[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 5286 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
2d Session
S. 5286
To provide for the strengthening of the supervision of digital asset
markets by self-regulatory organizations, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 15, 2022
Ms. Lummis introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To provide for the strengthening of the supervision of digital asset
markets by self-regulatory organizations, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Responsible Self-Regulation Act of
2022''.
SEC. 2. DEFINITIONS.
(a) In General.--Subtitle VI of title 31, United States Code, is
amended by adding after chapter 97 the following:
``CHAPTER 98--DIGITAL ASSETS
``Sec.
``9801. Definitions.
``Sec. 9801. Definitions
``In this chapter:
``(1) Ancillary asset.--
``(A) In general.--The term `ancillary asset' means
an intangible, fungible asset that is offered, sold, or
otherwise provided to a person in connection with the
purchase and sale of a security through an arrangement
or scheme that constitutes an investment contract, as
that term is used in section 2(a)(1) of the Securities
Act of 1933 (15 U.S.C. 77b(a)(1)).
``(B) Exclusion.--The term `ancillary asset' does
not include an asset that provides the holder of the
asset with any of the following rights in a business
entity:
``(i) A debt or equity interest in that
entity.
``(ii) Liquidation rights with respect to
that entity.
``(iii) An entitlement to an interest or
dividend payment from that entity.
``(iv) A profit or revenue share in that
entity solely from the entrepreneurial or
managerial efforts of others.
``(v) Any other financial interest in that
entity.
``(2) Appropriate commission.--The term `appropriate
commission' means the Commodity Futures Trading Commission or
the Securities and Exchange Commission, or both, as applicable,
based on the commission that has statutory jurisdiction over a
digital asset intermediary and acts as the primary registration
or licensing authority, consistent with paragraph (4).
``(3) Digital asset.--The term `digital asset'--
``(A) means a natively electronic asset that--
``(i) confers economic, proprietary, or
access rights or powers; and
``(ii) is recorded using cryptographically
secured distributed ledger technology, or any
similar analogue; and
``(B) includes--
``(i) virtual currency and ancillary
assets;
``(ii) payment stablecoins; and
``(iii) any other security or commodity
that meets the requirements of subparagraph
(A).
``(4) Digital asset intermediary.--The term `digital asset
intermediary'--
``(A) means--
``(i) a person that--
``(I) holds a license,
registration, or other similar
authorization, as specified by this
chapter, the Commodity Exchange Act (7
U.S.C. 1 et seq.), the Securities Act
of 1933 (15 U.S.C. 77a et seq.), the
Corporation of Foreign Bondholders Act,
1933 (15 U.S.C. 77bb et seq.), the
Trust Indenture Act of 1939 (15 U.S.C.
77aaa et seq.), the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.),
the Securities Investor Protection Act
of 1970 (15 U.S.C. 78aaa et seq.), the
Investment Company Act of 1940 (15
U.S.C. 80a-1 et seq.), the Investment
Advisers Act of 1940 (15 U.S.C. 80b-1),
and the Omnibus Small Business Capital
Formation Act of 1980 (15 U.S.C. 80c);
and
``(II) may conduct market
activities relating in digital assets;
or
``(ii) a person that is required by law to
hold a license, registration, or other similar
authorization described in clause (i);
``(B) includes--
``(i) a person that holds a license,
registration, or other similar authorization
under State or Federal law and issues a payment
stablecoin; and
``(ii) a person that is required by law to
hold a license, registration, or other similar
authorization described in clause (i); and
``(C) does not include a depository institution.
``(5) Registered digital asset association.--The term
`registered digital asset association' means an organization
jointly registered by the Securities and Exchange Commission
and Commodity Futures Trading Commission under section 9802 for
the supervision of digital asset intermediaries.
``(6) Security.--The term `security' has the meaning given
the term in section 3(a) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)).
``(7) Virtual currency.--The term `virtual currency'--
``(A) means a digital asset that--
``(i) is used primarily as a medium of
exchange, unit of account, store of value, or
any combination of such functions;
``(ii) is not legal tender, as described in
section 5103; and
``(iii) does not derive value from, or is
not backed by, an underlying financial asset
(except other digital assets); and
``(B) includes a digital asset, consistent with
subparagraph (A), that is accompanied by a statement
from the issuer that a denominated or pegged value will
be maintained and be available upon redemption from the
issuer or other identified person, based solely on
computer code deployed to a distributed ledger
technology network that executes an instruction based
on the occurrence or non-occurrence of a specified
condition, or any similar analogue.''.
(b) Technical and Conforming Amendment.--The table of contents for
subtitle VI of title 31, United States Code, is amended by adding at
the end the following:
``98. Digital assets........................................ 9801''.
SEC. 3. REGISTERED DIGITAL ASSET ASSOCIATIONS.
(a) In General.--Chapter 98 of title 31, United States Code, as
amended by section 2, is amended by adding at the end the following:
``Sec. 9802. Registered digital asset associations
``(a) Definitions.--In this section:
``(1) Nonmember professional.--The term `nonmember
professional' means any person that--
``(A) is a digital asset intermediary; and
``(B) is a not a member of a registered digital
asset association or affiliated organization.
``(2) Registration information.--The term `registration
information' means the information reported in connection with
the licensing, registration, or other authorization of digital
asset intermediaries and their associated persons, including--
``(A) disciplinary actions, regulatory, judicial,
and arbitration proceedings, and other information
required by law or digital asset association rule; and
``(B) the source and status of the information
described in subparagraph (A).
``(b) Registration; Application.--An association of digital asset
intermediaries may be registered as a digital asset association, under
the terms and conditions provided in this section, and in accordance
with the provisions of this section and section 9803, by jointly filing
with the Securities and Exchange Commission and the Commodity Futures
Trading Commission an application for registration, in such form as the
commissions may require, containing the rules of the association and
such other information and documents that may be prescribed as
necessary or appropriate in the public interest or for customer
protection.
``(c) Determinations by Commissions Requisite to Registration.--An
association of digital asset intermediaries may not be registered as a
registered digital asset association under subsection (b) unless a
majority of the members of each of the Securities and Exchange
Commission and the Commodity Futures Trading Commission, voting
separately, determine that--
``(1) by reason of the number and the scope of the
transactions of the association, the association will be able
to carry out the purposes of this section;
``(2) the association is so organized, and has the
capacity, to--
``(A) be able to carry out the purposes of this
section and other applicable State and Federal laws;
and
``(B) subject to any rule or order of the
appropriate commission, enforce compliance by members
of the association (and persons associated with those
members) with the provisions of applicable law, the
rules under those provisions, and the rules of the
association;
``(3) the rules of the association provide that any digital
asset intermediary may become a member of the association and
any person may become associated with a member of the
association;
``(4) the rules of the association ensure a fair
representation of the members of the association, including
emerging growth companies (as defined in section 2(a) of the
Securities Act of 1933 (15 U.S.C. 77b(a))), in the selection of
the directors of the association and administration of the
affairs of the association;
``(5) the rules of the association provide for the
equitable allocation of reasonable dues, fees, and other
charges among members of the association and other persons
using any facility or system that the association operates or
controls;
``(6) the rules of the association--
``(A) are designed to--
``(i) prevent fraudulent and manipulative
acts and practices in order to promote just and
equitable principles of trade;
``(ii) foster cooperation and coordination
with persons engaged in regulating, clearing,
settling, processing information with respect
to, and facilitating transactions in digital
assets;
``(iii) remove impediments to, and perfect
the mechanism of, a free and open market; and
``(iv) protect customers and the public
interest; and
``(B) are not designed to--
``(i) permit unfair discrimination between
customers and digital asset intermediaries;
``(ii) fix minimum profits;
``(iii) impose any schedule or fix rates of
commissions, allowances, discounts, or other
fees to be charged by the members of the
association; or
``(iv) regulate by virtue of any authority
conferred by law matters not related to the
purposes of this section or the administration
of the association;
``(7) the rules of the association provide that, subject to
any rule or order of the appropriate commission, the members of
the association (and persons associated with those members)
shall be appropriately disciplined for a violation of any
provision of applicable law, the rules under such a provision,
or the rules of the association by expulsion, suspension,
limitation of activities, functions, and operations, fine,
censure, a suspension or bar from being associated with a
member, or any other fitting sanction;
``(8) the rules of the association are consistent with the
provisions of subsection (h) and, in general, provide a fair
procedure for--
``(A) the disciplining of members and persons
associated with members;
``(B) the denial of membership to any person
seeking membership in the association;
``(C) the barring of any person from becoming
associated with a member of the association; and
``(D) the prohibition or limitation by the
association of any person with respect to access to
services offered by the association or a member of the
association;
``(9) the rules of the association do not impose any burden
on competition not necessary or appropriate in furtherance of
the purposes of this section;
``(10) the requirements of subsection (d), as applicable,
are satisfied; and
``(11) the rules of the association include provisions
governing the form and content of quotations relating to
digital assets, which shall be designed to--
``(A) produce fair and informative quotations;
``(B) prevent fictitious or misleading quotations;
and
``(C) promote orderly procedures for collecting,
distributing, and publishing quotations.
``(d) Rules; Provision for Registration of Affiliated
Organization.--
``(1) In general.--The Securities and Exchange Commission
and the Commodity Futures Trading Commission may permit or
require the rules of an association applying for registration
under subsection (b) to provide for the admission of an
organization registered as an affiliated organization pursuant
to subsection (e), to participate in the applicant association
as an affiliate of the applicant association, under terms
permitting powers and responsibilities to the affiliate, and
under such other appropriate terms and conditions, as may be
provided by the rules of the applicant association, if those
rules appear to the commissions jointly to be necessary or
appropriate in the public interest or for customer protection
and to carry out the purposes of this section.
``(2) Duties and powers of the commissions.--The duties and
powers of the Securities and Exchange Commission and the
Commodity Futures Trading Commission with respect to any
association or affiliate organization shall in no way be
limited by reason of any such affiliation.
``(e) Registration as Affiliated Organization; Prerequisites;
Association Rules.--
``(1) In general.--An applicant organization shall not be
registered as an affiliated organization, unless--
``(A) the organization, notwithstanding that the
organization does not satisfy the requirements under
subsection (c)(1), will, upon the registration of the
organization under this subsection, be admitted to
affiliation with an organization registered as a
digital asset association pursuant to subsection (c),
in the manner and under the terms and conditions
provided by the rules of the registered digital asset
association in accordance with subsection (d); and
``(B) the organization and the rules of the
organization satisfy the requirements under paragraphs
(2) through (11) of subsection (c).
``(2) Exception.--Any restrictions upon membership of an
applicant organization shall not be less stringent than in the
case of the registered digital asset association with which the
organization is to be affiliated.
``(f) Dealings With Nonmember Professionals.--
``(1) In general.--The rules of a digital asset association
may provide that no member of the association may deal with any
nonmember professional except at the same prices, for the same
commissions or fees, and on the same terms and conditions the
member accords to the general public.
``(2) Rule of construction.--Nothing in this subsection may
be construed to prevent any member of a registered digital
asset association from granting to any other member of any
other registered digital asset association any discount,
allowance, commission, or special terms in connection with a
digital asset transaction.
``(g) Denial of Membership.--
``(1) In general.--Membership in a registered digital asset
association under this section shall be limited to digital
asset intermediaries.
``(2) Denial for public interest or consumer protection.--
``(A) In general.--A registered digital asset
association may, and the appropriate commission, by
order, may direct such an association to, as necessary
or appropriate in the public interest or for customer
protection, deny membership to any person, and bar from
becoming associated with a member any person, that is
subject to a statutory disqualification within the laws
under the jurisdiction of that commission.
``(B) Notice.--A registered digital asset
association shall file notice with the appropriate
commission, in such form and containing such
information as the appropriate commission shall
require, not less than 30 days before admitting any
person to membership or permitting any person to become
associated with a member, if the association knew, or
in the exercise of reasonable care should have known,
that such person was subject to a statutory
disqualification.
``(3) Procedure.--
``(A) In general.--A registered digital asset
association may--
``(i) deny membership to, or condition the
membership of, a digital asset intermediary,
if--
``(I) the intermediary does not
meet such standards of financial
responsibility or operational
capability, or such intermediary or any
individual associated with the
intermediary does not meet such
standards of training, experience, and
competence, as are prescribed by the
rules of the association; or
``(II) the intermediary or person
associated with the intermediary has
engaged, and there is a reasonable
likelihood the intermediary or person
will again engage, in acts or practices
inconsistent with just and equitable
principles of trade; and
``(ii) examine and verify the
qualifications of an applicant to become a
member and the individuals associated with the
applicant in accordance with procedures
established by the rules of the association.
``(B) Association.--A registered digital asset
association may--
``(i) bar an individual from becoming
associated with a member, or condition the
association of an individual with a member, if
that individual--
``(I) does not meet such standards
of training, experience, and competence
as are prescribed by the rules of the
association; or
``(II) has engaged, and there is a
reasonable likelihood the individual
will again engage, in acts or practices
inconsistent with just and equitable
principles of trade;
``(ii) examine and verify the
qualifications of an applicant to become a
person associated with a member in accordance
with procedures established by the rules of the
association; and
``(iii) require an individual associated
with a member, or any class of such
individuals, to be registered with the
association in accordance with procedures so
established.
``(C) Bar on association.--A registered digital
asset association may bar any person from becoming
associated with a member if that person does not
agree--
``(i) to supply the association with such
information with respect to the relationship
and dealings of the person with the member as
may be specified in the rules of the
association; and
``(ii) to permit examination of the records
of the person to verify the accuracy of any
information supplied by the person under clause
(i).
``(4) Denial for type of business.--
``(A) In general.--Subject to subparagraph (B), a
registered digital asset association may deny
membership to a digital asset intermediary not engaged
in a type of business in which the rules of the
association require members to be engaged.
``(B) Condition.--No digital asset association may
deny membership to a digital asset intermediary by
reason of the amount of such type of business done by
such intermediary or the other types of business in
which the intermediary is engaged.
``(h) Discipline of Registered Digital Asset Association Members
and Persons Associated With Members; Summary Proceedings.--
``(1) Discipline.--
``(A) Notification.--In any proceeding by a
registered digital asset association to determine
whether a member, or a person associated with a member,
should be disciplined (other than a summary proceeding
pursuant to paragraph (3)), the association shall bring
specific charges, notify such member or person of (and
give the person an opportunity to defend against) those
charges, and keep a record.
``(B) Statement.--A determination by a registered
digital asset association to impose discipline in a
proceeding under subparagraph (A) shall be supported by
a statement setting forth--
``(i) any act or practice in which the
member, or person associated with a member, has
been found to have engaged, or that such member
or person has been found to have omitted;
``(ii) the specific provision of law, the
rules under such a provision, or the rules of
the association that an act or practice
described in clause (i), or omission to act, is
charged with violating; and
``(iii) the sanction imposed and a
justification for the sanction.
``(2) Denial of membership or services.--
``(A) Notification.--In any proceeding by a
registered digital asset association to determine
whether a person shall be denied membership, barred
from becoming associated with a member, or prohibited
or limited with respect to access to services offered
by the association or a member of the association
(other than a summary proceeding pursuant to paragraph
(3)), the association shall--
``(i) notify that person and give the
person an opportunity to be heard;
``(ii) provide the person the specific
grounds for denial, bar, or prohibition or
limitation under consideration; and
``(iii) maintain a record.
``(B) Statement.--A determination by a registered
digital asset association to deny membership, bar a
person from becoming associated with a member, or
prohibit or limit a person with respect to access to
services offered by the association or a member under
subparagraph (A) shall be supported by a statement
setting forth the specific grounds on which the denial,
bar, or prohibition or limitation is based.
``(3) Summary proceeding.--
``(A) In general.--A registered digital asset
association may summarily--
``(i) suspend a member of the association,
or a person associated with such a member, that
is--
``(I) expelled or suspended from
any other digital asset association; or
``(II) barred or suspended from
being associated with a member of
another digital asset association;
``(ii) suspend a member of the association
that is in such financial or operating
difficulty that the association determines (and
so notifies the appropriate commission) that
the member cannot be permitted to continue to
do business as a member, in order to protect
customers, creditors, other members, or the
association; or
``(iii) limit or prohibit any person from
accessing services offered by the association
if clause (i) or (ii) is applicable to that
person, or, in the case of a person that is not
a member of the association, if the association
determines that the person--
``(I) does not meet the
qualification requirements or other
prerequisites for that access; and
``(II) cannot be permitted to
continue to have such access with
safety, in order to protect customers,
creditors, members, or the association.
``(B) Opportunity for hearing.--Any person
aggrieved by a summary action under subparagraph (A)
shall be promptly afforded an opportunity for a hearing
by the applicable digital asset association in
accordance with the provisions of paragraph (1) or (2).
``(C) Stay.--The appropriate commission, by order,
may stay a summary action described in subparagraph (A)
on the motion of the commission or upon application by
any person aggrieved by the summary action, if the
commission determines summarily or after notice and
opportunity for hearing (which may consist solely of
the submission of affidavits or presentation of oral
arguments) that the stay is consistent with the public
interest and customer protection.
``(i) Obligation To Maintain Registration, Disciplinary, and Other
Data.--
``(1) Maintenance of system to respond to inquiries.--A
registered digital asset association shall establish and
maintain--
``(A) a system for collecting and retaining
registration information; and
``(B) a website, including an application
programming interface, to receive and promptly respond
to inquiries regarding registration information on the
members of the association and associated persons with
respect to those members.
``(2) Recovery of costs.--A registered digital asset
association may charge persons making inquiries described in
paragraph (1)(B), other than individual customers of digital
asset intermediaries, reasonable fees for responses.
``(3) Process for disputed information.--Each registered
digital asset association shall adopt rules establishing a
process for disputing the accuracy of information provided in
response to inquiries under this subsection.
``(4) Limitation on liability.--A registered digital asset
association, or any digital asset intermediary reporting
information to such an association, shall not have any
liability to any person for any actions taken or omitted in
good faith under this subsection.
``(j) Avoidance of Duplicative Rules.--
``(1) In general.--Each digital asset association
registered under subsection (b) shall issue rules as necessary
to avoid duplicative or conflicting rules applicable to any
digital asset intermediary that is a member of a national
securities exchange, board of trade, contract market,
registered securities association, registered futures
association, or similar digital asset association.
``(2) Other membership.--A digital asset intermediary shall
not be required to become a member of another digital asset
association unless the intermediary performs activities with
financial assets other than digital assets.
``(3) Non-digital asset activities.--
``(A) Rules by commissions.--The Securities and
Exchange Commission and the Commodity Futures Trading
Commission shall jointly prescribe rules under which a
digital asset intermediary that is a member or
affiliate of a digital asset association registered
under this section may perform activities with
financial assets other than digital assets, if those
activities are not a majority of the business of an
intermediary and are conducted in a responsible manner,
without membership in another digital asset
association.
``(B) Rules by digital asset associations.--A
registered digital asset association under this section
shall adopt rules governing activities with financial
assets other than digital assets, which shall be
consistent with existing law, rule, guidance or
industry best practices or the rules of other digital
asset associations.''.
(b) Technical and Conforming Amendment.--The table of sections for
chapter 98 of title 31, United States Code, as added by section 2, is
amended by adding at the end the following:
``9802. Registered digital asset associations.''.
SEC. 4. REGISTRATION, RULEMAKING, AND SUPERVISION OF DIGITAL ASSET
ASSOCIATIONS.
(a) In General.--Chapter 98 of title 31, United States Code, as
amended by section 3, is amended by adding at the end the following:
``Sec. 9803. Registration, rulemaking, and supervision of digital asset
associations
``(a) Registration Procedures; Notice of Filing; Other Regulatory
Agencies.--
``(1) Publication of notice.--
``(A) In general.--The Securities and Exchange
Commission and Commodity Futures Trading Commission
shall, upon the filing of an application for
registration as a digital asset association under
section 9802, publish notice of that filing and afford
interested persons an opportunity to submit written
data, views, and arguments concerning the application.
``(B) Requirements.--Not later than 90 days after
the date on which notice is published under
subparagraph (A), or within a longer period to which
the applicable applicant consents, the Securities and
Exchange Commission and Commodity Futures Trading
Commission shall--
``(i) by joint order, grant registration of
the digital asset association; or
``(ii) institute proceedings to determine
whether registration should be denied.
``(C) Proceedings.--
``(i) In general.--Proceedings instituted
under subparagraph (B)(ii) shall include notice
of the grounds for denial under consideration
and opportunity for hearing before the joint
commissions.
``(ii) Hearing.--A hearing described in
clause (i) shall be concluded not later than
180 days after the date on which notice of the
filing of the application for registration is
published under subparagraph (A).
``(iii) Further proceedings.--
``(I) Separate votes.--At the
conclusion of a hearing conducted under
this subparagraph, and not later than
the end of the 180-day period described
in clause (ii), the Securities and
Exchange Commission and Commodity
Futures Trading Commission, voting
separately, shall act to grant or deny
the applicable registration.
``(II) Effect of failure to issue
joint order.--The failure of the
Securities and Exchange Commission and
Commodity Futures Trading Commission to
issue a joint order during the period
described in subclause (I) shall be
deemed to be a denial of the applicable
registration.
``(D) Considerations.--With respect to an
application for registration described in this
paragraph, the Securities and Exchange Commission and
Commodity Futures Trading Commission shall--
``(i) grant registration if all statutory
requirements have been met and the rules under
those statutory provisions with respect to the
applicant are satisfied; and
``(ii) deny such registration if the
commissions do not make the findings described
in clause (i).
``(2) Withdrawal from registration.--
``(A) In general.--A digital asset association may,
upon such terms and conditions as the Securities and
Exchange Commission and Commodity Futures Trading
Commission, by rule, determine necessary or appropriate
in the public interest or for the protection of
customers, withdraw from registration described in
paragraph (1) by filing a written notice of withdrawal
with the commissions.
``(B) Considerations.--
``(i) In general.--If the Securities and
Exchange Commission and Commodity Futures
Trading Commission, voting separately, each
finds that a digital asset association is no
longer in existence or has ceased to do
business in the capacity specified in the
application for registration submitted by the
association, the commissions may cancel the
registration of the association.
``(ii) Effect of failure to vote.--The
failure to issue a joint order described in
clause (i) shall be deemed to maintain the
registration of the applicable digital asset
association.
``(C) Effect of withdrawal, cancellation,
suspension, or revocation.--Upon withdrawal by
registration or the cancellation, suspension, or
revocation of the registration of a digital asset
association, the registration of any association
affiliated with the association shall automatically
terminate.
``(b) Proposed Rule Changes; Notice; Proceedings.--
``(1) In general.--Except as otherwise provided in
paragraph (2)--
``(A) a digital asset association shall file with
the appropriate commission, in accordance with the
rules of that commission, copies of any proposed rule
or any proposed change in, addition to, or deletion
from the rules of such digital asset association
accompanied by a concise general statement of the basis
and purpose of such proposed rule change;
``(B) the appropriate commission shall--
``(i) as soon as practicable after the date
on which a proposed rule change is filed under
subparagraph (A), publish notice of that filing
together with the terms of substance of the
proposed rule change or a description of the
subjects and issues involved; and
``(ii) give interested persons an
opportunity to submit written data, views, and
arguments concerning that proposed rule change;
``(C) no proposed rule change described in
subparagraph (A) shall take effect unless approved by
the appropriate commission or otherwise permitted in
accordance with the provisions of this subsection; and
``(D) no proposed rule change described in
subparagraph (A) relating to a matter under the
jurisdiction of more than 1 commission may be filed.
``(2) Approval process.--
``(A) Approval process established.--
``(i) In general.--Except as provided in
clause (ii), not later than 30 days after the
date on which notice of a proposed rule change
is published under paragraph (1), the
appropriate commission shall--
``(I) by order, approve or
disapprove the proposed rule change; or
``(II) institute proceedings under
subparagraph (B) to determine whether
the proposed rule change should be
disapproved.
``(ii) Extension of time period.--The
appropriate commission may extend the period
established under clause (i) by not more than
an additional 30 days, if--
``(I) the commission determines
that a longer period is appropriate and
publishes the reasons for that
determination; or
``(II) the digital asset
association that filed the proposed
rule change consents to a longer
period.
``(B) Proceedings.--
``(i) Notice and hearing.--If the
appropriate commission does not approve or
disapprove a proposed rule change under
subparagraph (A), the commission shall provide
to the digital asset association that filed the
proposed rule change--
``(I) notice of the grounds for
disapproval under consideration; and
``(II) opportunity for hearing, to
be concluded not later than 180 days
after the date of publication of notice
of the filing of the proposed rule
change.
``(ii) Order of approval or disapproval.--
``(I) In general.--Except as
provided in subclause (II), not later
than 180 days after the date on which
notice is published under paragraph
(1), the appropriate commission shall
issue an order approving or
disapproving the proposed rule change
that is the subject of the notice.
``(II) Extension of time period.--
The appropriate commission may extend
the period for issuance under clause
(I) by not more than 60 days, if--
``(aa) the commission
determines that a longer period
is appropriate and publishes
the reasons for such
determination; or
``(bb) the digital asset
association that filed the
proposed rule change consents
to the longer period.
``(C) Standards for approval and disapproval.--
``(i) Approval.--The appropriate commission
shall approve a proposed rule change of a
digital asset association if the commission
finds that the proposed rule change is
consistent with law.
``(ii) Time for approval.--The appropriate
commission may not approve a proposed rule
change earlier than 30 days after the date of
publication of notice with respect to the
proposed rule change under paragraph (1),
unless the commission finds good cause for so
doing and publishes the reason for the finding.
``(D) Result of failure to institute or conclude
proceedings.--A proposed rule change shall be deemed to
have been approved by the appropriate commission, if--
``(i) the commission does not approve or
disapprove the proposed rule change, or begin
proceedings under subparagraph (B), within the
period described in subparagraph (A); or
``(ii) the commission does not issue an
order approving or disapproving the proposed
rule change under subparagraph (B) within the
period described in subparagraph (B)(ii).
``(E) Publication date based on federal register
publishing.--
``(i) In general.--For purposes of this
paragraph, if, after filing a proposed rule
change with the appropriate commission under
paragraph (1), a digital asset association
publishes a notice of the filing of that
proposed rule change, together with the
substantive terms of that proposed rule change,
on a publicly accessible website, the
commission shall send the notice to the Federal
Register for publication of the proposed rule
change under paragraph (1) not later than 5
days after the date on which that website
publication is made.
``(ii) Effect of failing to send.--If the
appropriate commission fails to send notice
under clause (i) during the 5-day period
described in that clause, the date of
publication shall be deemed to be the date on
which the applicable website publication is
made.
``(3) Internal governance.--With respect to a proposed rule
relating to the internal operation, governance, and procedures
of a digital asset association, or a proposed rule relating to
the determination of the legal character of a digital asset--
``(A) the proposed rule shall be--
``(i) subject to approval by the Securities
and Exchange Commission and the Commodity
Futures Trading Commission; and
``(ii) deemed to be approved on the date
that is 5 days after the date on which the
proposed rule is submitted, unless either
commission objects to the proposed rule change;
and
``(B) if a commission objects to the proposed rule
change under subparagraph (A)(ii)--
``(i) the commission shall, in a public
format, provide to the digital asset
association and the non-objecting commission
the reasons for the objection;
``(ii) the digital asset association, and
interested members of the public, may provide
written comments to the commissions during the
20-day period beginning on the date on which
the objection is noted; and
``(iii) the Securities and Exchange
Commission and the Commodity Futures Trading
Commission, voting separately, shall jointly
issue an order approving or disapproving the
proposed rule, with the failure to issue such a
joint order being deemed to be approval of the
proposed rule.
``(4) Exception.--
``(A) In general.--Notwithstanding paragraphs (2)
and (3), a proposed rule change shall take effect upon
filing if self-certified by a digital asset association
as--
``(i) constituting a stated policy,
practice, or interpretation with respect to the
meaning, administration, or enforcement of an
existing rule of the digital asset association;
``(ii) establishing or changing a due, fee,
or other charge imposed by the digital asset
association on any person, whether or not the
person is a member of the digital asset
association; or
``(iii) notwithstanding any other provision
of this subsection, necessary for customer
protection, the maintenance of fair and orderly
markets, or the safeguarding of digital assets,
customer funds, or other property, in which
case the proposed rule change under shall be
filed promptly thereafter in accordance with
paragraph (1).
``(B) Enforcement.--
``(i) In general.--Any proposed rule change
of a digital asset association that has taken
effect under subparagraph (A) may be enforced
by the association to the extent the rule
change is not inconsistent with applicable law.
``(ii) Suspension.--
``(I) In general.--At any time
during the 60-day period beginning on
the date on which a proposed rule
change is filed under paragraph (1),
the appropriate commission may
temporarily and summarily suspend the
change in the rules of the applicable
digital asset association on a
temporary basis, if the commission
determines that such action is
necessary or appropriate in the public
interest, for customer protection, or
to otherwise comply with applicable
law.
``(II) Requirements.--If a
commission takes action under subclause
(I), the commission shall institute
proceedings under paragraph (2)(B) to
determine whether the applicable
proposed rule should be approved or
disapproved.
``(iii) Rule of construction.--Action under
this subparagraph shall not affect the validity
or force of a proposed rule change during the
period the rule change was in effect and shall
not be reviewable in a judicial proceeding, nor
deemed to be final agency action for purposes
of section 704 of title 5.
``(5) Rule of construction relating to filing date of
proposed rule changes.--
``(A) In general.--For purposes of this subsection,
the date of filing of a proposed rule change shall be
deemed to be the date on which the applicable
commission receives the proposed rule change.
``(B) Exception.--
``(i) In general.--Subject to clause (ii),
a proposed rule has not been received by the
applicable commission for purposes of
subparagraph (A), if, not later than 7 business
days after the date on which the commission
receives the rule, the commission notifies the
applicable digital asset association that the
proposed rule change does not comply with the
rules of the commission relating to the
required form of a proposed rule change.
``(ii) Lengthy and complex proposed rule
changes.--
``(I) In general.--If the
applicable commission determines that a
proposed rule change is unusually
lengthy, and is complex or raises novel
regulatory issues, the commission shall
inform the applicable digital asset
association of that determination not
later than 7 business days after the
date on which the commission receives
the rule.
``(II) Deadline.--For the purposes
of subparagraph (A), a proposed rule
change described in subclause (I) has
not been received by the applicable
commission, if, not later than 21 days
after the date on which the commission
receives the rule, the commission
notifies the applicable digital asset
association that the proposed rule
change does not comply with the rules
of the commission relating to the
required form of a proposed rule
change.
``(C) Applicability.--This paragraph shall not
apply to a rule relating to the internal operations,
governance, and procedure of a digital asset
association.
``(c) Amendment of Rules of Digital Asset Associations.--
``(1) In general.--The appropriate commission may, by rule,
abrogate, add to, and delete from the rules of a digital asset
association as the commission determines necessary or
appropriate to ensure the fair administration of the digital
asset association or to conform the rules of the association to
law or applicable rule, in the following manner:
``(A) The appropriate commission shall notify the
digital asset association and publish notice of the
proposed rulemaking in the Federal Register, which
shall include the text of the proposed amendment to the
rules of the digital asset association and a statement
of the reasons of the commission, including any
pertinent facts, for commencing the proposed
rulemaking.
``(B)(i) The appropriate commission shall give
interested persons an opportunity for the oral
presentation of data, views, and arguments, in addition
to an opportunity to make written submissions.
``(ii) A transcript shall be kept of any oral
presentation under clause (i).
``(C) A rule adopted pursuant to this paragraph
shall incorporate the text of the amendment to the
rules of the digital asset association and a statement
of the appropriate commission regarding the basis for
amendment of the rule, which shall include an
identification of any facts on which the determination
of the commission to amend the rules of the digital
asset association is based, including the reasons for
the conclusions of the commission relating to any facts
that were disputed in the rulemaking.
``(2) Rule of construction.--Nothing in this subsection may
be construed to impair or limit the authority of the
appropriate commission to make, or to modify or alter the
procedures the commission may follow in making, rules pursuant
to any other authority granted by law that is consistent with
this subsection.
``(3) Effect of rules.--Any amendment to the rules of a
digital asset association made by the appropriate commission
under this subsection shall be considered for all purposes to
be part of the rules of that digital asset association and
shall not be considered to be a rule of the commission.
``(4) Consultations.--With respect to rules described in
subsection (b)(4)(A)(iii), the appropriate commission shall
consult with and consider the views of the other commission and
the Secretary of the Treasury before abrogating, adding to, and
deleting from those rules, except where the commission
determines that an emergency exists requiring expeditious or
summary action and publishes the reasons of the commission for
taking that action.
``(d) Notice of Disciplinary Action Taken by Digital Asset
Association Against a Member or Participant; Review of Action by
Appropriate Commission; Procedure.--
``(1) In general.--If a digital asset association imposes
any final disciplinary sanction on any member of the
association, or any participant with respect to the
association, denies membership or participation to any
applicant, prohibits or limits any person from accessing
services offered by the association or a member of the
association, imposes any final disciplinary sanction on any
person associated with a member, or bars any person from
becoming associated with a member, the digital asset
association shall promptly file notice of that action with the
appropriate commission.
``(2) Review.--
``(A) In general.--Any action with respect to which
a digital asset association is required to file notice
under paragraph (1) shall be subject to review by the
appropriate commission for the applicable member,
participant, applicant, or other person, on its own
motion, or upon application by any person aggrieved by
that action if filed not later than 30 days after the
date on which the notice was filed with the appropriate
commission and received by the aggrieved person, or
within such longer period as the appropriate commission
may determine.
``(B) Application.--Application to the appropriate
commission for review, or the institution of review by
the commission on its own motion, shall not operate as
a stay of an action described in subparagraph (A)
unless the appropriate commission otherwise orders,
summarily or after notice and opportunity for hearing
on the question of a stay, which may consist solely of
the submission of affidavits or presentation of oral
arguments.
``(C) Stays.--For the purposes of this paragraph,
each of the appropriate commissions shall establish for
appropriate cases an expedited procedure for
consideration and determination of the question of a
stay.
``(3) Applicability.--This subsection shall apply only to
the extent that a digital asset association imposes any final
disciplinary sanction for--
``(A) a violation of Federal law or the rules
issued under Federal law; or
``(B) a violation of a rule of the digital asset
association, as to which a proposed change would be
required to be filed under this section.
``(e) Disposition of Review; Cancellation, Reduction, or Remission
of Sanction.--
``(1) In general.--In any proceeding to review a final
disciplinary sanction imposed by a digital asset association on
a member of the association, a participant with respect to the
association, or a person associated with such a member, after
notice and opportunity for hearing, which may consist solely of
consideration of the record before the digital asset
association and opportunity for the presentation of supporting
reasons to affirm, modify, or set aside the sanction--
``(A) if the appropriate commission finds that such
member, participant, or person associated with a member
has engaged in such acts or practices, or has omitted
such acts, as the digital asset association has found
that person to have engaged in or omitted, that such
acts or practices, or omissions to act, are in
violation of law, the rules thereunder, or the rules of
the digital asset association, and that such provisions
are, and were applied in a manner, consistent with law,
the commission, by order, shall--
``(i) make a declaration regarding that
finding; and
``(ii) as appropriate--
``(I) affirm the sanction imposed
by the digital asset association;
``(II) modify the sanction in
accordance with paragraph (2); or
``(III) remand to the digital asset
association for further proceedings; or
``(B) if the appropriate commission does not make a
finding described in subparagraph (A), the commission
shall, by order--
``(i) set aside the sanction imposed by the
digital asset association; and
``(ii) if appropriate, remand to the
digital asset association for further
proceedings.
``(2) Modification.--If the appropriate commission for a
member, participant, or person associated with a member, having
due regard for the public interest and customer protection,
finds, after a proceeding under paragraph (1), that a sanction
imposed by a digital asset association upon that member,
participant, or person associated with a member imposes any
burden on competition not necessary or appropriate or is
excessive or oppressive, the commission may cancel, reduce, or
require the remission of that sanction.
``(f) Dismissal of Review Proceeding.--
``(1) In general.--In any proceeding to review the denial
of membership or participation in a digital asset association
to any applicant, the barring of any person from becoming
associated with a member of a digital asset association, or the
prohibition or limitation by a digital asset association of any
person from accessing services offered by the digital asset
association or any member of the association, if the
appropriate commission, after notice and opportunity for
hearing, which may consist solely of consideration of the
record before the digital asset association and opportunity for
the presentation of supporting reasons to dismiss the
proceeding or set aside the action of the digital asset
association, finds that the specific grounds on which that
denial, bar, or prohibition or limitation is based exist in
fact, that such denial, bar, or prohibition or limitation is in
accordance with the rules of the digital asset association, and
that such rules are, and were applied in a manner, consistent
with law, the appropriate commission, by order, shall dismiss
the proceeding.
``(2) Failure to make finding.--If the appropriate
commission does not make a finding described in paragraph (1),
or if the commission finds that the applicable denial, bar,
prohibition, or limitation imposes any burden on competition
not necessary or appropriate, the commission, by order, shall
set aside the action of the digital asset association and
require the association to admit the applicable applicant to
membership or participation, permit that person to become
associated with a member, or grant that person access to
services offered by the digital asset association or a member
of the association.
``(g) Suspension or Revocation of Digital Asset Association
Registration; Other Sanctions.--
``(1) In general.--If necessary or appropriate in the
public interest, for customer protection, or otherwise in
furtherance of the purposes of this section, the appropriate
commissions, voting separately, may issue a joint order
suspending for a period not exceeding 1 year or revoking the
registration of a digital asset association, or censuring or
imposing limitations upon the activities, functions, and
operations of a digital asset association, if, the commissions
find, on the record after notice and opportunity for hearing,
that the digital asset association--
``(A) has violated or is unable to comply with any
provision of law, rule, or the rules of the association
without reasonable justification or excuse; or
``(B) has failed to enforce compliance with any
provision by a member of the association or a person
associated with a member of the association.
``(2) Expulsion.--The appropriate commission may, by order,
if necessary or appropriate in the public interest, for
customer protection, or otherwise in furtherance of the
purposes of this section, to suspend for a period not exceeding
1 year or expel from a digital asset association, any member of
a digital asset association, or participant with respect to a
digital asset association, if such member or participant is
subject to an order of the commission or if the commission, on
the record after notice and opportunity for hearing, determines
that the member or participant has willfully violated, or has
effected any transaction for any other person who the member or
participant had reason to believe was violating, with respect
to such transaction any applicable provision of law under the
jurisdiction of the commission.
``(3) Bar on association.--The applicable commission may,
by order, if necessary or appropriate in the public interest,
for customer protection, or otherwise in furtherance of the
purposes of this section, to suspend for a period not exceeding
1 year or to bar any person from being associated with a member
of such digital asset association, if the person is subject to
an order of the appropriate commission or if the appropriate
commission finds, on the record after notice and opportunity
for hearing, that the person has willfully violated, or has
effected any transaction for any other person who the person
associated with a member had reason to believe was violating,
with respect to the transaction any applicable provision of law
under the jurisdiction of the commission.
``(4) Removal from office.--If necessary or appropriate in
the public interest, for customer protection, or otherwise in
furtherance of the purposes of this section, the Securities and
Exchange Commission and the Commodity Futures Trading
Commission, voting separately, may, by joint order, remove from
office or censure any person who is, or at the time of the
alleged misconduct was, an officer or director of a digital
asset association, if the commissions find, on the record after
notice and opportunity for a hearing before an impartial
hearing officer, that such person has willfully violated any
provision of law, the rules thereunder, or the rules of such
digital asset association, willfully abused the authority of
the person, or without reasonable justification or excuse has
failed to enforce compliance with any provision of law by any
member or person associated with a member.
``(h) Interagency Working Group.--The Securities and Exchange
Commission and the Commodity Futures Trading Commission shall each
appoint an equal number of employees, under the supervision of the
Chairman of the respective commissions, to an interagency working
group, which shall coordinate and facilitate the responsibilities and
powers of the respective commissions under this chapter.''.
(b) Technical and Conforming Amendment.--The table of sections for
chapter 98 of title 31, United States Code, as amended by section 3, is
amended by adding at the end the following:
``9803. Registration, rulemaking, and supervision of digital asset
associations.''.
SEC. 5. RECORDS AND REPORTS; DUTIES AND POWERS OF REGISTERED DIGITAL
ASSET ASSOCIATIONS.
(a) In General.--Chapter 98 of title 31, United States Code, as
amended by section 4, is amended by adding at the end the following:
``Sec. 9804. Records and reports; duties and powers of registered
digital asset associations
``(a) In General.--Each member of a registered digital asset
association shall make, and keep for prescribed periods, such
electronic records and disseminate reports as the registered digital
asset association, by rule, prescribes as necessary or appropriate in
the public interest.
``(b) Records Subject to Examination.--
``(1) Procedures for cooperation with other agencies.--
``(A) In general.--All records of a member
described in subsection (a) are subject at any time, or
from time to time, to reasonable periodic, special, or
other examinations by the registered digital asset
association of the member.
``(B) Notice.--Before conducting an examination
under subparagraph (A), the examining authority shall--
``(i) inform all other relevant regulatory
agencies and digital asset associations with
jurisdiction over the member regarding the
proposed examination; and
``(ii) consult concerning the feasibility
and desirability of coordinating such
examination with examinations conducted by
other entities with a view to avoiding
unnecessary duplication and undue regulatory
burden.
``(C) Examinations of members.--Upon a showing of
good cause, the Securities and Exchange Commission or
the Commodity Futures Trading Commission, as
applicable, may conduct a special examination of a
registered digital asset association or a member of
such an association.
``(D) Report.--With respect to an examination under
this paragraph, the examining authority shall share
such information, including reports of the examination,
customer complaint information, and other nonpublic
regulatory information, as may be appropriate to foster
a coordinated approach to regulatory oversight for
members that are subject to examination by more than 1
examining authority.
``(E) Requirements when examination not ongoing.--A
registered digital asset association, at all times when
an examination under this paragraph is not in progress,
shall conduct ongoing supervision of members of the
association, as may be provided by the rules of the
association.
``(2) Clarification.--Notwithstanding any other provision
of this subsection, the records of a member of a registered
digital asset association shall not be subject to routine
periodic examinations by the Securities and Exchange Commission
or the Commodity Futures Trading Commission.
``(3) Examination standards.--Each registered digital asset
association shall--
``(A) adopt tailored supervision and examination
standards commensurate with the size and complexity of
the association and risks faced by members of the
association;
``(B) to the extent reasonably possible, reduce the
regulatory burden for emerging growth companies, as
defined in section 2(a) of the Securities Act of 1933
(15 U.S.C. 77b(a)), including through the use of self-
certification and expedited or automated examinations;
and
``(C) in consultation with other registered digital
asset associations, develop standard form customer
agreements for the execution of digital asset
transactions.
``(c) Registered Digital Asset Associations.--
``(1) In general.--The Securities and Exchange Commission
and Commodity Futures Trading Commission, shall, by rule or
order, in order to foster cooperation and coordination among
registered digital asset associations--
``(A) with respect to any person that is a member
of or participant in more than 1 registered digital
asset association, relieve any registered digital asset
association of any responsibility--
``(i) to receive regulatory reports from
the person;
``(ii) to examine the person for
compliance; or
``(iii) to carry out other specified
regulatory functions with respect to the
person; and
``(B) allocate among registered digital asset
associations the authority to adopt rules with respect
to matters as to which, in the absence of the
allocation, such registered digital asset associations
share authority.
``(2) Considerations.--
``(A) In general.--In making a rule, or entering an
order, under paragraph (1), the appropriate commission
shall take into consideration the regulatory
capabilities and procedures of the applicable
registered digital asset associations, availability of
staff, convenience of location, unnecessary regulatory
duplication, and all other factors applicable to
customer protection, cooperation and coordination among
registered digital asset associations, and the
development of a healthy digital asset market, which
may include providing for the acceptance of examination
reports prepared by a registered digital asset
association under this chapter with respect to a
digital asset intermediary for which digital asset
activities constitute a majority of business, in lieu
of examinations conducted by other registered digital
asset associations.
``(B) Notification requirement.--The Securities and
Exchange Commission or Commodity Futures Trading
Commission, by rule or order, may require that a
registered digital asset association relieved of any
responsibility under this paragraph, and any person
with respect to which that responsibility relates, to
take such steps as are specified in any rule or order
to notify customers of, and persons doing business
with, the person of the limited nature of the
responsibility of that registered digital asset
association for the acts, practices, and course of
business of the person.
``(d) Missing and Stolen Digital Assets.--Each member of a
registered digital asset association or other financial institution
conducting digital asset transactions shall report to the Financial
Crimes Enforcement Network of the Department of the Treasury such
information as may be required by rule relating to digital asset theft
or missing private keys for the possession or control of digital
assets.
``(e) Confidentiality.--
``(1) Sharing of information.--
``(A) In general.--Section 24 of the Securities
Exchange Act of 1934 (15 U.S.C. 78x) shall apply to the
sharing of information by the Securities and Exchange
Commission and Commodity Futures Trading Commission in
accordance with this subsection.
``(B) Protection from inappropriate disclosure.--
The commissions and a registered digital asset
association shall ensure that all confidential
information is not inappropriately disclosed pursuant
to subparagraph (A).
``(2) Appropriate disclosure not prohibited.--Nothing in
this subsection may be construed to authorize the Securities
and Exchange Commission and Commodity Futures Trading
Commission or a registered digital asset association to--
``(A) withhold information from Congress; or
``(B) prevent the commissions or an association
from complying with--
``(i) a request for information from any
Federal or State department or agency
requesting the information for purposes within
the scope of the jurisdiction of that
department or agency; or
``(ii) an order of a court of the United
States in an action brought by the United
States or the commissions.
``(f) Best Execution.--A registered digital asset association, in
consultation with members of the association, the Securities and
Exchange Commission, and the Commodity Futures Trading Commission,
shall develop rules governing the best execution of digital asset
transactions.
``(g) Initial Determination of Legal Character.--
``(1) In general.--
``(A) Initial determination.--A registered digital
asset association may make an initial determination of
the legal character of a digital asset as a security,
an ancillary asset, a commodity (as defined in section
1a of the Commodity Exchange Act (7 U.S.C. 1a)), or as
otherwise provided by law, upon the written request of
a member of the association.
``(B) Consultation; hearings.--Upon receipt of a
request under subparagraph (A), a registered digital
asset association--
``(i) shall consult with the commissions
and make an initial determination regarding the
request, after public notice and comment, not
later than 45 days after the date on which the
association receives the request; and
``(ii) may hold a public hearing with
respect to an initial determination described
in clause (i), if--
``(I) the matter is of significant
precedential value or complex; or
``(II) holding such a hearing is
otherwise in the public interest.
``(2) Publication.--A registered digital asset association
shall publish all determinations made under paragraph (1) on
the website of the association.
``(h) Objection to Initial Determination.--
``(1) In general.--
``(A) Deadline for objection.--Not later than 30
days after the date on which an initial determination
is made under subsection (g), the Securities and
Exchange Commission or Commodity Futures Trading
Commission may object to the initial determination of
the registered digital asset association by issuing an
order, after public notice, comment, and a hearing.
``(B) Effect of objection.--Upon an objection under
subparagraph (A), the initial determination to which
the objection applies shall be held in abeyance.
``(2) Order.--
``(A) In general.--Not later than 60 days after the
date on which a commission objects under paragraph (1),
the commissions shall, after public notice and comment
of not less than 30 days, issue an order resolving the
objection and the status of the digital asset, as
described in subsection (g)(1)(A), which may include
joint responsibility of the commissions.
``(B) Failure to issue.--If the Securities and
Exchange Commission and the Commodity Futures Trading
Commission fail to issue a joint order under
subparagraph (A), the determination of the registered
digital asset association under subsection (g) shall
become final, unless an action is brought in an
appropriate district court of the United States of
competent jurisdiction.''.
(b) Technical and Conforming Amendment.--The table of sections for
chapter 98 of title 31, United States Code, as amended by section 4, is
amended by adding at the end the following:
``9804. Records and reports; duties and powers of registered digital
asset associations.''.
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