-negligible entity, digital asset mining and staking, and charitable financing are DAO’s business activities aimed at determining if DAO is a Social Club under Section 501. Is not considered. (C) (7) Internal revenue code 11

Commodities v.Securities

Under this bill, it is presumed that certain investment contracts for which the issuer provides subsidized assets are not securities subject to the Securities Act of 1933 or the Securities Act of 1933.12, but commodities subject to the Commodity Exchange Act. ..

For these purposes, a “subsidiary asset” is defined as an “intangible, viable asset provided, sold, or otherwise provided to the person concerned.” An entity’s debt or equity, an entity’s business rights, the right to receive interest or dividends from that entity, or the entity’s profits obtained solely from the efforts of the entity’s enterprise or management. Revenue distribution is not included. Other or other financial interests in the entity. 14

The bill also expands the jurisdiction of the Commodities Futures Trading Commission to cover digital asset trading other than those containing “digital collectibles and other unique digital assets” 15. In addition, the bill requires the registration and regulation of certain “digital asset exchanges.” “16


The bill issues all ancillary activities related to Stablecoin payments by the depository if it maintains high quality liquid assets equal to at least 100% of the face value of Stablecoin payments issued by the institution. Allows you to redeem, redeem, and execute. 17

Eligible “high quality liquid assets” are consistent with 1) US legal bidding, 2) Deposits on demand at depository institutions, 3) Balances held by the Federal Reserve Bank, and 4) Foreign account units. Means foreign withdrawable deposits. Payment stablecoin is pegged, 5) securities with an original maturity of less than one year and not issued or guaranteed by the Treasury (or preliminary repurchase agreements associated with such securities), and 7) other high quality. Current assets that the appropriate federal banking agency or state banking supervisor has determined to be consistent with safe and sound banking operations18.

The depository must publicly disclose a description of the assets that support the payment stablecoin19. Depositors must also obtain permission from the appropriate federal or state bank supervisor before issuing payment stablecoins.


1. Lummis-Gillibrand Responsible Financial Innovation Act, S. 4356, 117th Cong. 101 (2022) (hereinafter “RFIA”) (Proposed 31 USC 9801 (2)). The bill text has not yet been added to Congress’s website, but a copy is here.

2. ID. (Proposed 31 USC 9801 (4)).

3. ID. (Proposed 31 USC 9801 (8)).

4. ID. (Proposed 31 USC 9801 (10)).

5. RFIA, Note 1, 208 above (added 26 USC 451 (l)).

6. ID. Seconds 201 (a) (Proposed 26 USC 139J).

7. ID. Seconds 201 (c).

8. ID. Seconds 203 (a) (corrected 26 USC 864 (b) (2), which provides a secure port for certain securities and commodities trading activities in the United States by foreigners).

9. 26 See USC 871, 881, 882.

1o. RFIA 204 (a) (added 26 USC 7701 (a) (51)).

11. ID. 204 (a).

12. Same as above. 301 (added 15 USC 41 (b) (4)).

13. Same as above. 301 (added 15 USC 41 (a)).

14. Same as above.

15. Same as above. 401-403.

16. Same as above. 404 (7 USC 5i added). For these purposes, “Digital Asset Exchange” means “a trading facility listed to trade at least one digital asset.” Id. 401 (7 USC 1a (15B)).

17. RFIA 601 (12 USC 4810 (a), (b) added). A “deposit institution” is defined by reference to Section 19 (b) (1) of the Federal Reserve Act (12 USC 461 (b) (1)). Id. (Added 12 USC 4810 (m)). “Stable payment coin” means a digital asset that can be redeemed on demand on a one-to-one basis against fiat currency, accompanied by a statement from the issuer that the asset is redeemable and is issued by the entity. .. Or more financial assets other than digital assets and are intended to be used as a medium of exchange. See id. 101 (a) (31 USC 9801 (5) added, “payment stablecoin” defined), 601 (12 USC 4810 (m) (2) added, 31 USC 9801 added, “payment stablecoin” Defined).

18.RFIA seconds 601 (added 12 USC 4810 (b)).

19.RFIA seconds 601 (added 12 USC 4801 (c)).

20. RFIA601.

The content of this article is intended to provide a general guide to the subject. Expert advice should be sought for certain situations.




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