Policy

Federal Policy

Taxation –

Virtual currency is treated as property and general tax principles applicable to property transactions apply to transactions using virtual currency.

Regulatory –

The US continues to make progress in developing federal-level cryptocurrency legislation. The Financial Crimes Enforcement Network (FinCEN) does not consider cryptocurrencies to be legal tender but considers cryptocurrency exchanges to be money transmitters on the basis that cryptocurrency tokens are “other value that substitutes for currency.” The Internal Revenue Service (IRS) does not consider cryptocurrency to be legal tender but defines it as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value” and has issued tax guidance accordingly.

State – New Jersey

Bill No – A1975 – Mukherji/Lopez – Virtual Currency and Blockchain Regulation Act.

Bill No – A2371 – Lopez – Digital Asset and Blockchain Technology Act.

Bill No – A3287 – Tully – Prohibits public officials from accepting virtual currency and
non-fungible tokens as gifts.

Bill No – A3288 – Tully – Establishes Blockchain Promotion and Integration

Taxation Policy –

New Jersey conforms to the federal tax treatment of convertible virtual currency as detailed in Notice 2014-21 issued by the IRS. Because transactions using virtual currency must be reported in U.S. dollars for federal tax purposes, taxpayers are required to determine the fair market value of the convertible virtual currency in U.S. dollars as of the date of payment or receipt.

For Sales Tax purposes, convertible virtual currency is treated as intangible property. As such, the purchase or use of the currency in a transaction is not subject to Sales Tax. However, New Jersey sales or use tax applies when a person transfers convertible virtual currency for taxable goods or services

For Corporation Business Tax and Gross Income Tax purposes, New Jersey follows the federal tax treatment of convertible virtual currency.

Regulatory Policy –

To date, New Jersey has not needed to introduce blockchain specific legislation because the prevalent fintech matters (set out below) have not necessitated it. These can be grouped as follows:

1. Initial Coin Offerings; (“ICOs”);
2. Security Token Offerings (“STOs”);
3. non-security token issuances;
4. Cryptocurrency Exchanges (so-called Virtual “Currency Exchanges”);
5. Security Token Exchanges;
6. arrangements clearly falling within the existing regulatory
framework such as custody; and
7. Jersey funds investing in digital assets.
2. Security Token Offerings (“STOs”);
3. non-security token issuances;
4. Cryptocurrency Exchanges (so-called Virtual “Currency Exchanges”);
5. Security Token Exchanges;
6. arrangements clearly falling within the existing regulatory
framework such as custody; and
7. Jersey funds investing in digital assets.