The Smart Cryptocurrency Rules Act

Summary

As federal rules have not yet been created to cover cryptocurrencies and digital assets such as Bitcoin and Ethereum, and considering that states can claim some authority over digital assets or registered companies that deal in digital assets, this establishes preliminary definitions and rules to promote entrepreneurship and provide legal certainty to benefit residents and investors who use cryptocurrency.

The Smart Cryptocurrency Rules Act

1. Definitions: For the purposes of this chapter, the words defined in this section have the meaning given.

a. “Cryptocurrency,” refers to a form of virtual currency recorded using cryptographically secured distributed ledger technology. There are various means of recording transactions and managing the issuance of new units (proof-of-work or proof-of-stake, etc.), but they rely on a consensus protocol to prevent counterfeiting, double-spends, and fraudulent transactions.

b. “Digital assets” refers to cryptocurrencies, as well as natively electronic assets, which may include stablecoins, non-fungible tokens (NFTs), and other digital-only assets that confer economic, proprietary, or access rights or powers.

c. “Digital Property” is anything that is owned by a person or entity that exists as a natively electronic entity.

d. “Reciprocity” is the mutual exchange of privileges between states and regulatory agencies.

e. “Public utility” is an entity providing services to the general public that has been granted certain monopoly rights on the provision of electricity or energy in a state, county, or municipal jurisdiction.

f. “Mining” refers to the process of using computer hash power to solve complex mathematical and computational problems, which earns cryptocurrencies as a reward in a proof-of-work system.

g. “Pre-emption” is a doctrine that holds that certain regulatory matters preempt or take precedence over local laws. As such, any local jurisdiction (county or municipal) may not pass a law inconsistent with the state law.

h. “Tax” refers to the government’s collection of fees or surcharges based upon an assessment of value.

2. Digital assets as digital property

a. Cryptocurrencies and digital assets, for the purposes of state law and regulation, are considered personal digital property of an individual or entity and follow the rules of property set for in [State] [Property Code §§].

b. No additional taxation, withholding, assessment, or charge on the value of digital assets shall occur if used as a method of payment. If the cryptocurrency is traded as an investment vehicle, it shall be taxed at the set capital gains rate.

c. Cryptocurrencies shall not be subject to additional tax, withholding, assessment, or charge by municipal or county jurisdictions.

3. Reciprocity of Money Transmitter Licenses

a. For the purpose of standardizing the issuance of money transmitter licenses across state jurisdictions, cryptocurrency exchanges, brokers, and other cryptocurrency-related firms required to apply for money transmitter licenses to offer services, in accordance with state law, will have reciprocal privileges in this state:

i. any cryptocurrency-related entity with an active money transmitter license from any state shall be permitted to offer its services in this state. Proof will be submitted to the relevant state regulatory agency, and accepted as a reciprocal license within 30 days.

4. Public utilities shall not discriminate or differentiate between cryptocurrency mining and other commercial uses of electricity

a. As states have regulatory authority over public utilities, public utility companies that offer electricity services shall not discriminate or otherwise introduce pricing classifications that would be perceived to penalize or additionally burden individuals or entities that use hardware and software to mine cryptocurrencies.

5. Local preemption

a. This law preempts any municipal or county regulations and restrictions that concern digital assets, including taxation, mining, and additional transparency requirements.