[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4763 Referred in Senate (RFS)]
<DOC>
118th CONGRESS
2d Session
H. R. 4763
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 9, 2024
Received; read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
AN ACT
To provide for a system of regulation of digital assets by the
Commodity Futures Trading Commission and the Securities and Exchange
Commission, 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; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Financial
Innovation and Technology for the 21st Century Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--DEFINITIONS; RULEMAKING; NOTICE OF INTENT TO REGISTER
Sec. 101. Definitions under the Securities Act of 1933.
Sec. 102. Definitions under the Securities Exchange Act of 1934.
Sec. 103. Definitions under the Commodity Exchange Act.
Sec. 104. Definitions under this Act.
Sec. 105. Rulemakings.
Sec. 106. Notice of intent to register for digital commodity exchanges,
brokers, and dealers.
Sec. 107. Notice of intent to register for digital asset brokers,
dealers, and trading systems.
Sec. 108. Commodity Exchange Act savings provisions.
Sec. 109. Administrative requirements.
Sec. 110. International harmonization.
Sec. 111. Implementation.
Sec. 112. Application of the Bank Secrecy Act.
TITLE II--CLARITY FOR ASSETS OFFERED AS PART OF AN INVESTMENT CONTRACT
Sec. 201. Short title.
Sec. 202. Treatment of investment contract assets.
TITLE III--OFFERS AND SALES OF DIGITAL ASSETS
Sec. 301. Exempted transactions in digital assets.
Sec. 302. Requirements for offers and sales of certain digital assets.
Sec. 303. Enhanced disclosure requirements.
Sec. 304. Certification of certain digital assets.
Sec. 305. Effective date.
TITLE IV--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE
SECURITIES AND EXCHANGE COMMISSION
Sec. 401. Treatment of digital commodities and other digital assets.
Sec. 402. Authority over permitted payment stablecoins and restricted
digital assets.
Sec. 403. Registration of digital asset trading systems.
Sec. 404. Requirements for digital asset trading systems.
Sec. 405. Registration of digital asset brokers and digital asset
dealers.
Sec. 406. Requirements of digital asset brokers and digital asset
dealers.
Sec. 407. Rules related to conflicts of interest.
Sec. 408. Treatment of certain digital assets in connection with
federally regulated intermediaries.
Sec. 409. Exclusion for decentralized finance activities.
Sec. 410. Registration and requirements for notice-registered digital
asset clearing agencies.
Sec. 411. Treatment of custody activities by banking institutions.
Sec. 412. Effective date; administration.
Sec. 413. Discretionary Surplus Fund.
Sec. 414. Studies on foreign adversary participation.
TITLE V--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE COMMODITY
FUTURES TRADING COMMISSION
Sec. 501. Commission jurisdiction over digital commodity transactions.
Sec. 502. Requiring futures commission merchants to use qualified
digital commodity custodians.
Sec. 503. Trading certification and approval for digital commodities.
Sec. 504. Registration of digital commodity exchanges.
Sec. 505. Qualified digital commodity custodians.
Sec. 506. Registration and regulation of digital commodity brokers and
dealers.
Sec. 507. Registration of associated persons.
Sec. 508. Registration of commodity pool operators and commodity
trading advisors.
Sec. 509. Exclusion for decentralized finance activities.
Sec. 510. Funding for implementation and enforcement.
Sec. 511. Effective date.
Sec. 512. Sense of the Congress.
TITLE VI--INNOVATION AND TECHNOLOGY IMPROVEMENTS
Sec. 601. Findings; sense of Congress.
Sec. 602. Codification of the SEC Strategic Hub for Innovation and
Financial Technology.
Sec. 603. Codification of LabCFTC.
Sec. 604. CFTC-SEC Joint Advisory Committee on Digital Assets.
Sec. 605. Study on decentralized finance.
Sec. 606. Study on non-fungible digital assets.
Sec. 607. Study on expanding financial literacy amongst digital asset
holders.
Sec. 608. Study on financial market infrastructure improvements.
TITLE I--DEFINITIONS; RULEMAKING; NOTICE OF INTENT TO REGISTER
SEC. 101. DEFINITIONS UNDER THE SECURITIES ACT OF 1933.
Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is
amended by adding at the end the following:
``(20) Affiliated person.--
``(A) In general.--The term `affiliated person'
means a person (including a related person) that--
``(i) with respect to a digital asset
issuer--
``(I) directly, or indirectly
through one or more intermediaries,
controls, or is controlled by, or is
under common control with, such digital
asset issuer; or
``(II) was described under clause
(i) at any point in the previous 3-
month period; or
``(ii) with respect to any digital asset--
``(I) beneficially owns 5 percent
or more of the units of such digital
asset that are then outstanding; or
``(II) was described under clause
(i) at any point in the previous 3-
month period.
``(B) Beneficial ownership disclosure.--The
Commission shall issue rules to require a person that
beneficially owns 5 percent or more of the units of a
digital asset that are then outstanding to file with
the Commission a report at such time as the Commission
determines appropriate.
``(21) Blockchain.--The term `blockchain' means any
technology--
``(A) where data is--
``(i) shared across a network to create a
public ledger of verified transactions or
information among network participants;
``(ii) linked using cryptography to
maintain the integrity of the public ledger and
to execute other functions; and
``(iii) distributed among network
participants in an automated fashion to
concurrently update network participants on the
state of the public ledger and any other
functions; and
``(B) composed of source code that is publicly
available.
``(22) Blockchain protocol.--The term `blockchain protocol'
means any executable software deployed to a blockchain composed
of source code that is publicly available and accessible,
including a smart contract or any network of smart contracts.
``(23) Blockchain system.--The term `blockchain system'
means any blockchain or blockchain protocol.
``(24) Decentralized governance system.--
``(A) In general.--The term `decentralized
governance system' means, with respect to a blockchain
system, any rules-based system permitting persons using
the blockchain system or the digital assets related to
such blockchain system to form consensus or reach
agreement in the development, provision, publication,
management, or administration of such blockchain
system.
``(B) Relationship of persons to decentralized
governance systems.--Persons acting through a
decentralized governance system shall be treated as
separate persons unless such persons are under common
control.
``(C) Exclusion.--The term `decentralized
governance system' does not include a system in which--
``(i) a person or group of persons under
common control have the ability to--
``(I) unilaterally alter the rules
of consensus or agreement for the
blockchain system; or
``(II) determine the final outcome
of decisions related to the
development, provision, publication,
management, or administration of such
blockchain system;
``(ii) a person or group of persons is
directly engaging in an activity that requires
registration with the Commission or the
Commodity Futures Trading Commission other
than--
``(I) developing, providing,
publishing, managing, or administering
a blockchain system; or
``(II) an activity with respect to
which the organization is exempt from
such registration; or
``(iii) a person or group of persons
seeking to knowingly evade the requirements
imposed on a digital asset issuer, a related
person, an affiliated person, or any other
person registered (or required to be
registered) under the securities laws, the
Financial Innovation and Technology for the
21st Century Act, or the Commodity Exchange
Act.
``(25) Decentralized system.--With respect to a blockchain
system to which a digital asset relates, the term
`decentralized system' means the following conditions are met:
``(A) During the previous 12-month period, no
person--
``(i) had the unilateral authority,
directly or indirectly, through any contract,
arrangement, understanding, relationship, or
otherwise, to control or materially alter the
functionality or operation of the blockchain
system; or
``(ii) had the unilateral authority to
restrict or prohibit any person who is not a
digital asset issuer, related person, or an
affiliated person from--
``(I) using, earning, or
transmitting the digital asset;
``(II) deploying software that uses
or integrates with the blockchain
system;
``(III) participating in a
decentralized governance system with
respect to the blockchain system; or
``(IV) operating a node, validator,
or other form of computational
infrastructure with respect to the
blockchain system.
``(B) During the previous 12-month period--
``(i) no digital asset issuer or affiliated
person beneficially owned, in the aggregate, 20
percent or more of the total amount of units of
such digital asset that--
``(I) can be created, issued, or
distributed in such blockchain system;
and
``(II) were freely transferrable or
otherwise used or available to be used
for the purposes of such blockchain
system;
``(ii) no digital asset issuer or
affiliated person had the unilateral authority
to direct the voting, in the aggregate, of 20
percent or more of the outstanding voting power
of such digital asset or related decentralized
governance system; or
``(iii) the digital asset did not include
voting power with respect to any decentralized
governance system of the blockchain system.
``(C) During the previous 3-month period, the
digital asset issuer, any affiliated person, or any
related person has not implemented or contributed any
intellectual property to the source code of the
blockchain system that materially alters the
functionality or operation of the blockchain system,
unless such implementation or contribution to the
source code--
``(i) addressed vulnerabilities, errors,
regular maintenance, cybersecurity risks, or
other technical changes to the blockchain
system; or
``(ii) were adopted through the consensus
or agreement of a decentralized governance
system.
``(D) During the previous 3-month period, neither
any digital asset issuer nor any affiliated person
described under paragraph (20)(A) has marketed to the
public the digital assets as an investment.
``(E) During the previous 12-month period, all
issuances of units of such digital asset through the
programmatic functioning of the blockchain system were
end user distributions. For purposes of the previous
sentence, any units of such digital asset that are made
available over time and were created in the initial
block of the blockchain system shall be considered
issued at the point in time of creation.
``(26) Digital asset.--
``(A) In general.--The term `digital asset' means
any fungible digital representation of value that can
be exclusively possessed and transferred, person to
person, without necessary reliance on an intermediary,
and is recorded on a cryptographically secured public
distributed ledger.
``(B) Exclusions.--The term `digital asset' does
not include--
``(i) any note, stock, treasury stock,
security future, security-based swap, bond,
debenture, evidence of indebtedness,
certificate of interest or participation in any
profit-sharing agreement, collateral-trust
certificate, preorganization certificate or
subscription, transferable share, voting-trust
certificate, certificate of deposit for a
security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call,
straddle, option, privilege on any security,
certificate of deposit, or group or index of
securities (including any interest therein or
based on the value thereof); or
``(ii) any asset which, based on its terms
and other characteristics, is, represents, or
is functionally equivalent to an agreement,
contract, or transaction that is--
``(I) a contract of sale of a
commodity (as defined under section 1a
of the Commodity Exchange Act) for
future delivery or an option thereon;
``(II) a security futures product;
``(III) a swap;
``(IV) an agreement, contract, or
transaction described in section
2(c)(2)(C)(i) or 2(c)(2)(D)(i) of the
Commodity Exchange Act;
``(V) a commodity option authorized
under section 4c of the Commodity
Exchange Act; or
``(VI) a leverage transaction
authorized under section 19 of the
Commodity Exchange Act.
``(C) Rule of construction.--Nothing in this
paragraph shall be construed to create a presumption
that a digital asset is a representation of any type of
security not excluded from the definition of digital
asset.
``(D) Relationship to a blockchain system.--A
digital asset is considered to relate to a blockchain
system if the digital asset is intrinsically linked to
the blockchain system, including--
``(i) where the digital asset's value is
reasonably expected to be generated by the
programmatic functioning of the blockchain
system;
``(ii) where the digital asset has voting
rights with respect to the decentralized
governance system of the blockchain system; or
``(iii) where the digital asset is issued
through the programmatic functioning of the
blockchain system.
``(E) Treatment of certain digital assets sold
pursuant to an investment contract.--A digital asset
offered or sold or intended to be offered or sold
pursuant to an investment contract is not and does not
become a security as a result of being sold or
otherwise transferred pursuant to that investment
contract.
``(27) Digital asset issuer.--
``(A) In general.--With respect to a digital asset,
the term `digital asset issuer' means any person that,
in exchange for any consideration--
``(i) issues or causes to be issued a unit
of such digital asset to a person; or
``(ii) offers or sells a right to a future
issuance of a unit of such digital asset to a
person.
``(B) Exclusion.--The term `digital asset issuer'
does not include any person solely because such person
deploys source code that creates or issues units of a
digital asset that are only distributed in end user
distributions.
``(C) Prohibition on evasion.--It shall be unlawful
for any person to knowingly evade classification as a
`digital asset issuer' and facilitate an arrangement
for the primary purpose of effecting a sale,
distribution, or other issuance of a digital asset.
``(28) Digital asset maturity date.--The term `digital
asset maturity date' means, with respect to any digital asset,
the first date on which 20 percent or more of the total units
of such digital asset that are then outstanding as of such date
are--
``(A) digital commodities; or
``(B) digital assets that have been registered with
the Commission.
``(29) Digital commodity.--The term `digital commodity' has
the meaning given that term under section 1a of the Commodity
Exchange Act (7 U.S.C. 1a).
``(30) End user distribution.--
``(A) In general.--The term `end user distribution'
means an issuance of a unit of a digital asset that--
``(i) does not involve an exchange of more
than a nominal value of cash, property, or
other assets; and
``(ii) is distributed in a broad,
equitable, and non-discretionary manner based
on conditions capable of being satisfied by any
participant in the blockchain system,
including, as incentive-based rewards--
``(I) to users of the digital asset
or any blockchain system to which the
digital asset relates;
``(II) for activities directly
related to the operation of the
blockchain system, such as mining,
validating, staking, or other activity
directly tied to the operation of the
blockchain system; or
``(III) to the existing holders of
another digital asset, in proportion to
the total units of such other digital
asset as are held by each person.
``(B) Prohibition on evasion.--It shall be unlawful
for any person to facilitate an end user distribution
to knowingly evade classification as a digital asset
issuer, related person, or an affiliated person, or the
requirements related to a digital asset issuance.
``(31) Functional system.--With respect to a blockchain
system to which a digital asset relates, the term `functional
system' means the network allows network participants to use
such digital asset for--
``(A) the transmission and storage of value on the
blockchain system;
``(B) the participation in services provided by or
an application running on the blockchain system; or
``(C) the participation in the decentralized
governance system of the blockchain system.
``(32) Permitted payment stablecoin.--
``(A) In general.--The term `permitted payment
stablecoin' means a digital asset--
``(i) that is or is designed to be used as
a means of payment or settlement;
``(ii) the issuer of which--
``(I) is obligated to convert,
redeem, or repurchase for a fixed
amount of monetary value; or
``(II) represents will maintain or
creates the reasonable expectation that
it will maintain a stable value
relative to the value of a fixed amount
of monetary value;
``(iii) the issuer of which is subject to
regulation by a Federal or State regulator with
authority over entities that issue payment
stablecoins; and
``(iv) that is not--
``(I) a national currency; or
``(II) a security issued by an
investment company registered under
section 8(a) of the Investment Company
Act of 1940 (15 U.S.C. 80a-8(a)).
``(B) Monetary value defined.--For purposes of
subparagraph (A), the term `monetary value' means a
national currency, deposit (as defined under section 3
of the Federal Deposit Insurance Act), or an equivalent
instrument that is denominated in a national currency.
``(33) Related person.--With respect to a digital asset
issuer, the term `related person' means--
``(A) a founder, promoter, employee, consultant,
advisor, or person serving in a similar capacity;
``(B) any person that is or was in the previous 6-
month period an executive officer, director, trustee,
general partner, advisory board member, or person
serving in a similar capacity;
``(C) any equity holder or other security holder;
or
``(D) any other person that received a unit of
digital asset from such digital asset issuer through--
``(i) an exempt offering, other than an
offering made in reliance on section 4(a)(8);
or
``(ii) a distribution that is not an end
user distribution described under section
42(d)(1) of the Securities Exchange Act of
1934.
``(34) Restricted digital asset.--
``(A) In general.--The term `restricted digital
asset' means--
``(i) prior to the first date on which each
blockchain system to which a digital asset
relates is a functional system and certified to
be a decentralized system under section 44 of
the Securities Exchange Act of 1934, any unit
of the digital asset held by a person, other
than the digital asset issuer, a related
person, or an affiliated person, that was--
``(I) issued to such person through
a distribution, other than an end user
distribution described under section
42(d)(1) of the Securities Exchange Act
of 1934; or
``(II) acquired by such person in a
transaction that was not executed on a
digital commodity exchange;
``(ii) during any period when any
blockchain system to which a digital asset
relates is not a functional system or not
certified to be a decentralized system under
section 44 of the Securities Exchange Act of
1934, any digital asset held by a related
person or an affiliated person; and
``(iii) any unit of a digital asset held by
the digital asset issuer.
``(B) Exclusion.--The term `restricted digital
asset' does not include a permitted payment stablecoin.
``(35) Securities laws.--The term `securities laws' has the
meaning given that term under section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)).
``(36) Source code.--With respect to a blockchain system,
the term `source code' means a listing of commands to be
compiled or assembled into an executable computer program.''.
SEC. 102. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.
Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)) is amended--
(8) by redesignating the second paragraph (80) (relating to
funding portals) as paragraph (81); and
(9) by adding at the end the following:
``(82) Bank secrecy act.--The term `Bank Secrecy Act'
means--
``(A) section 21 of the Federal Deposit Insurance
Act (12 U.S.C. 1829b);
``(B) chapter 2 of title I of Public Law 91-508 (12
U.S.C. 1951 et seq.); and
``(C) subchapter II of chapter 53 of title 31,
United States Code.
``(83) Digital asset broker.--The term `digital asset
broker'--
``(A) means any person engaged in the business of
effecting transactions in restricted digital assets for
the account of others; and
``(B) does not include--
``(i) a blockchain protocol or a person or
group of persons solely because of their
development of a blockchain protocol; or
``(ii) a bank engaging in certain banking
activities with respect to a restricted digital
asset in the same manner as a bank is excluded
from the definition of a broker under paragraph
(4).
``(84) Digital asset custodian.--The term `digital asset
custodian' means an entity in the business of providing
custodial or safekeeping services for restricted digital assets
for others.
``(85) Digital asset dealer.--The term `digital asset
dealer'--
``(A) means any person engaged in the business of
buying and selling restricted digital assets for such
person's own account through a broker or otherwise; and
``(B) does not include--
``(i) a person that buys or sells
restricted digital assets for such person's own
account, either individually or in a fiduciary
capacity, but not as a part of a regular
business;
``(ii) a blockchain protocol or a person or
group of persons solely because of their
development of a blockchain protocol; or
``(iii) a bank engaging in certain banking
activities with respect to a restricted digital
asset in the same manner as a bank is excluded
from the definition of a dealer under paragraph
(5).
``(86) Digital asset trading system.--The term `digital
asset trading system'--
``(A) means any organization, association, person,
or group of persons, whether incorporated or
unincorporated, that constitutes, maintains, or
provides a market place or facilities for bringing
together purchasers and sellers of restricted digital
assets or for otherwise performing with respect to
restricted digital assets the functions commonly
performed by a stock exchange within the meaning of
section 240.3b-16 of title 17, Code of Federal
Regulations, as in effect on the date of enactment of
this paragraph; and
``(B) does not include a blockchain protocol or a
person or group of persons solely because of their
development of a blockchain protocol.
``(87) Notice-registered digital asset clearing agency.--
The term `notice-registered digital asset clearing agency'
means a clearing agency that has registered with the Commission
pursuant to section 17A(b)(9).
``(88) Additional digital asset-related terms.--
``(A) Securities act of 1933.--The terms
`affiliated person', `blockchain system',
`decentralized governance system', `decentralized
system', `digital asset', `digital asset issuer',
`digital asset maturity date', `end user distribution',
`functional system', `permitted payment stablecoin',
`related person', `restricted digital asset', and
`source code' have the meaning given those terms,
respectively, under section 2(a) of the Securities Act
of 1933 (15 U.S.C. 77b(a)).
``(B) Commodity exchange act.--The terms `digital
commodity', `digital commodity broker', `digital
commodity dealer', and `digital commodity exchange'
have the meaning given those terms, respectively, under
section 1a of the Commodity Exchange Act (7 U.S.C.
1a).''.
SEC. 103. DEFINITIONS UNDER THE COMMODITY EXCHANGE ACT.
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
(1) in paragraph (10)(A)--
(A) by redesignating clauses (iii) and (iv) as
clauses (iv) and (v), respectively; and
(B) by inserting after clause (ii) the following:
``(iii) digital commodity;'';
(2) in paragraph (11)--
(A) in subparagraph (A)(i)--
(i) by redesignating subclauses (III) and
(IV) as subclauses (IV) and (V), respectively;
and
(ii) by inserting after subclause (II) the
following:
``(III) digital commodity;''; and
(B) by redesignating subparagraph (B) as
subparagraph (C) and inserting after subparagraph (A)
the following:
``(B) Exclusion.--The term `commodity pool
operator' does not include--
``(i) a decentralized governance system; or
``(ii) any excluded activity, as described
in section 4v.'';
(3) in paragraph (12)(A)(i)--
(A) in subclause (II), by adding at the end a
semicolon;
(B) by redesignating subclauses (III) and (IV) as
subclauses (IV) and (V), respectively; and
(C) by inserting after subclause (II) the
following:
``(III) a digital commodity;'';
(4) in paragraph (40)--
(A) by striking ``and'' at the end of subparagraph
(E);
(B) by striking the period at the end of
subparagraph (F) and inserting ``; and''; and
(C) by adding at the end the following:
``(G) a digital commodity exchange registered under
section 5i.''; and
(5) by adding at the end the following:
``(52) Associated person of a digital commodity broker.--
``(A) In general.--Except as provided in
subparagraph (B), the term `associated person of a
digital commodity broker' means a person who is
associated with a digital commodity broker as a
partner, officer, employee, or agent (or any person
occupying a similar status or performing similar
functions) in any capacity that involves--
``(i) the solicitation or acceptance of an
order for the purchase or sale of a digital
commodity; or
``(ii) the supervision of any person
engaged in the solicitation or acceptance of an
order for the purchase or sale of a digital
commodity.
``(B) Exclusion.--The term `associated person of a
digital commodity broker' does not include any person
associated with a digital commodity broker the
functions of which are solely clerical or ministerial.
``(53) Associated person of a digital commodity dealer.--
``(A) In general.--Except as provided in
subparagraph (B), the term `associated person of a
digital commodity dealer' means a person who is
associated with a digital commodity dealer as a
partner, officer, employee, or agent (or any person
occupying a similar status or performing similar
functions) in any capacity that involves--
``(i) the solicitation or acceptance of an
order for the purchase or sale of a digital
commodity; or
``(ii) the supervision of any person
engaged in the solicitation or acceptance of an
order for the purchase or sale of a digital
commodity.
``(B) Exclusion.--The term `associated person of a
digital commodity dealer' does not include any person
associated with a digital commodity dealer the
functions of which are solely clerical or ministerial.
``(54) Bank secrecy act.--The term `Bank Secrecy Act'
means--
``(A) section 21 of the Federal Deposit Insurance
Act (12 U.S.C. 1829b);
``(B) chapter 2 of title I of Public Law 91-508 (12
U.S.C. 1951 et seq.); and
``(C) subchapter II of chapter 53 of title 31,
United States Code.
``(55) Digital commodity.--
``(A) In general.--The term `digital commodity'
means--
``(i) any unit of a digital asset held by a
person, other than the digital asset issuer, a
related person, or an affiliated person, before
the first date on which each blockchain system
to which the digital asset relates is a
functional system and certified to be a
decentralized system under section 44 of the
Securities Exchange Act of 1934, that was--
``(I) issued to the person through
an end user distribution described
under section 42(d)(1) of the
Securities Exchange Act of 1934; or
``(II) acquired by such person in a
transaction that was executed on a
digital commodity exchange;
``(ii) any unit of a digital asset held by
a person, other than the digital asset issuer,
a related person, or an affiliated person,
after the first date on which each blockchain
system to which the digital asset relates is a
functional system and certified to be a
decentralized system under section 44 of the
Securities Exchange Act of 1934; and
``(iii) any unit of a digital asset held by
a related person or an affiliated person during
any period when any blockchain system to which
the digital asset relates is a functional
system and certified to be a decentralized
system under section 44 of the Securities
Exchange Act of 1934.
``(B) Exclusion.--The term `digital commodity' does
not include a permitted payment stablecoin.
``(C) Treatment of adjudicated non-securities.--If,
before enactment of this paragraph, a Federal court in
a Securities and Exchange Commission enforcement action
determines that a digital asset transaction is not an
offer or sale of a security, any unit of a digital
asset transferred pursuant to the transaction shall be
considered a digital commodity, unless the
determination is overturned.
``(56) Digital commodity broker.--
``(A) In general.--The term `digital commodity
broker' means any person who, in a digital commodity
cash or spot market, is--
``(i) engaged in soliciting or accepting
orders for the purchase or sale of a unit of a
digital commodity from a person that is not an
eligible contract participant;
``(ii) engaged in soliciting or accepting
orders for the purchase or sale of a unit of a
digital commodity from a person on or subject
to the rules of a registered entity; or
``(iii) registered with the Commission as a
digital commodity broker.
``(B) Exceptions.--The term `digital commodity
broker' does not include a person solely because the
person--
``(i) enters into a digital commodity
transaction the primary purpose of which is to
make, send, receive, or facilitate payments,
whether involving a payment service provider or
on a peer-to-peer basis;
``(ii) validates a digital commodity
transaction, operates a node, or engages in
similar activity to participate in
facilitating, operating, or securing a
blockchain system; or
``(iii) is a bank (as defined under section
3(a) of the Securities Exchange Act of 1934)
engaging in certain banking activities with
respect to a digital commodity in the same
manner as a bank is excluded from the
definition of a broker under section 3(a)(4) of
the Securities Exchange Act of 1934.
``(57) Digital commodity custodian.--The term `digital
commodity custodian' means an entity in the business of
holding, maintaining, or safeguarding digital commodities for
others.
``(58) Digital commodity dealer.--
``(A) In general.--The term `digital commodity
dealer' means any person who--
``(i) in digital commodity cash or spot
markets--
``(I) holds itself out as a dealer
in a digital commodity;
``(II) makes a market in a digital
commodity;
``(III) has an identifiable
business of dealing in a digital
commodity as principal for its own
account; or
``(IV) engages in any activity
causing the person to be commonly known
in the trade as a dealer or market
maker in a digital commodity;
``(ii) has an identifiable business of
entering into any agreement, contract, or
transaction described in subsection
(c)(2)(D)(i) involving a digital commodity; or
``(iii) is registered with the Commission
as a digital commodity dealer.
``(B) Exception.--The term `digital commodity
dealer' does not include a person solely because the
person--
``(i) enters into a digital commodity
transaction with an eligible contract
participant;
``(ii) enters into a digital commodity
transaction on or through a registered digital
commodity exchange;
``(iii) enters into a digital commodity
transaction for the person's own account,
either individually or in a fiduciary capacity,
but not as a part of a regular business;
``(iv) enters into a digital commodity
transaction the primary purpose of which is to
make, send, receive, or facilitate payments,
whether involving a payment service provider or
on a peer-to-peer basis;
``(v) validates a digital commodity
transaction, operates a node, or engages in
similar activity to participate in
facilitating, operating, or securing a
blockchain system; or
``(vi) is a bank (as defined under section
3(a) of the Securities Exchange Act of 1934)
engaging in certain banking activities with
respect to a digital commodity in the same
manner as a bank is excluded from the
definition of a dealer under section 3(a)(5) of
the Securities Exchange Act of 1934.
``(59) Digital commodity exchange.--The term `digital
commodity exchange' means a trading facility that offers or
seeks to offer a cash or spot market in at least 1 digital
commodity.
``(60) Digital asset-related definitions.--
``(A) Securities act of 1933.--The terms
`affiliated person', `blockchain system',
`decentralized governance system', `decentralized
system', `digital asset', `digital asset issuer', `end
user distribution', `functional system', `permitted
payment stablecoin', `related person', and `restricted
digital asset' have the meaning given the terms,
respectively, under section 2(a) of the Securities Act
of 1933 (15 U.S.C. 77b(a)).
``(B) Securities exchange act of 1934.--The terms
`digital asset broker' and `digital asset dealer' have
the meaning given those terms, respectively, under
section 3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)).
``(61) Mixed digital asset transaction.--The term `mixed
digital asset transaction' means an agreement, contract, or
transaction involving a digital commodity and--
``(A) a security; or
``(B) a restricted digital asset.''.
SEC. 104. DEFINITIONS UNDER THIS ACT.
In this Act:
(1) Definitions under the commodity exchange act.--The
terms ``digital commodity'', ``digital commodity broker'',
``digital commodity dealer'', ``digital commodity exchange'',
and ``mixed digital asset transaction'' have the meaning given
those terms, respectively, under section 1a of the Commodity
Exchange Act (7 U.S.C. 1a).
(2) Definitions under the securities act of 1933.--The
terms ``affiliated person'', ``blockchain'', ``blockchain
system'', ``blockchain protocol'', ``decentralized system'',
``digital asset'', ``digital asset issuer'', ``digital asset
maturity date'', ``digital asset trading system'', ``end user
distribution'', ``functional system'', ``permitted payment
stablecoin'', ``restricted digital asset'', ``securities
laws'', and ``source code'' have the meaning given those terms,
respectively, under section 2(a) of the Securities Act of 1933
(15 U.S.C. 77b(a)).
(3) Definitions under the securities exchange act of
1934.--The terms ``Bank Secrecy Act'', ``digital asset
broker'', ``digital asset dealer'', ``digital asset trading
system'', and ``self-regulatory organization'' have the meaning
given those terms, respectively, under section 3(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
SEC. 105. RULEMAKINGS.
(a) Definitions.--The Commodity Futures Trading Commission and the
Securities and Exchange Commission shall jointly issue rules to further
define the following terms:
(1) The terms ``affiliated person'', ``blockchain'',
``blockchain system'', ``blockchain protocol'', ``decentralized
system'', ``decentralized governance system'', ``digital
asset'', ``digital asset issuer'', ``digital asset maturity
date'', ``end user distribution'', ``functional system'',
``related person'', ``restricted digital asset'', and ``source
code'', as defined under section 2(a) of the Securities Act of
1933.
(2) The term ``digital commodity'', as defined under
section 1a of the Commodity Exchange Act.
(b) Joint Rulemaking for Exchanges and Intermediaries.--The
Commodity Futures Trading Commission and the Securities and Exchange
Commission shall jointly issue rules to exempt persons dually
registered with the Commodity Futures Trading Commission and the
Securities and Exchange Commission from duplicative, conflicting, or
unduly burdensome provisions of this Act, the securities laws, and the
Commodity Exchange Act and the rules thereunder, to the extent such
exemption would foster the development of fair and orderly markets in
digital assets, be necessary or appropriate in the public interest, and
be consistent with the protection of investors.
(c) Joint Rulemaking for Mixed Digital Asset Transactions.--The
Commodity Futures Trading Commission and the Securities and Exchange
Commission shall jointly issue rules applicable to mixed digital asset
transactions under this Act and the amendments made by this Act,
including by further defining such term.
(d) Protection of Self-custody.--
(1) In general.--The Financial Crimes Enforcement Network
may not issue any rule or order that would prohibit a U.S.
individual from--
(A) maintaining a hardware wallet, software wallet,
or other means to facilitate such individual's own
custody of digital assets; or
(B) conducting transactions with and self-custody
of digital assets for any lawful purpose.
(2) Rule of construction.--Paragraph (1) may not be
construed to limit the ability of Financial Crimes Enforcement
Network to carry out any enforcement action.
(e) Joint Rulemaking, Procedures, or Guidance for Delisting.--Not
later than 30 days after the date of the enactment of this Act, the
Commodity Futures Trading Commission and the Securities and Exchange
Commission shall jointly issue rules, procedures, or guidance (as
determined appropriate by the Commissions) regarding the process to
delist an asset for trading under sections 106 and 107 of this Act if
the Commissions determine that the listing is inconsistent with the
Commodity Exchange Act, the securities laws (including regulations
under those laws), or this Act.
(f) Joint Rulemaking for Capital Requirements.--The Commodity
Futures Trading Commission and the Securities and Exchange Commission
shall jointly issue rules to require a person with multiple
registrations with the Commodity Futures Trading Commission, the
Securities and Exchange Commission, or both such agencies to maintain
sufficient capital to comply with the stricter of any applicable
capital requirements to which such person is subject to by reason of
such registrations.
SEC. 106. NOTICE OF INTENT TO REGISTER FOR DIGITAL COMMODITY EXCHANGES,
BROKERS, AND DEALERS.
(a) In General.--
(1) Notice of intent to register.--Any person may file a
notice of intent to register with the Commodity Futures Trading
Commission (in this subsection referred to as the
``Commission'') as a--
(A) digital commodity exchange, for a person
intending to register as a digital commodity exchange
under section 5i of the Commodity Exchange Act;
(B) digital commodity broker, for a person
intending to register as a digital commodity broker
under section 4u of such Act; or
(C) digital commodity dealer, for a person
intending to register as a digital commodity dealer
under section 4u of such Act.
(2) Conditions.--A person filing a notice of intent to
register under paragraph (1) shall be in compliance with this
section if the person--
(A) submits to the Commission and continues to
materially update a statement of the nature of the
registrations the filer intends to pursue;
(B) submits to the Commission and continues to
materially update the information required by
subsections (b) and (c);
(C) complies with subsection (d);
(D) is a member of a futures association registered
under section 17 of the Commodity Exchange Act, and
complies with the rules of the association, including
the rules of the association pertaining to customer
disclosures and protection of customer assets; and
(E) pays all fees and penalties imposed on the
person under section 510 of this Act.
(b) Disclosure of General Information.--A person filing a notice of
intent to register under subsection (a) shall disclose to the
Commission the following:
(1) Information concerning the management of the person,
including information describing--
(A) the ownership and management of the person;
(B) the financial condition of the person;
(C) affiliated entities;
(D) potential conflicts of interest;
(E) the address of the person, including--
(i) the place of incorporation;
(ii) principal place of business; and
(iii) an address for service of process;
and
(F) a list of the States in which the person has
operations.
(2) Information concerning the operations of the person,
including--
(A) a general description of the person's business
and the terms of service for United States customers;
(B) a description of the person's account approval
process;
(C) any rulebook or other customer order fulfilment
rules;
(D) risk management procedures;
(E) a description of the product listing process;
and
(F) anti-money laundering policies and procedures.
(c) Listing Information.--A person filing a notice of intent to
register under subsection (a) shall provide to the Commission and the
Securities and Exchange Commission a detailed description of--
(1) the specific characteristics of each digital asset
listed or offered by the person, including information
regarding the digital asset's market activity, distribution,
and functional use; and
(2) the product listing determination made by the person
for each asset listed or offered for trading by the person.
(d) Requirements.--A person filing a notice of intent to register
under subsection (a) shall comply with the following requirements:
(1) Statutory disqualifications.--Except to the extent
otherwise specifically provided by Commission or registered
futures association rule, regulation, or order, the person
shall not permit an individual who is subject to a statutory
disqualification under paragraph (2) or (3) of section 8a of
the Commodity Exchange Act to effect or be involved in
effecting transactions on behalf of the person, if the person
knew, or in the exercise of reasonable care should have known,
of the statutory disqualification.
(2) Books and records.--The person shall keep their books
and records open to inspection and examination by the
Commission and by any registered futures association of which
the person is a member.
(3) Customer disclosures.--The person shall disclose to
customers--
(A) information about the material risks and
characteristics of the assets listed for trading on the
person;
(B) information about the material risks and
characteristics of the transactions facilitated by the
person;
(C) information about the location and manner in
which the digital assets of the customer will be and
are custodied;
(D) information concerning the policies and
procedures of the person that are related to the
protection of the data of customers of the person; and
(E) in their disclosure documents, offering
documents, and promotional material--
(i) in a prominent manner, that they are
not registered with or regulated by the
Commission; and
(ii) the contact information for the
whistleblower, complaint, and reparation
programs of the Commission.
(4) Customer assets.--
(A) In general.--The person shall--
(i) hold customer money, assets, and
property in a manner to minimize the risk of
loss to the customer or unreasonable delay in
customer access to money, assets, and property
of the customer;
(ii) treat and deal with all money, assets,
and property, including any rights associated
with any such money, assets, or property, of
any customer received as belonging to the
customer;
(iii) calculate the total digital asset
obligations of the person, and at all times
hold money, assets, or property equal to or in
excess of the total digital asset obligations;
and
(iv) not commingle such money, assets and
property held to meet the total commodity
obligation with the funds of the person or use
the money, assets, or property to margin,
secure, or guarantee any trade or contract, or
to secure or extend the credit, of any customer
or person other than the one for whom the same
are held, except that--
(I) the money, assets, and property
of any customer may be commingled with
that of any other customer, if
separately accounted for; and
(II) the share of the money,
assets, and property, as in the normal
course of business are necessary to
margin, guarantee, secure, transfer,
adjust, or settle a contract of sale of
a commodity asset, may be withdrawn and
applied to do so, including the payment
of commissions, brokerage, interest,
taxes, storage, and other charges
lawfully accruing in connection with
the contract of sale of a digital
commodity.
(B) Additional resources.--
(i) In general.--This section shall not
prevent or be construed to prevent the person
from adding to the customer money, assets, and
property required to be segregated under
subparagraph (A), additional amounts of money,
assets, or property from the account of the
person as the person determines necessary to
hold money, assets, or property equal to or in
excess of the total digital asset obligations
of the person.
(ii) Treatment as customer funds.--Any
money, assets, or property deposited pursuant
to clause (i) shall be considered customer
property within the meaning of this subsection.
(e) Compliance.--
(1) In general.--A person who has filed a notice of intent
to register under this section and is in compliance with this
section shall be exempt from Securities and Exchange Commission
rules and regulations pertaining to registering as a national
securities exchange, broker, dealer, or clearing agency, for
activities related to a digital asset.
(2) Noncompliance.--Paragraph (1) shall not apply if, after
notice from the Commission and a reasonable opportunity to
correct the deficiency, a person who has submitted a notice of
intent to register is not in compliance with this section.
(3) Anti-fraud and anti-manipulation.--Paragraph (1) shall
not be construed to limit any anti-fraud, anti-manipulation, or
false reporting enforcement authority of the Commission, the
Securities and Exchange Commission, a registered futures
association, or a national securities association.
(4) Delisting.--Paragraph (1) shall not be construed to
limit the authority of the Commission and the Securities and
Exchange Commission to jointly require a person to delist an
asset for trading if the Commission and the Securities and
Exchange Commission determines that the listing is inconsistent
with the Commodity Exchange Act, the securities laws (including
regulations under those laws), or this Act.
(f) Registration.--
(1) In general.--A person may not file a notice of intent
to register with the Commission after the Commission has
finalized its rules for the registration of digital commodity
exchanges, digital commodity brokers, or digital commodity
dealers, as appropriate.
(2) Transition to registration.--Subsection (e)(1) shall
not apply to a person who has submitted a notice of intent to
register if--
(A) the Commission--
(i) determines that the person has failed
to comply with the requirements of this
section; or
(ii) denies the application of the person
to register; or
(B) the digital commodity exchange, digital
commodity broker, or digital commodity dealer that
filed a notice of intent to register failed to apply
for registration as such with the Commission within 180
days after the effective date of the final rules of the
Commission for the registration of digital commodity
exchanges, digital commodity brokers, or digital
commodity dealers, as appropriate.
(g) Rulemaking.--
(1) In general.--Within 180 days after the date of the
enactment of this Act, a registered futures association shall
adopt and enforce rules applicable to persons required by
subsection (a)(3) to be members of the association.
(2) Fees.--The rules adopted under paragraph (1) may
provide for dues in accordance with section 17(b)(6) of the
Commodity Exchange Act.
(3) Effect.--A registered futures association shall submit
to the Commission any rule adopted under paragraph (1), which
shall take effect pursuant to the requirements of section 17(j)
of the Commodity Exchange Act.
(h) Liability of the Filer.--It shall be unlawful for any person to
provide false information in support of a filing under this section if
the person knew or reasonably should have known that the information
was false.
(i) Whistleblower Enforcement.--For purposes of section 23 of the
Commodity Exchange Act, the term ``this Act'' includes this section.
SEC. 107. NOTICE OF INTENT TO REGISTER FOR DIGITAL ASSET BROKERS,
DEALERS, AND TRADING SYSTEMS.
(a) In General.--
(1) Notice of intent to register.--Any person may file a
notice of intent to register with the Securities and Exchange
Commission (in this section referred to as the ``Commission'')
as--
(A) a digital asset trading system, for a person
intending to register as a digital asset trading system
under section 6(m) of the Securities Exchange Act of
1934;
(B) a digital asset broker, for a person intending
to register as a digital asset broker under section 15H
of the Securities Exchange Act of 1934; or
(C) a digital asset dealer, for a person intending
to register as a digital asset dealer under section 15H
of the Securities Exchange Act of 1934.
(2) Conditions.--A person filing a notice of intent to
register under paragraph (1) shall be in compliance with this
section if the person--
(A) submits to the Commission and continues to
materially update a statement of the nature of the
registrations the filer intends to pursue;
(B) submits to the Commission and continues to
materially update the information required by
subsections (b) and (c);
(C) complies with the requirements of subsection
(d); and
(D) is a member of a national securities
association registered under section 15A of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-3) and
complies with the rules of the association, including
the rules of the association pertaining to customer
disclosures and protection of customer assets.
(b) Disclosure of General Information.--A person filing a notice of
intent to register under subsection (a) shall disclose to the
Commission the following:
(1) Information concerning the management of the person,
including information describing--
(A) the ownership and management of the person;
(B) the financial condition of the person;
(C) affiliated entities;
(D) potential conflicts of interest;
(E) the address of the person, including--
(i) the place of incorporation;
(ii) the principal place of business; and
(iii) an address for service of process;
and
(F) a list of the States in which the person has
operations.
(2) Information concerning the operations of the person,
including--
(A) a general description of the person's business
and the terms of service for United States customers;
(B) a description of the person's account approval
process;
(C) any rulebook or other customer order fulfilment
rules;
(D) risk management procedures;
(E) a description of the product listing process;
and
(F) anti-money laundering policies and procedures.
(c) Listing Information.--A person filing a notice of intent to
register under subsection (a) shall provide to the Commission and the
Commodity Futures Trading Commission a detailed description of--
(1) the specific characteristics of each digital asset
listed or offered for trading by the person, including
information regarding the digital asset's market activity,
distribution, and functional use; and
(2) the product listing determination made by the person
for each asset listed or offered for trading by the person.
(d) Requirements.--A person filing a notice of intent to register
under subsection (a) shall comply with the following requirements:
(1) Statutory disqualification.--Except to the extent
otherwise specifically provided by Commission or a national
securities association rule, regulation, or order, the person
may not permit an individual who is subject to a statutory
disqualification (as defined under section 3(a) of the
Securities Exchange Act of 1934) to effect or be involved in
effecting transactions on behalf of the person if the person
knows, or in the exercise of reasonable discretion should know,
the individual is subject to a statutory disqualification.
(2) Books and records.--The person shall keep their books
and records open to inspection and examination by the
Commission and any national securities association of which
they are a member.
(3) Customer disclosures.--The person shall disclose to
customers--
(A) information about the material risks and
characteristics of the assets listed for trading on the
person;
(B) information about the material risks and
characteristics of the transactions facilitated by the
person;
(C) information about the location and manner in
which the digital assets of the customer will be and
are custodied;
(D) information concerning the person's policies
and procedures related to the protection of customers'
data; and
(E) in their disclosure documents, offering
documents, and promotional material--
(i) in a prominent manner, that they are
not registered with or regulated by the
Commission; and
(ii) the contact information for the
whistleblower, complaint, and reparation
programs of the Commission.
(4) Customer assets.--
(A) In general.--The person shall--
(i) hold customer money, assets, and
property in a manner to minimize the risk of
loss to the customer or unreasonable delay in
customer access to money, assets, and property
of the customer;
(ii) treat and deal with all money, assets,
and property, including any rights associated
with any such money, assets, or property, of
any customer received as belonging to the
customer;
(iii) segregate all money, assets, and
property received from any customer of the
person from the funds of the person, except
that--
(I) the money, assets, and property
of any customer may be commingled with
that of any other customer, if
separately accounted for; and
(II) the share of the money,
assets, and property, as in the normal
course of business are necessary to
margin, guarantee, secure, transfer,
adjust, or settle a contract of sale of
a digital asset, may be withdrawn and
applied to do so, including the payment
of commissions, brokerage, interest,
taxes, storage, and other charges
lawfully accruing in connection with
the contract of sale of a digital
asset.
(B) Additional resources.--
(i) In general.--This section shall not
prevent or be construed to prevent the person
from adding to the customer money, assets, and
property required to be segregated under
subparagraph (A) additional amounts of money,
assets, or property from the account of the
person as the person determines necessary to
hold money, assets, or property equal to or in
excess of the total digital asset obligation of
the person.
(ii) Treatment as customer funds.--Any
money, assets, or property deposited pursuant
to clause (i) shall be considered customer
property within the meaning of this subsection.
(e) Compliance.--
(1) In general.--A person who has filed a notice of intent
to register under this section and is in compliance with this
section shall be exempt from Commission rules and regulations
pertaining to registering as a national securities exchange,
broker, dealer, or clearing agency, for activities related to a
digital asset.
(2) Noncompliance.--Paragraph (1) shall not apply if, after
notice from the Commission and a reasonable opportunity to
correct the deficiency, a person who has submitted a notice of
intent to register is not in compliance with this section.
(3) Anti-fraud and anti-manipulation.--Paragraph (1) shall
not be construed to limit any fraud, anti-manipulation, or
false reporting enforcement authority of the Commission, the
Commodity Futures Trading Commission, a registered futures
association, or a national securities association.
(4) Delisting.--Paragraph (1) shall not be construed to
limit the authority of the Commission and the Commodity Futures
Trading Commission to jointly require a person to delist an
asset for trading if the Commission and the Commodity Futures
Trading Commission determines that the listing is inconsistent
with the Commodity Exchange Act, the securities laws (including
regulations under those laws), or this Act.
(f) Registration.--
(1) In general.--A person may not file a notice of intent
to register with the Commission after the Commission has
finalized its rules for the registration of digital asset
brokers, digital asset dealers, digital asset trading systems,
and notice-registered clearing agencies, as appropriate.
(2) Transition to registration.--Subsection (e)(1) shall
not apply to a person who has submitted a notice of intent to
register if--
(A) the Commission--
(i) determines that the person has failed
to comply with the requirements of this
section; or
(ii) denies the application of the person
to register; or
(B) the digital asset broker, digital asset dealer,
or digital asset trading system that filed a notice of
intent to register failed to apply for registration as
such with the Commission within 180 days after the
effective date of the Commission's final rules for the
registration of digital asset brokers, digital asset
dealers, and digital asset trading systems, as
appropriate.
(g) Liability of the Filer.--It shall be unlawful for any person to
provide false information in support of a filing under this section if
the person knew or reasonably should have known that the information
was false.
(h) National Securities Association.--
(1) In general.--A national securities association may
adopt and enforce rules written specifically for persons filing
a notice of intent to register under subsection (a), including
rules that prescribe reasonable fees and charges to defray the
costs of the national securities association related to
overseeing such persons.
(2) Approval by the commission.--With respect to a
provisional rule described under paragraph (1) filed with the
Commission, the Commission shall--
(A) not later than 90 days following the date of
such filing, approve the rule if the Commission
determines that the rule effectuates the purposes of
this section; and
(B) make such approval on a summary basis pursuant
to section 19(b)(3)(B) of the Securities Exchange Act
of 1934.
(i) Whistleblower Enforcement.--For purposes of section 21F of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-6), the term
``securities laws'' includes this section.
SEC. 108. COMMODITY EXCHANGE ACT SAVINGS PROVISIONS.
(a) In General.--Nothing in this Act shall affect or apply to, or
be interpreted to affect or apply to--
(1) any agreement, contract, or transaction that is subject
to the Commodity Exchange Act as--
(A) a contract of sale of a commodity for future
delivery or an option on such a contract;
(B) a swap;
(C) a security futures product;
(D) an option authorized under section 4c of such
Act;
(E) an agreement, contract, or transaction
described in section 2(c)(2)(C)(i) of such Act; or
(F) a leverage transaction authorized under section
19 of such Act; or
(2) the activities of any person with respect to any such
agreement, contract, or transaction.
(b) Prohibitions on Spot Digital Commodity Entities.--Nothing in
this Act authorizes, or shall be interpreted to authorize, a digital
commodity exchange, digital commodity broker, or digital commodity
dealer to engage in any activities involving any transaction, contract,
or agreement described in subsection (a)(1), solely by virtue of being
registered or filing notice of intent to register as a digital
commodity exchange, digital commodity broker, or digital commodity
dealer.
(c) Definitions.--In this section, each term shall have the meaning
provided in the Commodity Exchange Act or the regulations prescribed
under such Act.
SEC. 109. ADMINISTRATIVE REQUIREMENTS.
(a) Securities and Exchange Act of 1934.--Section 21A of the
Securities and Exchange Act of 1934 (15 U.S.C. 78u-1) is amended by
adding at the end the following:
``(j) Duty of Members and Federal Employees Related to Digital
Assets.--
``(1) In general.--Solely for purposes of the insider
trading prohibitions arising under this Act, including section
10 and Rule 10b-5 thereunder, each individual who is a Member
of Congress, an employee of Congress, or an employee or agent
of any department or agency of the Federal Government owes a
duty arising from a relationship of trust and confidence to the
Congress, the United States Government, and the citizens of the
United States with respect to material, nonpublic information
related to a restricted digital asset that is derived from such
individual's position as a Member of Congress, employee of
Congress, or as an employee or agent of a department or agency
of the Federal Government or gained from the performance of
such individual's official responsibilities.
``(2) Definitions.--ln this subsection, the terms `Member
of Congress' and `employee of Congress' have the meaning given
those terms, respectively, under subsection (g)(2).''.
(b) Commodity Exchange Act.--Section 4c(a) of the Commodity
Exchange Act (7 U.S.C. 6c(a)) is amended--
(1) in paragraph (3)--
(A) in subparagraph (B), by striking ``or'' at the
end;
(B) in subparagraph (C), by striking the period and
inserting ``; or''; and
(C) by adding at the end the following:
``(D) a contract of sale of a digital commodity.'';
(2) in paragraph (4)--
(A) in subparagraph (A)--
(i) in clause (ii), by striking ``or'' at
the end;
(ii) in clause (iii), by striking the
period and inserting ``; or''; and
(iii) by adding at the end the following:
``(iv) a contract of sale of a digital
commodity.'';
(B) in subparagraph (B)--
(i) in clause (ii), by striking ``or'' at
the end;
(ii) in clause (iii), by striking the
period and inserting ``; or''; and
(iii) by adding at the end the following:
``(iv) a contract of sale of a digital
commodity.''; and
(C) in subparagraph (C)--
(i) in clause (ii), by striking ``or'' at
the end;
(ii) by striking ``(iii) a swap, provided
however,'' and inserting the following:
``(iii) a swap; or
``(iv) a contract of sale of a digital
commodity,
provided, however,''; and
(iii) by striking ``clauses (i), (ii), or
(iii)'' and insert ``any of clauses (i) through
(iv)''.
SEC. 110. INTERNATIONAL HARMONIZATION.
In order to promote effective and consistent global regulation of
digital assets, the Commodity Futures Trading Commission and the
Securities and Exchange Commission, as appropriate--
(1) shall consult and coordinate with foreign regulatory
authorities on the establishment of consistent international
standards with respect to the regulation of digital assets,
restricted digital assets, and digital commodities; and
(2) may agree to such information-sharing arrangements as
may be deemed to be necessary or appropriate in the public
interest or for the protection of investors, customers, and
users of digital assets.
SEC. 111. IMPLEMENTATION.
(a) Global Rulemaking Timeframe.--Unless otherwise provided in this
Act or an amendment made by this Act, the Commodity Futures Trading
Commission and the Securities and Exchange Commission, or both, shall
individually, and jointly where required, promulgate rules and
regulations required of each Commission under this Act or an amendment
made by this Act not later than 360 days after the date of enactment of
this Act.
(b) Rules and Registration Before Final Effective Dates.--
(1) In general.--In order to prepare for the implementation
of this Act, the Commodity Futures Trading Commission and the
Securities and Exchange Commission may, before any effective
date provided in this Act--
(A) promulgate rules, regulations, or orders
permitted or required by this Act;
(B) conduct studies and prepare reports and
recommendations required by this Act;
(C) register persons under this Act; and
(D) exempt persons, agreements, contracts, or
transactions from provisions of this Act, under the
terms contained in this Act.
(2) Limitation on effectiveness.--An action by the
Commodity Futures Trading Commission or the Securities and
Exchange Commission under paragraph (1) shall not become
effective before the effective date otherwise applicable to the
action under this Act.
SEC. 112. APPLICATION OF THE BANK SECRECY ACT.
(a) In General.--Section 5312 of title 31, United States Code, is
amended--
(1) in subsection (a)(2)(G), by striking ``or dealer'' and
inserting ``, dealer, digital asset broker, digital asset
dealer, or digital asset trading system''; and
(2) in subsection (c)(1)(A)--
(A) by inserting ``digital commodity broker,
digital commodity dealer,'' after ``futures commission
merchant,''; and
(B) by inserting before the period the following:
``and any digital commodity exchange registered, or
required to register, under the Commodity Exchange Act
which permits direct customer access''.
(b) GAO Study.--
(1) In general.--The Comptroller General of the United
States, in consultation with the Secretary of the Treasury,
shall conduct a study to--
(A) assess the risks posed by centralized
intermediaries that are primarily located in foreign
jurisdictions that provide services to U.S. persons
without regulatory requirements that are substantially
similar to the requirements of the Bank Secrecy Act;
and
(B) provide any regulatory or legislative
recommendations to address these risks under
subparagraph (A).
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General shall issue a
report to Congress containing all findings and determinations
made in carrying out the study required under paragraph (1).
TITLE II--CLARITY FOR ASSETS OFFERED AS PART OF AN INVESTMENT CONTRACT
SEC. 201. SHORT TITLE.
This title may be referred to as the ``Securities Clarity Act of
2024''.
SEC. 202. TREATMENT OF INVESTMENT CONTRACT ASSETS.
(a) Securities Act of 1933.--Section 2(a) of the Securities Act of
1933 (15 U.S.C. 77b(a)), as amended by section 101, is further
amended--
(1) in paragraph (1), by adding at the end the following:
``The term `security' does not include an investment contract
asset.''; and
(2) by adding at the end the following:
``(37) The term `investment contract asset' means a
fungible digital representation of value--
``(A) that can be exclusively possessed and
transferred, person to person, without necessary
reliance on an intermediary, and is recorded on a
cryptographically secured public distributed ledger;
``(B) sold or otherwise transferred, or intended to
be sold or otherwise transferred, pursuant to an
investment contract; and
``(C) that is not otherwise a security pursuant to
the first sentence of paragraph (1).''.
(b) Investment Advisers Act of 1940.--Section 202(a)(18) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(18)) is amended by
adding at the end the following: ``The term `security' does not include
an investment contract asset (as such term is defined under section
2(a) of the Securities Act of 1933).''.
(c) Investment Company Act of 1940.--Section 2(a)(36) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(36)) is amended by
adding at the end the following: ``The term `security' does not include
an investment contract asset (as such term is defined under section
2(a) of the Securities Act of 1933).''.
(d) Securities Exchange Act of 1934.--Section 3(a)(10) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)) is amended by
adding at the end the following: ``The term `security' does not include
an investment contract asset (as such term is defined under section
2(a) of the Securities Act of 1933).''.
(e) Securities Investor Protection Act of 1970.--Section 16(14) of
the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll(14)) is
amended by adding at the end the following: ``The term `security' does
not include an investment contract asset (as such term is defined under
section 2(a) of the Securities Act of 1933).''.
TITLE III--OFFERS AND SALES OF DIGITAL ASSETS
SEC. 301. EXEMPTED TRANSACTIONS IN DIGITAL ASSETS.
(a) In General.--The Securities Act of 1933 (15 U.S.C. 77a et seq.)
is amended--
(1) in section 4(a), by adding at the end the following:
``(8) transactions involving the offer or sale of units of
a digital asset by a digital asset issuer, if--
``(A) the aggregate amount of units of the digital
asset sold by the digital asset issuer in reliance on
the exemption provided under this paragraph, during the
12-month period preceding the date of such transaction,
including the amount sold in such transaction, is not
more than $75,000,000 (as such amount is annually
adjusted by the Commission to reflect the change in the
Consumer Price Index for All Urban Consumers published
by the Bureau of Labor Statistics of the Department of
Labor);
``(B) with respect to a transaction involving the
purchase of units of a digital asset by a person who is
not an accredited investor, the aggregate amount of all
units of digital assets purchased by such person during
the 12-month period preceding the date of such
transaction, including the unit of a digital asset
purchased in such transaction, does not exceed the
greater of--
``(i) 10 percent of the person's annual
income or joint income with that person's
spouse or spousal equivalent; or
``(ii) 10 percent of the person's net worth
or joint net worth with the person's spouse or
spousal equivalent;
``(C) after the completion of the transaction, the
purchaser does not own more than 10 percent of the
total amount of the units of the digital asset sold in
reliance on the exemption under this paragraph;
``(D) the transaction does not involve the offer or
sale of any digital asset not offered as part of an
investment contract;
``(E) the transaction does not involve the offer or
sale of a unit of a digital asset by a digital asset
issuer that--
``(i) is not organized under the laws of a
State, a territory of the United States, or the
District of Columbia;
``(ii) is a development stage company that
either--
``(I) has no specific business plan
or purpose; or
``(II) has indicated that the
business plan of the company is to
merge with or acquire an unidentified
company;
``(iii) is an investment company, as
defined in section 3 of the Investment Company
Act of 1940 (15 U.S.C. 80a-3), or is excluded
from the definition of investment company by
section 3(b) or section 3(c) of that Act (15
U.S.C. 80a-3(b) or 80a-3(c));
``(iv) is issuing fractional undivided
interests in oil or gas rights, or a similar
interest in other mineral rights;
``(v) is, or has been, subject to any order
of the Commission entered pursuant to section
12(j) of the Securities Exchange Act of 1934
during the 5-year period before the filing of
the offering statement; or
``(vi) is disqualified pursuant to section
230.262 of title 17, Code of Federal
Regulations; and
``(F) the issuer meets the requirements of section
4B(a).''; and
(2) by inserting after section 4A the following:
``SEC. 4B. REQUIREMENTS WITH RESPECT TO CERTAIN DIGITAL ASSET
TRANSACTIONS.
``(a) Requirements for Digital Asset Issuers.--
``(1) Information required in statement.--A digital asset
issuer offering or selling a unit of digital asset in reliance
on section 4(a)(8) shall file with the Commission a statement
containing the following information:
``(A) The name, legal status (including the
jurisdiction in which the issuer is organized and the
date of organization), and website of the digital asset
issuer.
``(B) The address and telephone number of the
issuer or a legal representative of the issuer.
``(C) A certification that the digital asset issuer
meets the relevant requirements described under section
4(a)(8).
``(D) An overview of the material aspects of the
offering.
``(E) A description of the purpose and intended use
of the offering proceeds.
``(F) A description of the plan of distribution of
any unit of a digital asset that is to be offered.
``(G) A description of the material risks
surrounding ownership of a unit of a digital asset.
``(H) A description of the material aspects of the
digital asset issuer's business.
``(I) A description of exempt offerings conducted
within the past three years by the digital asset
issuer.
``(J) A description of the digital asset issuer and
the current number of employees of the digital asset
issuer.
``(K) A description of any material transactions or
relationships between the digital asset issuer and
affiliated persons.
``(L) A description of exempt offerings conducted
within the past three years.
``(2) Information required for purchasers.--A digital asset
issuer that has filed a statement under paragraph (1) to offer
and sell a unit of a digital asset in reliance on section
4(a)(8) shall disclose the information described under section
43 of the Securities Exchange Act of 1934 on a freely
accessible public website.
``(3) Ongoing disclosure requirements.--A digital asset
issuer that has filed a statement under paragraph (1) to offer
and sell a unit of a digital asset in reliance on section
4(a)(8) shall file the following with the Commission:
``(A) Annual reports.--An annual report that
includes any material changes to the information
described under paragraph (2) for the current fiscal
year and for any fiscal year thereafter, unless the
issuer is no longer obligated to file such annual
report pursuant to paragraph (4).
``(B) Semiannual reports.--Along with each annual
report required under subparagraph (A), and separately
six months thereafter, a report containing--
``(i) an updated description of the current
state and timeline for the development of the
blockchain system to which the digital asset
relates, showing how and when the blockchain
system intends or intended to be considered a
functional system and a decentralized system;
``(ii) the amount of money raised by the
digital asset issuer in reliance on section
4(a)(8), how much of that money has been spent,
and the general categories and amounts on which
that money has been spent; and
``(iii) any material changes to the
information in the most recent annual report.
``(C) Current reports.--A current report shall be
filed with the Commission reflecting any material
changes to the information previously reported to the
Commission by the digital asset issuer.
``(4) Termination of reporting requirements.--
``(A) In general.--The ongoing reporting
requirements under paragraph (3) shall not apply to a
digital asset issuer 180 days after the end of the
covered fiscal year.
``(B) Covered fiscal year defined.--In this
paragraph, the term `covered fiscal year' means the
first fiscal year of an issuer in which the blockchain
system to which the digital asset relates is a
functional system and certified to be a decentralized
system under section 44 of the Securities Exchange Act
of 1934.
``(b) Requirements for Intermediaries.--
``(1) In general.--A person acting as an intermediary in a
transaction involving the offer or sale of a unit of a digital
asset in reliance on section 4(a)(8) shall--
``(A) register with the Commission as a digital
asset broker; and
``(B) be a member of a national securities
association registered under section 15A of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-3).
``(2) Purchaser qualification.--
``(A) In general.--Each time, before accepting any
commitment (including any additional commitment from
the same person), an intermediary or digital asset
issuer shall have a reasonable basis for believing that
the purchaser satisfies the requirements of section
4(a)(8).
``(B) Reliance on purchaser's representations.--For
purposes of subparagraph (A), an intermediary or
digital asset issuer may rely on a purchaser's
representations concerning the purchaser's annual
income and net worth and the amount of the purchaser's
other investments made, unless the intermediary or
digital asset issuer has reason to question the
reliability of the representation.
``(C) Reliance on issuer.--For purposes of
determining whether a transaction meets the
requirements described under subparagraph (A) through
(C) of section 4(a)(8), an intermediary may rely on the
efforts of a digital asset issuer.
``(c) Additional Provisions.--
``(1) Acceptance of written offers; sales.--After an issuer
files a statement under paragraph (1) to offer and sell a
digital asset in reliance on section 4(a)(8)--
``(A) written offers of the digital asset may be
made; and
``(B) the issuer may sell the digital assets in
reliance on section 4(a)(8), if such sales meet all
other requirements.
``(2) Solicitation of interest.--
``(A) In general.--At any time before the filing of
a statement under paragraph (1), a digital asset issuer
may communicate orally or in writing to determine
whether there is any interest in a contemplated
offering. Such communications are deemed to be an offer
of a unit of a digital asset for sale for purposes of
the anti-fraud provisions of the Federal securities
laws. No solicitation or acceptance of money or other
consideration, nor of any commitment, binding or
otherwise, from any person is permitted until the
statement is filed.
``(B) Conditions.--In any communication described
under subparagraph (A), the digital asset issuer
shall--
``(i) state that no money or other
consideration is being solicited, and if sent
in response, will not be accepted;
``(ii) state that no offer to buy a unit of
a digital asset can be accepted and no part of
the purchase price can be received until the
statement is filed and then only through an
intermediary; and
``(iii) state that a person's indication of
interest involves no obligation or commitment
of any kind.
``(C) Indications of interest.--Any written
communication described under subparagraph (A) may
include a means by which a person may indicate to the
digital asset issuer that such person is interested in
a potential offering. A digital asset issuer may
require a name, address, telephone number, or email
address in any response form included with a
communication described under subparagraph (A).
``(3) Disqualification provisions.--The Commission shall
issue rules to apply the disqualification provisions under
section 230.262 of title 17, Code of Federal Regulations, to
the exemption provided under section 4(a)(8).''.
(b) Additional Exemptions.--
(1) Certain registration requirements.--Section 12(g)(6) of
the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(6)) is
amended by striking ``under section 4(6)'' and inserting
``under section 4(a)(6) or 4(a)(8)''.
(2) Exemption from state regulation.--Section 18(b)(4) of
the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is amended--
(A) in section (B), by striking ``section 4(4)''
and inserting ``section 4(a)(4)'';
(B) in section (C), by striking ``section 4(6)''
and inserting ``section 4(a)(6)'';
(C) in subparagraph (F)--
(i) by striking ``section 4(2)'' each place
such term appears and inserting ``section
4(a)(2)'';
(ii) by striking ``or'' at the end;
(D) in subparagraph (G), by striking the period and
inserting ``; or''; and
(E) by adding at the end the following:
``(H) section 4(a)(8).''.
SEC. 302. REQUIREMENTS FOR OFFERS AND SALES OF CERTAIN DIGITAL ASSETS.
(a) In General.--Title I of the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) is amended by adding at the end the following:
``SEC. 42. REQUIREMENTS FOR OFFERS AND SALES OF CERTAIN DIGITAL ASSETS.
``(a) Offers and Sales of Certain Restricted Digital Assets.--
``(1) In general.--Notwithstanding any other provision of
law, subject to paragraph (2), a restricted digital asset may
be offered and sold on a digital asset trading system by any
person other than a digital asset issuer if, at the time of
such offer or sale, any blockchain system to which the
restricted digital asset relates is a functional system and the
information described in section 43 has been certified and made
publicly available for any blockchain system to which the
restricted digital asset relates.
``(2) Additional rules for related persons and affiliated
persons.--Except as provided under subsection (c), a restricted
digital asset owned by a related person or an affiliated person
may only be offered or sold after 12 months after the later
of--
``(A) the date on which such restricted digital
asset was acquired; or
``(B) the digital asset maturity date.
``(b) Offers and Sales of Certain Digital Commodities.--
``(1) In general.--Subject to paragraph (2), a digital
commodity may be offered and sold by any person.
``(2) Rules for related and affiliated persons.--Except as
provided under subsection (c), a digital commodity may only be
offered or sold by a related person or an affiliated person
if--
``(A) the holder of the digital commodity
originally acquired the digital asset while it was a
restricted digital asset not less than 12 months after
the later of--
``(i) the date on which such restricted
digital asset was acquired; or
``(ii) the digital asset maturity date;
``(B) any blockchain system to which the digital
commodity relates is certified to be a decentralized
system under section 44; and
``(C) the digital commodity is offered or sold on
or subject to the rules of a digital commodity exchange
registered under section 5i of the Commodity Exchange
Act.
``(3) Not an investment contract.--For purposes of the
securities laws, an offer or sale of a digital commodity that
does not violate paragraph (2) shall not be a transaction in an
investment contract.
``(c) Sales Restrictions for Affiliated Persons.--A digital asset
may be offered and sold by an affiliated person under subsection (a) or
(b) if--
``(1) the aggregate amount of such digital assets sold in
any 3-month period by the affiliated person is not greater than
one percent of the digital assets then outstanding; or
``(2) the affiliated person promptly, following the
placement of an order to sell one percent or more of the
digital assets then outstanding during any 3-month period,
reports the sale to--
``(A) the Commodity Futures Trading Commission, in
the case of an order to sell a digital commodity on or
subject to the rules of a digital commodity exchange;
or
``(B) the Securities and Exchange Commission, in
the case of a sell order for a restricted digital asset
placed with a digital asset trading system.
``(d) Treatment of Certain End User Distributions Under the
Securities Laws.--
``(1) In general.--With respect to a digital asset, an end
user distribution is described under this paragraph if--
``(A) each blockchain system to which such digital
asset relates is a functional system; and
``(B) with respect to the digital asset and each
blockchain system to which such digital asset relates,
the information described in section 43 has been
certified and made publicly available.
``(2) Not an investment contract.--For purposes of the
securities laws, an end user distribution described under
paragraph (1) shall not be a transaction in an investment
contract.
``(3) Exemption.--Section 5 of the Securities Act of 1933
(15 U.S.C. 77e) shall not apply to an end user distribution
described under paragraph (1) or a transaction in a unit of
digital asset issued in such a distribution.''.
(b) Rule of Construction.--Nothing in this Act or the amendments
made by this Act may be construed to restrict the use of a digital
asset, except as expressly provided in connection with--
(1) the offer or sale of a restricted digital asset or
digital commodity; or
(2) an intermediary's custody of a restricted digital asset
or digital commodity.
SEC. 303. ENHANCED DISCLOSURE REQUIREMENTS.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.), as amended by section 302, is further amended by adding at the
end the following:
``SEC. 43. ENHANCED DISCLOSURE REQUIREMENTS WITH RESPECT TO DIGITAL
ASSETS.
``(a) Disclosure Information.--With respect to a digital asset and
any blockchain system to which the digital asset relates, the
information described under this section is as follows:
``(1) Source code.--The source code for any blockchain
system to which the digital asset relates.
``(2) Transaction history.--A description of the steps
necessary to independently access, search, and verify the
transaction history of any blockchain system to which the
digital asset relates.
``(3) Digital asset economics.--A description of the
purpose of any blockchain system to which the digital asset
relates and the operation of any such blockchain system,
including--
``(A) information explaining the launch and supply
process, including the number of digital assets to be
issued in an initial allocation, the total number of
digital assets to be created, the release schedule for
the digital assets, and the total number of digital
assets then outstanding;
``(B) information on any applicable consensus
mechanism or process for validating transactions,
method of generating or mining digital assets, and any
process for burning or destroying digital assets on the
blockchain system;
``(C) an explanation of governance mechanisms for
implementing changes to the blockchain system or
forming consensus among holders of such digital assets;
and
``(D) sufficient information for a third party to
create a tool for verifying the transaction history of
the digital asset.
``(4) Plan of development.--The current state and timeline
for the development of any blockchain system to which the
digital asset relates, showing how and when the blockchain
system intends or intended to be considered a functional system
and decentralized system.
``(5) Development disclosures.--A list of all persons who
are related persons or affiliated persons who have been issued
a unit of a digital asset by a digital asset issuer or have a
right to a unit of a digital asset from a digital asset issuer.
``(6) Risk factor disclosures.--A description of the
material risks surrounding ownership of a unit of a digital
asset.
``(b) Certification.--
``(1) In general.--With respect to a digital asset and any
blockchain system to which the digital asset relates, the
information described under this section has been certified if
the digital asset issuer, an affiliated person, a decentralized
governance system, or a digital commodity exchange certifies on
a quarterly basis to the Commodity Futures Trading Commission
and the Securities and Exchange Commission that the information
is true and correct.
``(2) Prior disclosures.--Information described under this
section which was made available to the public prior to the
date of enactment of this section may be certified as true and
correct on the date such information was published in final
form.
``(3) Rulemaking.--The Commission and the Commodity Futures
Trading Commission may jointly issue rules regarding the
certification process described under paragraph (1).''.
SEC. 304. CERTIFICATION OF CERTAIN DIGITAL ASSETS.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.), as amended by section 303, is further amended by adding at the
end the following:
``SEC. 44. CERTIFICATION OF CERTAIN DIGITAL ASSETS.
``(a) Certification.--Any person may certify to the Securities and
Exchange Commission that the blockchain system to which a digital asset
relates is a decentralized system.
``(b) Filing Requirements.--A certification described under
subsection (a) shall be filed with the Commission, and include--
``(1) information regarding the person making the
certification;
``(2) a description of the blockchain system and the
digital asset which relates to such blockchain system,
including--
``(A) the operation of the blockchain system;
``(B) the functionality of the related digital
asset;
``(C) any decentralized governance system which
relates to the blockchain system; and
``(D) the process to develop consensus or agreement
within such decentralized governance system;
``(3) a description of the development of the blockchain
system and the digital asset which relates to the blockchain
system, including--
``(A) a history of the development of the
blockchain system and the digital asset which relates
to such blockchain system;
``(B) a description of the issuance process for the
digital asset which relates to the blockchain system;
``(C) information identifying the digital asset
issuer of the digital asset which relates to the
blockchain system; and
``(D) a list of any affiliated person related to
the digital asset issuer;
``(4) an analysis of the factors on which such person based
the certification that the blockchain system is a decentralized
system, including--
``(A) an explanation of the protections and
prohibitions available during the previous 12 months
against any one person being able to--
``(i) control or materially alter the
blockchain system;
``(ii) exclude any other person from using
or participating on the blockchain system; and
``(iii) exclude any other person from
participating in a decentralized governance
system;
``(B) information regarding the beneficial
ownership of the digital asset which relates to such
blockchain system and the distribution of voting power
in any decentralized governance system during the
previous 12 months;
``(C) information regarding the history of upgrades
to the source code for such blockchain system during
the previous 3 months, including--
``(i) a description of any consensus or
agreement process utilized to process or
approve changes to the source code;
``(ii) a list of any material changes to
the source code, the purpose and effect of the
changes, and the contributor of the changes, if
known; and
``(iii) any changes to the source code made
by the digital asset issuer, a related person,
or an affiliated person;
``(D) information regarding any activities
conducted to market the digital asset which relates to
the blockchain system during the previous 3 months by
the digital asset issuer or an affiliated person of the
digital asset issuer; and
``(E) information regarding any issuance of a unit
of the digital asset which relates to such blockchain
system during the previous 12 months; and
``(5) with respect to a blockchain system for which a
certification has previously been rebutted under this section
or withdrawn under section 5i(m) of the Commodity Exchange Act,
specific information relating to the analysis provided in
subsection (f)(2) in connection with such rebuttal or such
section 5i(m)(1)(C) in connection with such withdrawal.
``(c) Rebuttable Presumption.--The Commission may rebut a
certification described under subsection (a) with respect to a
blockchain system if the Commission, within 60 days of receiving such
certification, determines that the blockchain system is not a
decentralized system.
``(d) Certification Review.--
``(1) In general.--Any blockchain system that relates to a
digital asset for which a certification has been made under
subsection (a) shall be considered a decentralized system 60
days after the date on which the Commission receives a
certification under subsection (a), unless the Commission
notifies the person who made the certification within such time
that the Commission is staying the certification due to--
``(A) an inadequate explanation by the person
making the certification; or
``(B) any novel or complex issues which require
additional time to consider.
``(2) Public notice.--The Commission shall make the
following available to the public and provide a copy to the
Commodity Futures Trading Commission:
``(A) Each certification received under subsection
(a).
``(B) Each stay of the Commission under this
section, and the reasons therefore.
``(C) Any response from a person making a
certification under subsection (a) to a stay of the
certification by the Commission.
``(3) Consolidation.--The Commission may consolidate and
treat as one submission multiple certifications made under
subsection (a) for the same blockchain system which relates to
a digital asset which are received during the review period
provided under this subsection.
``(e) Stay of Certification.--
``(1) In general.--A notification by the Commission
pursuant to subsection (d)(1) shall stay the certification once
for up to an additional 120 days from the date of the
notification.
``(2) Public comment period.--Before the end of the 60-day
period described under subsection (d)(1), the Commission may
begin a public comment period of at least 30 days in
conjunction with a stay under this section.
``(f) Disposition of Certification.--
``(1) In general.--A certification made under subsection
(a) shall--
``(A) become effective--
``(i) upon the publication of a
notification from the Commission to the person
who made the certification that the Commission
does not object to the certification; or
``(ii) at the expiration of the
certification review period; and
``(B) not become effective upon the publication of
a notification from the Commission to the person who
made the certification that the Commission has rebutted
the certification.
``(2) Detailed analysis included with rebuttal.--The
Commission shall include, with each publication of a
notification of rebuttal described under paragraph (1)(B), a
detailed analysis of the factors on which the decision was
based.
``(g) Recertification.--With respect to a blockchain system for
which a certification has been rebutted under this section, no person
may make a certification under subsection (a) with respect to such
blockchain system during the 90-day period beginning on the date of
such rebuttal.
``(h) Appeal of Rebuttal.--
``(1) In general.--If a certification is rebutted under
this section, the person making such certification may appeal
the decision to the United States Court of Appeals for the
District of Columbia, not later than 60 days after the notice
of rebuttal is made.
``(2) Review.--In an appeal under paragraph (1), the court
shall have de novo review of the determination to rebut the
certification.''.
SEC. 305. EFFECTIVE DATE.
Unless otherwise provided in this title, this title and the
amendments made by this title shall take effect 360 days after the date
of enactment of this Act, except that, to the extent a provision of
this title requires a rulemaking, the provision shall take effect on
the later of--
(1) 360 days after the date of enactment of this Act; or
(2) 60 days after the publication in the Federal Register
of the final rule implementing the provision.
TITLE IV--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE
SECURITIES AND EXCHANGE COMMISSION
SEC. 401. TREATMENT OF DIGITAL COMMODITIES AND OTHER DIGITAL ASSETS.
(a) Securities Act of 1933.--Section 2(a)(1) of the Securities Act
of 1933 (15 U.S.C. 77b(a)(1)) is amended by adding at the end the
following: ``The term does not include a digital commodity or permitted
payment stablecoin.''.
(b) Securities Exchange Act of 1934.--Section 3(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
(1) in paragraph (1), by adding at the end the following:
``The term `exchange' does not include a digital asset trading
system or a blockchain protocol offering digital assets, or any
person or group of persons solely because of their development
of such a blockchain protocol.'';
(2) in paragraph (2), by adding at the end the following:
``A digital asset trading system is not a `facility' of an
exchange.'';
(3) in paragraph (4)(A), by inserting ``, other than
restricted digital assets,'' after ``securities'';
(4) in paragraph (5)(A), by inserting ``restricted digital
assets or'' after ``not including'';
(5) in paragraph (26) by inserting ``(other than a notice-
registered digital asset clearing agency)'' after ``or
registered clearing agency'';
(6) in paragraph (28) by inserting ``(other than a notice-
registered digital asset clearing agency)'' after ``registered
clearing agency''; and
(7) in paragraph (10), by adding at the end the following:
``The term does not include a digital commodity or permitted
payment stablecoin.''.
(c) Investment Advisers Act of 1940.--Section 202(a) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2) is amended--
(1) in paragraph (18), by adding at the end the following:
``The term does not include a digital commodity or permitted
payment stablecoin.'';
(2) by redesignating the second paragraph (29) (relating to
commodity pools) as paragraph (31);
(3) by adding at the end, the following:
``(32) Digital asset-related terms.--The terms `digital
commodity' and `permitted payment stablecoin' have the meaning
given those terms, respectively, under section 2(a) of the
Securities Act of 1933 (15 U.S.C. 77b(a)).''.
(d) Investment Company Act of 1940.--Section 2(a) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2) is amended--
(1) in paragraph (36), by adding at the end the following:
``The term does not include a digital commodity or permitted
payment stablecoin.''; and
(2) by adding at the end, the following:
``(55) Digital asset-related terms.--The terms `digital
commodity' and `permitted payment stablecoin' have the meaning
given those terms, respectively, under section 2(a) of the
Securities Act of 1933 (15 U.S.C. 77b(a)).''.
SEC. 402. AUTHORITY OVER PERMITTED PAYMENT STABLECOINS AND RESTRICTED
DIGITAL ASSETS.
(a) In General.--Section 10 of the Securities Exchange Act of 1934
(15 U.S.C. 78j) is amended--
(1) by moving subsection (c) so as to appear after
subsection (b);
(2) by designating the undesignated matter at the end of
that section as subsection (d); and
(3) by adding at the end the following:
``(e)(1) Rules promulgated under subsection (b) that prohibit
fraud, manipulation, or insider trading (but not rules imposing or
specifying reporting or recordkeeping requirements, procedures, or
standards as prophylactic measures against fraud, manipulation, or
insider trading), and judicial precedents decided under subsection (b)
and rules promulgated thereunder that prohibit fraud, manipulation, or
insider trading, shall apply with respect to permitted payment
stablecoin transactions and restricted digital assets transactions
engaged in by a broker, dealer, digital asset broker, or digital asset
dealer or through an alternative trading system or digital asset
trading system to the same extent as they apply to securities
transactions.
``(2) Judicial precedents decided under section 17(a) of the
Securities Act of 1933 and sections 9, 15, 16, 20, and 21A of this
title, and judicial precedents decided under applicable rules
promulgated under such sections, shall apply to permitted payment
stablecoins and restricted digital assets with respect to those
circumstances in which the permitted payment stablecoins or restricted
digital assets are brokered, traded, or custodied by a broker, dealer,
digital asset broker, digital asset dealer, or through an alternative
trading system or digital asset trading system to the same extent as
they apply to securities.
``(3) Nothing in this subsection may be construed to provide the
Commission authority to make any rule, regulation, or requirement or
impose any obligation or limitation on a permitted payment stablecoin
issuer or a digital asset issuer regarding any aspect of the operations
of a permitted payment stablecoin issuer, a digital asset issuer, a
permitted payment stablecoin, or a restricted digital asset.''.
(b) Treatment of Permitted Payment Stablecoins.--Title I of the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), as amended by
section 404, is amended by inserting after section 6B the following:
``SEC. 6C. TREATMENT OF TRANSACTIONS IN PERMITTED PAYMENT STABLECOINS.
``(a) Authority to Broker, Trade, and Custody Permitted Payment
Stablecoins.--Permitted payment stablecoins may be brokered, traded, or
custodied by a broker, dealer, digital asset broker, or digital asset
dealer or through an alternative trading system or digital asset
trading system.
``(b) Commission Jurisdiction.--The Commission shall only have
jurisdiction over a transaction in a permitted payment stablecoin with
respect to those circumstances in which a permitted payment stablecoin
is brokered, traded, or custodied--
``(1) by a broker, dealer, digital asset broker, or digital
asset dealer; or
``(2) through an alternative trading system or digital
asset trading system.
``(c) Limitation.--Subsection (b) shall only apply to a transaction
described in subsection (b) for the purposes of regulating the offer,
execution, solicitation, or acceptance of a permitted payment
stablecoin in those circumstances in which the permitted payment
stablecoin is brokered, traded, or custodied--
``(1) by a broker, dealer, digital asset broker, or digital
asset dealer; or
``(2) through an alternative trading system or digital
asset trading system.''.
SEC. 403. REGISTRATION OF DIGITAL ASSET TRADING SYSTEMS.
Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is
amended by adding at the end the following:
``(m) Digital Asset Trading System.--
``(1) In general.--It shall be unlawful for any digital
asset trading system to make use of the mails or any means or
instrumentality of interstate commerce within or subject to the
jurisdiction of the United States to effect any transaction in
a restricted digital asset, unless such digital asset trading
system is registered with the Commission.
``(2) Application.--A person desiring to register as a
digital asset trading system shall submit to the Commission an
application in such form and containing such information as the
Commission may require for the purpose of making the
determinations required for approval.
``(3) Exemptions.--A digital asset trading system that
offers or seeks to offer at least one restricted digital asset
shall not be required to register under this section (and
paragraph (1) shall not apply to such digital asset trading
system) if the trading system satisfies any exemption contained
on a list of exemptions prepared by the Commission to be as
close as practicable to those exemptions set forth in section
240.3b-16(b) of title 17, Code of Federal Regulations,
applicable to the definition of an exchange.
``(4) Additional registrations.--
``(A) With the commission.--
``(i) In general.--A registered digital
asset trading system shall be permitted to
maintain any other registration with the
Commission relating to the other activities of
the registered digital asset trading system,
including as a--
``(I) national securities exchange;
``(II) broker;
``(III) dealer;
``(IV) alternative trading system,
pursuant to part 242 of title 17, Code
of Federal Regulations, as in effect on
the date of enactment of this
subsection;
``(V) digital asset broker; or
``(VI) digital asset dealer.
``(ii) Rulemaking.--The Commission shall
prescribe rules for an entity with multiple
registrations described under clause (i) to
exempt the entity from duplicative,
conflicting, or unduly burdensome provisions of
this Act and the rules under this Act, to the
extent such an exemption would protect
investors, maintain fair, orderly, and
efficient markets, and facilitate capital
formation.
``(B) With the commodity futures trading
commission.--A registered digital asset trading system
shall be permitted to maintain a registration with the
Commodity Futures Trading Commission as a digital
commodity exchange to offer contracts of sale for
digital commodities.''.
SEC. 404. REQUIREMENTS FOR DIGITAL ASSET TRADING SYSTEMS.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.) is amended by inserting after section 6 the following:
``SEC. 6A. REQUIREMENTS FOR DIGITAL ASSET TRADING SYSTEMS.
``(a) Holding of Customer Assets.--
``(1) Qualified digital asset custodian required.--A
digital asset trading system shall hold customer restricted
digital assets with a qualified digital asset custodian
described under section 6B.
``(2) Custody prohibited.--A digital asset trading system,
in its capacity as such, may not hold custody of customer
money, assets, or property.
``(3) Custody in other capacity.--Nothing in this Act may
be construed to prohibit a person registered as a digital asset
trading system from holding custody of customer money, assets,
or property in any other permitted capacity, including as a
digital asset broker, digital asset dealer, or qualified
digital asset custodian in compliance with the requirements of
this Act.
``(b) Rulemaking.--The Commission shall prescribe rules for digital
asset trading systems relating to the following:
``(1) Notice.--Notice to the Commission of the initial
operation of a digital asset trading system or any material
change to the operation of the digital asset trading system.
``(2) Order display.--The thresholds at which a digital
asset trading system is required to display the orders of the
digital asset trading system, and the manner of such display.
``(3) Fair access.--The thresholds at which a digital asset
trading system is required to have policies regarding providing
fair access to the digital asset trading system.
``(4) Capacity, integrity, and security of automated
systems.--Policies and procedures reasonably designed to ensure
the capacity, integrity, and security of the digital asset
trading system, taking into account the particular nature of
digital asset trading systems.
``(5) Examinations, inspections, and investigations.--The
examination and inspection of the premises, systems, and
records of the digital asset trading system by the Commission
or by a self-regulatory organization of which such digital
asset trading system is a member.
``(6) Recordkeeping.--The making, keeping current, and
preservation of records related to trading activity on the
digital asset trading system.
``(7) Reporting.--The reporting of transactions in digital
assets that occur through the digital asset trading system.
``(8) Procedures.--The establishment of adequate written
safeguards and written procedures to protect confidential
trading information.
``(c) Name Requirement.--A digital asset trading system may not use
the word `exchange' in the name of the digital asset trading system,
unless the digital asset trading system--
``(1) is operated by a registered national securities
exchange; and
``(2) is clearly indicated as being provided outside of the
system's capacity as a national securities exchange.
``SEC. 6B. REQUIREMENTS FOR QUALIFIED DIGITAL ASSET CUSTODIANS.
``(a) In General.--A digital asset custodian is a qualified digital
asset custodian if the digital asset custodian complies with the
requirements of this section.
``(b) Supervision Requirement.--A digital asset custodian that is
not subject to supervision and examination by an appropriate Federal
banking agency, the National Credit Union Administration, the Commodity
Futures Trading Commission, or the Securities and Exchange Commission
shall be subject to adequate supervision and appropriate regulation
by--
``(1) a State bank supervisor (within the meaning of
section 3 of the Federal Deposit Insurance Act);
``(2) a State credit union supervisor, as defined under
section 6003 of the Anti-Money Laundering Act of 2020; or
``(3) an appropriate foreign governmental authority in the
home country of the digital asset custodian.
``(c) Other Requirements.--
``(1) Not otherwise prohibited.--The digital asset
custodian has not been prohibited by a supervisor of the
digital asset custodian from engaging in an activity with
respect to the custody and safekeeping of digital assets.
``(2) Information sharing.--
``(A) In general.--A digital asset custodian shall
share information with the Commission on request and
comply with such requirements for periodic sharing of
information regarding customer accounts that the
digital asset custodian holds on behalf of an entity
registered with the Commission as the Commission
determines by rule are reasonably necessary to
effectuate any of the provisions, or to accomplish any
of the purposes, of this Act.
``(B) Provision of information.--Any entity that is
subject to regulation and examination by an appropriate
Federal banking agency may satisfy any information
request described in subparagraph (A) by providing the
Commission with a detailed listing, in writing, of the
restricted digital assets of a customer within the
custody or use of the entity.
``(d) Adequate Supervision and Appropriate Regulation.--
``(1) In general.--For purposes of subsection (b), the
terms `adequate supervision' and `appropriate regulation' mean
such minimum standards for supervision and regulation as are
reasonably necessary to protect the digital assets of customers
of an entity registered with the Commission, including
standards relating to the licensing, examination, and
supervisory processes that require the digital asset custodian
to, at a minimum--
``(A) receive a review and evaluation of ownership,
character and fitness, conflicts of interest, business
model, financial statements, funding resources, and
policies and procedures of the digital asset custodian;
``(B) hold capital sufficient for the financial
integrity of the digital asset custodian;
``(C) protect customer assets;
``(D) establish and maintain books and records
regarding the business of the digital asset custodian;
``(E) submit financial statements and audited
financial statements to the applicable supervisor
described in subsection (b);
``(F) provide disclosures to the applicable
supervisor described in subsection (b) regarding
actions, proceedings, and other items as determined by
such supervisor;
``(G) maintain and enforce policies and procedures
for compliance with applicable State and Federal laws,
including those related to anti-money laundering and
cybersecurity;
``(H) establish a business continuity plan to
ensure functionality in cases of disruption; and
``(I) establish policies and procedures to resolve
complaints.
``(2) Rulemaking with respect to definitions.--
``(A) In general.--For purposes of this section,
the Commission may, by rule, further define the terms
`adequate supervision' and `appropriate regulation' as
necessary in the public interest, as appropriate for
the protection of investors, and consistent with the
purposes of this Act.
``(B) Conditional treatment of certain custodians
before rulemaking.--Before the effective date of a
rulemaking under subparagraph (A), a trust company is
deemed subject to adequate supervision and appropriate
regulation if--
``(i) the trust company is expressly
permitted by a State bank supervisor to engage
in the custody and safekeeping of digital
assets;
``(ii) the State bank supervisor has
established licensing, examination, and
supervisory processes that require the trust
company to, at a minimum, meet the conditions
described in subparagraphs (A) through (I) of
paragraph (1); and
``(iii) the trust company is in good
standing with its State bank supervisor.
``(C) Transition period for certain custodians.--In
implementing the rulemaking under subparagraph (A), the
Commission shall provide a transition period of not
less than two years for any trust company which is
deemed subject to adequate supervision and appropriate
regulation under subparagraph (B) on the effective date
of the rulemaking.''.
SEC. 405. REGISTRATION OF DIGITAL ASSET BROKERS AND DIGITAL ASSET
DEALERS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by inserting after section 15G the following:
``SEC. 15H. REGISTRATION OF DIGITAL ASSET BROKERS AND DIGITAL ASSET
DEALERS.
``(a) Registration.--
``(1) In general.--It shall be unlawful for any digital
asset broker or digital asset dealer (other than a natural
person associated with a registered digital asset broker or
registered digital asset dealer, and other than such a digital
asset broker or digital asset dealer whose business is
exclusively intrastate and who does not make use of a digital
asset trading system) to make use of the mails or any means or
instrumentality of interstate commerce to effect any
transactions in, or to induce or attempt to induce the purchase
or sale of, any restricted digital asset unless such digital
asset broker or digital asset dealer is registered in
accordance with this section.
``(2) Application.--A person desiring to register as a
digital asset broker or digital asset dealer shall submit to
the Commission an application in such form and containing such
information as the Commission may require for the purpose of
making the determinations required for approval.
``(b) National Securities Association Membership.--
``(1) In general.--A digital asset broker or digital asset
dealer may not register or maintain registration under this
section unless such digital asset broker or digital asset
dealer is a member of a national securities association
registered under section 15A.
``(2) Treatment under section 15a.--
``(A) In general.--For purposes of section 15A--
``(i) the term `broker' includes a digital
asset broker and the term `registered broker'
includes a registered digital asset broker;
``(ii) the term `dealer' includes a digital
asset dealer and the term `registered dealer'
includes a registered digital asset dealer; and
``(iii) the term `security' includes a
restricted digital asset.
``(B) Clarification.--Notwithstanding subparagraph
(A), a national securities association shall, with
respect to the restricted digital asset activities of a
digital asset broker or a digital asset dealer, only
examine for and enforce against such digital asset
broker or digital asset dealer--
``(i) rules of such national securities
association written specifically for digital
asset brokers or digital asset dealers;
``(ii) the provisions of the Financial
Innovation and Technology for the 21st Century
Act and rules issued thereunder applicable to
digital asset brokers and digital asset
dealers; and
``(iii) the provisions of the securities
laws and the rules thereunder applicable to
digital asset brokers and digital asset
dealers.
``(c) Additional Registrations With the Commission.--
``(1) In general.--A registered digital asset broker or
registered digital asset dealer shall be permitted to maintain
any other registration with the Commission relating to the
other activities of the registered digital asset broker or
registered digital asset dealer, including as--
``(A) a national securities exchange;
``(B) a broker;
``(C) a dealer;
``(D) an alternative trading system, pursuant to
part 242 of title 17, Code of Federal Regulations, as
in effect on the date of enactment of this section; or
``(E) a digital asset trading system.
``(2) Rulemaking.--The Commission shall prescribe rules for
an entity with multiple registrations described under paragraph
(1) to exempt the entity from duplicative, conflicting, or
unduly burdensome provisions of this Act and the rules under
this Act, to the extent such an exemption would protect
investors, maintain fair, orderly, and efficient markets, and
facilitate capital formation.
``(3) Self-regulatory organizations.--The Commission shall
require any self-regulatory organization with a registered
digital asset broker or registered digital asset dealer as a
member to provide such rules as may be necessary to further
compliance with this section, protect investors, maintain fair,
orderly, and efficient markets, and facilitate capital
formation.
``(d) Additional Registrations With the Commodity Futures Trading
Commission.--A registered digital asset broker or registered digital
asset dealer shall be permitted to maintain a registration with the
Commodity Futures Trading Commission as a digital commodity broker or
digital commodity dealer, to list or trade contracts of sale for
digital commodities.''.
SEC. 406. REQUIREMENTS OF DIGITAL ASSET BROKERS AND DIGITAL ASSET
DEALERS.
(a) In General.--Section 15H of the Securities Exchange Act of
1934, as added by section 405, is amended by adding at the end the
following:
``(e) Anti-fraud.--No digital asset broker or digital asset dealer
shall make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce or
attempt to induce the purchase or sale of, any restricted digital asset
by means of any manipulative, deceptive, or other fraudulent device or
contrivance.
``(f) Holding of Customer Assets.--
``(1) In general.--A digital asset broker or digital asset
dealer shall hold customer money, assets, and property in a
manner to minimize the risk of loss to the customer or
unreasonable delay in the access to the money, assets, and
property of the customer.
``(2) Qualified digital asset custodian required.--A
digital asset broker or digital asset dealer shall hold
customer restricted digital assets described in paragraph (1)
with a qualified digital asset custodian described under
section 6B.
``(3) Segregation of funds.--
``(A) In general.--A digital asset broker or
digital asset dealer shall treat and deal with all
money, assets, and property held for a customer of the
digital asset broker or digital asset dealer, or that
accrues to a customer as a result of trading in
restricted digital assets, as belonging to the
customer.
``(B) Commingling prohibited.--Money, assets, and
property of a customer described in subparagraph (A)
shall be separately accounted for and shall not be
commingled with the funds of the digital asset broker
or digital asset dealer or be used to margin, secure,
or guarantee any trades of any person other than the
customer of the digital asset broker or digital asset
dealer for whom the same are held.
``(4) Exceptions.--
``(A) Use of funds.--
``(i) In general.--Notwithstanding
paragraph (4), money, assets, and property of
customers of a digital asset broker or digital
asset dealer described in paragraph (4) may be
maintained and deposited in the same account or
accounts with any bank, trust company, or
qualified digital asset custodian described
under section 6B, if the money, assets, and
property remain segregated from the money,
assets, and property of the digital asset
broker or digital asset dealer.
``(ii) Withdrawal.--Notwithstanding
paragraph (4), such share of the money, assets,
and property described in paragraph (4) as in
the normal course of business shall be
necessary to transfer, adjust, or settle a
restricted digital asset transaction pursuant
to a customer's instruction (standing or
otherwise) may be withdrawn and applied to such
purposes, including the withdrawal and payment
of commissions, brokerage, interest, taxes,
storage, and other charges lawfully accruing in
connection with a restricted digital asset
transaction.
``(iii) Commission action.--In accordance
with such terms and conditions as the
Commission may prescribe by rule, regulation,
or order, any money, assets, or property of a
customer of a digital asset broker or digital
asset dealer described in paragraph (4) may be
commingled and deposited as provided in this
section with any other money, assets, or
property received by the digital asset broker
or digital asset dealer and required by the
Commission to be separately accounted for and
treated and dealt with as belonging to the
customer of the digital asset broker or digital
asset dealer.
``(B) Participation in blockchain services.--
``(i) In general.--A customer shall have
the right to waive the restrictions in
paragraph (4) for any unit of a digital asset
to be used under clause (ii), by affirmatively
electing, in writing to the digital asset
broker or digital asset dealer, to waive the
restrictions.
``(ii) Use of funds.--Customer digital
assets removed from segregation under clause
(i) may be pooled and used by the digital asset
broker or digital asset dealer or its designee
to provide a blockchain service for a
blockchain system to which the unit of the
digital asset removed from segregation under
clause (i) relates.
``(iii) Limitations.--
``(I) In general.--The Commission
may, by rule, establish notice and
disclosure requirements, and any other
limitations and rules related to the
waiving of any restrictions under this
subparagraph that are reasonably
necessary to protect customers.
``(II) Customer choice.--A digital
asset broker or digital asset dealer
may not require a waiver from a
customer described in clause (i) as a
condition of doing business with the
digital asset broker or digital asset
dealer.
``(iv) Blockchain service defined.--In this
subparagraph, the term `blockchain service'
means any activity relating to validating
transactions on a blockchain system, providing
security for a blockchain system, or other
similar activity required for the ongoing
operation of a blockchain system.
``(5) Further limitations.--No person shall treat or deal
with a restricted digital asset held on behalf of any customer
pursuant to paragraph (4) by utilizing any unit of such
restricted digital asset to participate in a blockchain service
(as defined in paragraph (5)(B)(iv)) or a decentralized
governance system associated with the restricted digital asset
or the blockchain system to which the restricted digital asset
relates in any manner other than that which is expressly
directed by the customer from which such unit of a restricted
digital asset was received.
``(g) Capital Requirements.--
``(1) In general.--Each registered digital asset broker and
registered digital asset dealer shall meet such minimum capital
requirements as the Commission may prescribe to ensure that the
digital asset broker or digital asset dealer is able to--
``(A) conduct an orderly wind-down of the
activities of the digital asset broker or digital asset
dealer; and
``(B) fulfill the customer obligations of the
digital asset broker or digital asset dealer.
``(2) Calculation.--For purposes of any Commission rule or
order adopted under this section or any interpretation thereof
regulating a digital asset broker or digital asset dealer's
financial responsibility obligations and capital requirements,
a registered digital asset broker or digital asset dealer that
maintains control of customer digital assets in a manner that
satisfies the rules issued by the Commission under subsection
(f)(2) shall not be required to include the custodial
obligation with respect to such digital assets as liabilities
or such digital assets as assets of the digital asset broker or
digital asset dealer.
``(h) Reporting and Recordkeeping.--Each registered digital asset
broker and digital asset dealer--
``(1) shall make such reports as are required by the
Commission by rule or regulation regarding the transactions,
positions, and financial condition of the digital asset broker
or digital asset dealer;
``(2) shall keep books and records in such form and manner
and for such period as may be prescribed by the Commission by
rule or regulation; and
``(3) shall keep the books and records open to inspection
and examination by any representative of the Commission.''.
(b) Definition of Clearing Agency.--Section 3(a)(23)(B) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)(B)) is amended by
inserting ``digital asset broker, digital asset dealer,'' after
``broker, dealer,'' each place such term appears.
SEC. 407. RULES RELATED TO CONFLICTS OF INTEREST.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by inserting after section 10D the following:
``SEC. 10E. CONFLICTS OF INTEREST RELATED TO DIGITAL ASSETS.
``Each registered digital asset trading system, registered digital
asset broker, registered digital asset dealer, and notice-registered
digital asset clearing agency shall establish, maintain, and enforce
written policies and procedures reasonably designed, taking into
consideration the nature of such person's business, to mitigate any
conflicts of interest and transactions or arrangements with
affiliates.''.
SEC. 408. TREATMENT OF CERTAIN DIGITAL ASSETS IN CONNECTION WITH
FEDERALLY REGULATED INTERMEDIARIES.
Section 18(b) of the Securities Act of 1933 (15 U.S.C. 77r(b)) is
amended by adding at the end the following:
``(5) Exemption for certain digital assets in connection
with federally regulated intermediaries.--A restricted digital
asset is treated as a covered security with respect to a
transaction that is exempt from registration under this Act
when it is--
``(A) brokered, traded, custodied, or cleared by a
digital asset broker or digital asset dealer registered
under section 15H of the Securities Exchange Act of
1934; or
``(B) traded through a digital asset trading
system.''.
SEC. 409. EXCLUSION FOR DECENTRALIZED FINANCE ACTIVITIES.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), as
amended by section 405, is further amended by inserting after section
15H the following:
``SEC. 15I. DECENTRALIZED FINANCE ACTIVITIES NOT SUBJECT TO THIS ACT.
``(a) In General.--Notwithstanding any other provision of this Act,
a person shall not be subject to this Act and the regulations
thereunder based on the person directly or indirectly engaging in any
of the following activities, whether singly or in combination thereof,
in relation to the operation of a blockchain system or in relation to
decentralized finance (as defined in section 605(d) of the Financial
Innovation and Technology for the 21st Century Act):
``(1) Compiling network transactions, operating or
participating in a liquidity pool, relaying, searching,
sequencing, validating, or acting in a similar capacity with
respect to a digital asset.
``(2) Providing computational work, operating a node, or
procuring, offering, or utilizing network bandwidth, or other
similar incidental services with respect to a digital asset.
``(3) Providing a user-interface that enables a user to
read and access data about a blockchain system, send messages,
or otherwise interact with a blockchain system.
``(4) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing a blockchain system.
``(5) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing software or systems that
create or deploy a hardware or software wallet or other system
facilitating an individual user's own personal ability to keep,
safeguard, or custody such user's digital assets or related
private keys.
``(b) Exceptions.--Subsection (a) shall not be construed to apply
to the anti-fraud and anti-manipulation authorities of the
Commission.''.
SEC. 410. REGISTRATION AND REQUIREMENTS FOR NOTICE-REGISTERED DIGITAL
ASSET CLEARING AGENCIES.
Section 17A(b) of the Securities Exchange Act of 1934 (15 U.S.C.
78q-1(b)) is amended--
(1) in subsection (1), by inserting after the first
sentence the following: ``The previous sentence shall not apply
to a notice-registered digital asset clearing agency with
respect to a restricted digital asset.''; and
(2) by adding at the end the following:
``(9) Registration and requirements for notice-registered
digital asset clearing agency.--
``(A) Eligibility.--A person may register with the
Commission as a notice-registered digital asset
clearing agency if the person--
``(i) is otherwise registered as a digital
asset broker or digital asset dealer with the
Commission and is engaging in a business
involving restricted digital assets, in
compliance with Commission rules pursuant to
section 15H(f);
``(ii) is a bank; or
``(iii) is a clearing agency already
registered with the Commission pursuant to this
section.
``(B) Registration.--A person may register with the
Commission as a notice-registered digital asset
clearing agency by filing with the Commission a notice
of the activities of the person or planned activities
in such form as the Commission determines appropriate.
``(C) Effectiveness of registration.--
``(i) In general.--The registration of a
person filing a notice described under
subparagraph (B) as a notice-registered digital
asset clearing agency shall be effective upon
publication by the Commission of such notice,
which shall occur no later than 14 days after
the date of such filing.
``(ii) Initial registrations.--
``(I) In general.--A person
registered as a notice-registered
digital asset clearing agency before
the date on which the Commission adopts
rules under subparagraph (D) shall,
after such rules are adopted, renew the
person's registration pursuant to such
rules.
``(II) Exception.--Notwithstanding
subclause (I), a person registered as a
notice-registered digital asset
clearing agency before the end of the
2-year period beginning on the date of
the enactment of this section shall
have such registration remain in effect
until the end of such 2-year period.
``(D) Rulemaking.--The Commission may adopt rules,
which may not take effect until at least 360 days
following the date of enactment of this paragraph, with
regard to the activities of notice-registered digital
asset clearing agencies, taking into account the nature
of restricted digital assets.''.
SEC. 411. TREATMENT OF CUSTODY ACTIVITIES BY BANKING INSTITUTIONS.
(a) Treatment of Custody Activities.--The appropriate Federal
banking agency (as defined under section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813)), the National Credit Union
Administration (in the case of a credit union), and the Securities and
Exchange Commission may not require, or take supervisory action that
would cause, a depository institution, national bank, Federal credit
union, State credit union, or trust company, or any affiliate (as such
term is defined under section 2 of the Bank Holding Company Act of
1956) thereof--
(1) to include assets held in custody or safekeeping, or
the assets associated with a cryptographic key held in custody
or safekeeping, as a liability on such institution's financial
statement or balance sheet, except that cash held for a third
party by such institution that is commingled with the general
assets of such institution may be reflected as a liability on a
financial statement or balance sheet;
(2) to hold additional regulatory capital against assets in
custody or safekeeping, or the assets associated with a
cryptographic key held in custody or safekeeping, except as
necessary to mitigate against operational risks inherent with
the custody or safekeeping services, as determined by--
(A) the appropriate Federal banking agency;
(B) the National Credit Union Administration (in
the case of a credit union);
(C) a State bank supervisor (as defined under
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813)); or
(D) a State credit union supervisor (as defined
under section 6003 of the Anti-Money Laundering Act of
2020);
(3) to recognize a liability for any obligations related to
activities or services performed for digital assets with
respect to which such institution does not have beneficial
ownership if that liability would exceed the expense recognized
in the income statement as a result of the corresponding
obligation.
(b) Definitions.--In this section:
(1) Depository institution.--The term ``depository
institution'' has the meaning given that term under section 3
of the Federal Deposit Insurance Act.
(2) Credit union terms.--The terms ``Federal credit union''
and ``State credit union'' have the meaning given those terms,
respectively, under section 101 of the Federal Credit Union
Act.
SEC. 412. EFFECTIVE DATE; ADMINISTRATION.
Except as otherwise provided under this title, this title and the
amendments made by this title shall take effect 360 days after the date
of enactment of this Act, except that, to the extent a provision of
this title requires a rulemaking, the provision shall take effect on
the later of--
(1) 360 days after the date of enactment of this Act; or
(2) 60 days after the publication in the Federal Register
of the final rule implementing the provision.
SEC. 413. DISCRETIONARY SURPLUS FUND.
(a) In General.--The dollar amount specified under section
7(a)(3)(A) of the Federal Reserve Act (12 U.S.C. 289(a)(3)(A)) is
reduced by $15,000,000.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on September 30, 2034.
SEC. 414. STUDIES ON FOREIGN ADVERSARY PARTICIPATION.
(a) In General.--The Secretary of the Treasury, in consultation
with the Commodity Futures Trading Commission and the Securities and
Exchange Commission, shall, not later than 1 year after date of the
enactment of this section, conduct a study and submit a report to the
relevant congressional committees that--
(1) identifies any digital asset registrants which are
owned by governments of foreign adversaries;
(2) determines whether any governments of foreign
adversaries are collecting personal data or trading data about
United States persons in the digital asset markets; and
(3) evaluates whether any proprietary intellectual property
of digital asset registrants is being misused or stolen by any
governments of foreign adversaries.
(b) GAO Study and Report.--
(1) In general.--The Comptroller General shall, not later
than 1 year after date of the enactment of this section,
conduct a study and submit a report to the relevant
congressional committees that--
(A) identifies any digital asset registrants which
are owned by governments of foreign adversaries;
(B) determines whether any governments of foreign
adversaries are collecting personal data or trading
data about United States persons in the digital asset
markets; and
(C) evaluates whether any proprietary intellectual
property of digital asset registrants is being misused
or stolen by any governments of foreign adversaries.
(c) Definitions.--In this section:
(1) Digital asset registrant.--The term ``digital asset
registrant'' means any person required to register as a digital
asset trading system, digital asset broker, digital asset
dealer, digital commodity exchange, digital commodity broker,
or digital commodity dealer under this Act.
(2) Foreign adversaries.--The term ``foreign adversaries''
means the foreign governments and foreign non-government
persons determined by the Secretary of Commerce to be foreign
adversaries under section 7.4(a) of title 15, Code of Federal
Regulations.
(3) Relevant congressional committees.--The term ``relevant
congressional committees'' means--
(A) the Committees on Financial Services and
Agriculture of the House of Representatives; and
(B) the Committees on Banking, Housing, and Urban
Affairs and Agriculture, Nutrition, and Forestry of the
Senate.
TITLE V--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE COMMODITY
FUTURES TRADING COMMISSION
SEC. 501. COMMISSION JURISDICTION OVER DIGITAL COMMODITY TRANSACTIONS.
(a) Savings Clause.--Section 2(a)(1) of the Commodity Exchange Act
(7 U.S.C. 2(a)(1)) is amended by adding at the end the following:
``(J) Except as expressly provided in this Act,
nothing in the Financial Innovation and Technology for
the 21st Century Act shall affect or apply to, or be
interpreted to affect or apply to--
``(i) any agreement, contract, or
transaction that is subject to this Act as--
``(I) a contract of sale of a
commodity for future delivery or an
option on such a contract;
``(II) a swap;
``(III) a security futures product;
``(IV) an option authorized under
section 4c of this Act;
``(V) an agreement, contract, or
transaction described in subparagraph
(C)(i) or (D)(i) of subsection (c)(2)
of this section; or
``(VI) a leverage transaction
authorized under section 19 of this
Act; or
``(ii) the activities of any person with
respect to any such an agreement, contract, or
transaction.''.
(b) Limitation on Authority Over Permitted Payment Stablecoins.--
Section 2(c)(1) of the Commodity Exchange Act (7 U.S.C. 2(c)(1)) is
amended--
(1) in subparagraph (F), by striking ``or'' at the end;
(2) in subparagraph (G), by striking the period and
inserting ``; or''; and
(3) by adding at the end the following:
``(H) permitted payment stablecoins.''.
(c) Commission Jurisdiction Over Digital Asset Transactions.--
Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) is
amended--
(1) in subparagraph (D)--
(A) in clause (ii)--
(i) in subclause (I) by inserting ``(other
than an agreement, contract, or transaction in
a permitted payment stablecoin)'' after
``paragraph (1)'';
(ii) in subclause (III)--
(I) in the matter that precedes
item (aa), by inserting ``of a
commodity, other than a digital
commodity or a permitted payment
stablecoin,'' before ``that''; and
(II) in item (bb), by striking
``or'' at the end; and
(iii) by redesignating subclauses (IV) and
(V) as subclauses (VI) and (VII) and inserting
after subclause (III) the following:
``(IV) a contract of sale of a
digital commodity or a permitted
payment stablecoin that results in
actual delivery, as the Commission
shall by rule determine, within 2 days
or such other period as the Commission
may determine by rule or regulation
based upon the typical commercial
practice in cash or spot markets for
the digital commodity involved;
``(V) a contract of sale of a
digital commodity or a permitted
payment stablecoin that--
``(aa) is executed with a
registered digital commodity
dealer--
``(AA) directly;
``(BB) through a
registered digital
commodity broker; or
``(CC) on or
subject to the rules of
a registered digital
commodity exchange; and
``(bb) is not a contract of
sale of--
``(AA) a digital
commodity or a
permitted payment
stablecoin that
references, represents
an interest in, or is
functionally equivalent
to an agricultural
commodity, an excluded
commodity, or an exempt
commodity, other than
the digital commodity
itself, as shall be
further defined by the
Commission; or
``(BB) a digital
commodity or a
permitted payment
stablecoin to which the
Commission determines,
by rule or regulation,
it is not in the public
interest for this
section to apply;'';
and
(B) by redesignating clause (iv) as clause (v) and
inserting after clause (iii) the following:
``(iv) The Commission shall adopt rules and
regulations applicable to digital commodity
dealers and digital commodity brokers in
connection with the agreements, contracts or
transactions in digital commodities or
permitted payment stablecoins described in
clause (ii)(V) of this subparagraph, which
shall set forth minimum requirements related to
disclosure, recordkeeping, margin and financing
arrangements, capital, reporting, business
conduct, documentation, and supervision of
employees and agents. Except as prohibited in
subparagraph (G)(iii), the Commission may also
make, promulgate, and enforce such rules and
regulations as, in the judgment of the
Commission, are reasonably necessary to
effectuate any of the provisions of, or to
accomplish any of the purposes of, this Act in
connection with agreements, contracts, or
transactions described in such clause (ii)(V),
which may include, without limitation,
requirements regarding registration with the
Commission and membership in a registered
futures association.''; and
(2) by adding at the end the following:
``(F) Commission Jurisdiction With Respect to Digital Commodity
Transactions.--
``(i) In general.--Subject to sections 6d and 12(e), the
Commission shall have exclusive jurisdiction with respect to
any account, agreement, contract, or transaction involving a
contract of sale of a digital commodity in interstate commerce,
including in a digital commodity cash or spot market, that is
offered, solicited, traded, facilitated, executed, cleared,
reported, or otherwise dealt in--
``(I) on or subject to the rules of a registered
entity or an entity that is required to be registered
as a registered entity; or
``(II) by any other entity registered, or required
to be registered, with the Commission.
``(ii) Limitations.--Clause (i) shall not apply with
respect to custodial or depository activities for a digital
commodity, or custodial or depository activities for any
promise or right to a future digital commodity, of an entity
regulated by an appropriate Federal banking agency or a State
bank supervisor (within the meaning of section 3 of the Federal
Deposit Insurance Act).
``(iii) Mixed digital asset transactions.--
``(I) In general.--Clause (i) shall not apply to a
mixed digital asset transaction.
``(II) Reports on mixed digital asset
transactions.--A digital asset issuer, related person,
affiliated person, or other person registered with the
Securities and Exchange Commission that engages in a
mixed digital asset transaction, shall, on request,
open to inspection and examination by the Commodity
Futures Trading Commission all books and records
relating to the mixed digital asset transaction,
subject to the confidentiality and disclosure
requirements of section 8.
``(G) Agreements, Contracts, and Transactions in Stablecoins.--
``(i) Treatment of permitted payment stablecoins on
commission-registered entities.--Subject to clauses (ii) and
(iii), the Commission shall have jurisdiction over a cash or
spot agreement, contract, or transaction in a permitted payment
stablecoin that is offered, offered to enter into, entered
into, executed, confirmed the execution of, solicited, or
accepted--
``(I) on or subject to the rules of a registered
entity; or
``(II) by any other entity registered with the
Commission.
``(ii) Permitted payment stablecoin transaction rules.--
This Act shall apply to a transaction described in clause (i)
only for the purpose of regulating the offer, execution,
solicitation, or acceptance of a cash or spot permitted payment
stablecoin transaction on a registered entity or by any other
entity registered with the Commission, as if the permitted
payment stablecoin were a digital commodity.
``(iii) No authority over permitted payment stablecoins.--
Notwithstanding clauses (i) and (ii), the Commission shall not
make a rule or regulation, impose a requirement or obligation
on a registered entity or other entity registered with the
Commission, or impose a requirement or obligation on a
permitted payment stablecoin issuer, regarding the operation of
a permitted payment stablecoin issuer or a permitted payment
stablecoin.''.
(d) Conforming Amendment.--Section 2(a)(1)(A) of such Act (7 U.S.C.
2(a)(1)(A)) is amended in the 1st sentence by inserting ``subparagraphs
(F) and (G) of subsection (c)(2) of this section or'' before ``section
19''.
SEC. 502. REQUIRING FUTURES COMMISSION MERCHANTS TO USE QUALIFIED
DIGITAL COMMODITY CUSTODIANS.
Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended--
(1) in subsection (a)(2)--
(A) in the 1st proviso, by striking ``any bank or
trust company'' and inserting ``any bank, trust
company, or qualified digital commodity custodian'';
and
(B) by inserting ``: Provided further, That any
such property that is a digital commodity shall be held
in a qualified digital commodity custodian'' before the
period at the end; and
(2) in subsection (f)(3)(A)(i), by striking ``any bank or
trust company'' and inserting ``any bank, trust company, or
qualified digital commodity custodian''.
SEC. 503. TRADING CERTIFICATION AND APPROVAL FOR DIGITAL COMMODITIES.
Section 5c of the Commodity Exchange Act (7 U.S.C. 7a-2) is
amended--
(1) in subsection (a), by striking ``5(d) and 5b(c)(2)''
and inserting ``5(d), 5b(c)(2), and 5i(c)'';
(2) in subsection (b)--
(A) in each of paragraphs (1) and (2), by inserting
``digital commodity exchange,'' before ``derivatives'';
and
(B) in paragraph (3), by inserting ``digital
commodity exchange,'' before ``derivatives'' each place
it appears;
(3) in subsection (c)--
(A) in paragraph (2), by inserting ``or
participants'' before ``(in'';
(B) in paragraph (4)(B), by striking ``1a(10)'' and
inserting ``1a(9)''; and
(C) in paragraph (5), by adding at the end the
following:
``(D) Special rules for digital commodity
contracts.--In certifying any new rule or rule
amendment, or listing any new contract or instrument,
in connection with a contract of sale of a commodity
for future delivery, option, swap, or other agreement,
contract, or transaction, that is based on or
references a digital commodity, a registered entity
shall make or rely on a certification under subsection
(d) for the digital commodity.''; and
(4) by inserting after subsection (c) the following:
``(d) Certifications for Digital Commodity Trading.--
``(1) In general.--Notwithstanding subsection (c), for the
purposes of listing or offering a digital commodity for trading
in a digital commodity cash or spot market, an eligible entity
shall issue a written certification that the digital commodity
meets the requirements of this Act (including the regulations
prescribed under this Act).
``(2) Contents of the certification.--
``(A) In general.--In making a written
certification under this paragraph, the eligible entity
shall furnish to the Commission--
``(i) an analysis of how the digital
commodity meets the requirements of section
5i(c)(3);
``(ii) information about the digital
commodity regarding--
``(I) its purpose and use;
``(II) its unit creation or release
process;
``(III) its consensus mechanism;
``(IV) its governance structure;
``(V) its participation and
distribution; and
``(VI) its current and proposed
functionality; and
``(iii) any other information, analysis, or
documentation the Commission may, by rule,
require.
``(B) Reliance on prior disclosures.--In making a
certification under this subsection, an eligible entity
may rely on the records and disclosures of any relevant
person registered with the Securities and Exchange
Commission or other State or Federal agency.
``(3) Modifications.--
``(A) In general.--An eligible entity shall modify
a certification made under paragraph (1) to--
``(i) account for significant changes in
any information provided to the Commission
under paragraph (2)(A)(ii); or
``(ii) permit or restrict trading in units
of a digital commodity held by a related person
or an affiliated person.
``(B) Recertification.--Modifications required by
this subsection shall be subject to the same
disapproval and review process as a new certification
under paragraphs (4) and (5).
``(4) Disapproval.--
``(A) In general.--The written certification
described in paragraph (1) shall become effective
unless the Commission finds that the digital asset does
not meet the requirements of this Act or the rules and
regulations thereunder.
``(B) Analysis required.--The Commission shall
include, with any findings referred to in subparagraph
(A), a detailed analysis of the factors on which the
decision was based.
``(C) Public findings.--The Commission shall make
public any disapproval decision, and any related
findings and analysis, made under this paragraph.
``(5) Review.--
``(A) In general.--Unless the Commission makes a
disapproval decision under paragraph (4), the written
certification described in paragraph (1) shall become
effective, pursuant to the certification by the
eligible entity and notice of the certification to the
public (in a manner determined by the Commission) on
the date that is--
``(i) 20 business days after the date the
Commission receives the certification (or such
shorter period as determined by the Commission
by rule or regulation), in the case of a
digital commodity that has not been certified
under this section or for which a certification
is being modified under paragraph (3); or
``(ii) 2 business days after the date the
Commission receives the certification (or such
shorter period as determined by the Commission
by rule or regulation) for any digital
commodity that has been certified under this
section.
``(B) Extensions.--The time for consideration under
subparagraph (A) may be extended through notice to the
eligible entity that there are novel or complex issues
that require additional time to analyze, that the
explanation by the submitting eligible entity is
inadequate, or of a potential inconsistency with this
Act--
``(i) once, for 30 business days, through
written notice to the eligible entity by the
Chairman; and
``(ii) once, for an additional 30 business
days, through written notice to the digital
commodity exchange from the Commission that
includes a description of any deficiencies with
the certification, including any--
``(I) novel or complex issues which
require additional time to analyze;
``(II) missing information or
inadequate explanations; or
``(III) potential inconsistencies
with this Act.
``(6) Certification required.--Notwithstanding any other
provision of this Act, a registered entity or other entity
registered with the Commission shall not list for trading,
accept for clearing, offer to enter into, enter into, execute,
confirm the execution of, or conduct any office or business
anywhere in the United States, its territories or possessions,
for the purpose of soliciting, or accepting any order for, or
otherwise dealing in, any transaction in, or in connection
with, a digital commodity, unless a certification has been made
under this section for the digital commodity.
``(7) Prior approval before registration.--
``(A) In general.--A person applying for
registration with the Commission for the purposes of
listing or offering a digital commodity for trading in
a digital commodity cash or spot market may request
that the Commission grant prior approval for the person
to list or offer the digital commodity on being
registered with the Commission.
``(B) Request for prior approval.--A person seeking
prior approval under subparagraph (A) shall furnish the
Commission with a written certification that the
digital commodity meets the requirements of this Act
(including the regulations prescribed under this Act)
and the information described in paragraph (2).
``(C) Deadline.--The Commission shall take final
action on a request for prior approval not later than
90 business days after submission of the request,
unless the person submitting the request agrees to an
extension of the time limitation established under this
subparagraph.
``(D) Disapproval.--
``(i) In general.--The Commission shall
approve a new contract or other instrument
unless the Commission finds that the new
contract or other instrument would violate this
Act (including a regulations prescribed under
this Act).
``(ii) Analysis required.--The Commission
shall include, with any findings made under
clause (i), a detailed analysis of the factors
on which the decision is based.
``(iii) Public findings.--The Commission
shall make public any disapproval decision, and
any related findings and analysis, made under
this paragraph.
``(8) Eligible entity defined.--In this subsection, the
term `eligible entity' means a registered entity or group of
registered entities acting jointly.''.
SEC. 504. REGISTRATION OF DIGITAL COMMODITY EXCHANGES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 5h the following:
``SEC. 5I. REGISTRATION OF DIGITAL COMMODITY EXCHANGES.
``(a) In General.--
``(1) Registration.--
``(A) In general.--A trading facility that offers
or seeks to offer a cash or spot market in at least 1
digital commodity shall register with the Commission as
a digital commodity exchange.
``(B) Application.--A person desiring to register
as a digital commodity exchange shall submit to the
Commission an application in such form and containing
such information as the Commission may require for the
purpose of making the determinations required for
approval.
``(C) Exemptions.--A trading facility that offers
or seeks to offer a cash or spot market in at least 1
digital commodity shall not be required to register
under this section if the trading facility--
``(i) permits no more than a de minimis
amount of trading activity in a digital
commodity; or
``(ii) serves only customers in a single
State or territory.
``(2) Additional registrations.--
``(A) With the commission.--
``(i) In general.--A registered digital
commodity exchange may also register as--
``(I) a designated contract market;
or
``(II) a swap execution facility.
``(ii) Rules.--For an entity with multiple
registrations under clause (i), the
Commission--
``(I) shall prescribe rules to
exempt the entity from duplicative,
conflicting, or unduly burdensome
provisions of this Act and the rules
under this Act, to the extent such an
exemption would foster the development
of fair and orderly cash or spot
markets in digital commodities, be
necessary or appropriate in the public
interest, and be consistent with the
protection of customers; and
``(II) may, after an analysis of
the risks and benefits, prescribe rules
to provide for portfolio margining, as
may be necessary to protect market
participants, promote fair and
equitable trading in digital commodity
markets, and promote responsible
economic or financial innovation.
``(B) With the securities and exchange
commission.--A registered digital commodity exchange
may register with the Securities and Exchange
Commission as a digital asset trading system to list or
trade contracts of sale for restricted digital assets.
``(C) With a registered futures association.--
``(i) In general.--A registered digital
commodity exchange shall also be a member of a
registered futures association and comply with
rules related to such activity, if the
registered digital commodity exchange accepts
customer funds required to be segregated under
subsection (d).
``(ii) Rulemaking required.--The Commission
shall require any registered futures
association with a digital commodity exchange
as a member to provide such rules as may be
necessary to further compliance with subsection
(d), protect customers, and promote the public
interest.
``(D) Registration required.--A person required to
be registered as a digital commodity exchange under
this section shall register with the Commission as such
regardless of whether the person is registered with
another State or Federal regulator.
``(b) Trading.--
``(1) Prohibition on certain trading practices.--
``(A) Section 4b shall apply to any agreement,
contract, or transaction in a digital commodity as if
the agreement, contract, or transaction were a contract
of sale of a commodity for future delivery.
``(B) Section 4c shall apply to any agreement,
contract, or transaction in a digital commodity as if
the agreement, contract, or transaction were a
transaction involving the purchase or sale of a
commodity for future delivery.
``(C) Section 4b-1 shall apply to any agreement,
contract, or transaction in a digital commodity as if
the agreement, contract, or transaction were a contract
of sale of a commodity for future delivery.
``(2) Prohibition on acting as a counterparty.--
``(A) In general.--A digital commodity exchange or
any affiliate of such an exchange shall not trade on or
subject to the rules of the digital commodity exchange
for its own account.
``(B) Exceptions.--The Commission shall, by rule,
permit a digital commodity exchange or any affiliate of
a digital commodity exchange to engage in trading on an
affiliated exchange so long as the trading is not
solely for the purpose of the profit of the exchange,
including the following:
``(i) Customer direction.--A transaction
for, or entered into at the direction of, or
for the benefit of, an unaffiliated customer.
``(ii) Risk management.--A transaction to
manage the risks associated with the digital
commodity business of the exchange.
``(iii) Functional use.--A transaction
related to the functional operation of a
blockchain network.
``(C) Notice requirement.--In order for a digital
commodity exchange or any affiliate of a digital
commodity exchange to engage in trading on the
affiliated exchange pursuant to subsection (B), notice
must be given to the Commission that shall enumerate
how any proposed activity is consistent with the
exceptions in subsection (B) and the principles of the
Act.
``(D) Delegation.--The Commission may, by rule,
delegate authority to the Director of the Division of
Market Oversight, or such other employee or employees
as the Director of the Division of Market Oversight may
designate from time to time, to carry out these
provisions.
``(3) Trading securities.--A registered digital commodity
exchange that is also registered with the Securities and
Exchange Commission may offer a contract of sale of a
restricted digital asset.
``(4) Rules for certain digital asset sales.--The digital
commodity exchange shall have in place such rules as may be
necessary to reasonably ensure the orderly sale of any unit of
a digital commodity sold by a related person or an affiliated
person.
``(c) Core Principles for Digital Commodity Exchanges.--
``(1) Compliance with core principles.--
``(A) In general.--To be registered, and maintain
registration, as a digital commodity exchange, a
digital commodity exchange shall comply with--
``(i) the core principles described in this
subsection; and
``(ii) any requirement that the Commission
may impose by rule or regulation pursuant to
section 8a(5).
``(B) Reasonable discretion of a digital commodity
exchange.--Unless otherwise determined by the
Commission by rule or regulation, a digital commodity
exchange described in subparagraph (A) shall have
reasonable discretion in establishing the manner in
which the digital commodity exchange complies with the
core principles described in this subsection.
``(2) Compliance with rules.--A digital commodity exchange
shall--
``(A) establish and enforce compliance with any
rule of the digital commodity exchange, including--
``(i) the terms and conditions of the
trades traded or processed on or through the
digital commodity exchange; and
``(ii) any limitation on access to the
digital commodity exchange;
``(B) establish and enforce trading, trade
processing, and participation rules that will deter
abuses and have the capacity to detect, investigate,
and enforce those rules, including means--
``(i) to provide market participants with
impartial access to the market; and
``(ii) to capture information that may be
used in establishing whether rule violations
have occurred; and
``(C) establish rules governing the operation of
the exchange, including rules specifying trading
procedures to be used in entering and executing orders
traded or posted on the facility.
``(3) Listing standards for digital commodities.--
``(A) In general.--A digital commodity exchange
shall permit trading only in a digital commodity that
is not readily susceptible to manipulation.
``(B) Public information requirements.--
``(i) In general.--A digital commodity
exchange shall permit trading only in a digital
commodity if the information required in clause
(ii) is correct, current, and available to the
public.
``(ii) Required information.-- With respect
to a digital commodity and each blockchain
system to which the digital commodity relates
for which the digital commodity exchange will
make the digital commodity available to the
customers of the digital commodity exchange,
the information required in this clause is as
follows:
``(I) Source code.--The source code
for any blockchain system to which the
digital commodity relates.
``(II) Transaction history.--A
narrative description of the steps
necessary to independently access,
search, and verify the transaction
history of any blockchain system to
which the digital commodity relates.
``(III) Digital asset economics.--A
narrative description of the purpose of
any blockchain system to which the
digital asset relates and the operation
of any such blockchain system,
including--
``(aa) information
explaining the launch and
supply process, including the
number of digital assets to be
issued in an initial
allocation, the total number of
digital assets to be created,
the release schedule for the
digital assets, and the total
number of digital assets then
outstanding;
``(bb) information
detailing any applicable
consensus mechanism or process
for validating transactions,
method of generating or mining
digital assets, and any process
for burning or destroying
digital assets on the
blockchain system;
``(cc) an explanation of
governance mechanisms for
implementing changes to the
blockchain system or forming
consensus among holders of the
digital assets; and
``(dd) sufficient
information for a third party
to create a tool for verifying
the transaction history of the
digital asset.
``(IV) Trading volume and
volatility.--The trading volume and
volatility of the digital commodity.
``(V) Additional information.--Such
additional information as the
Commission may, by rule, determine to
be necessary for a customer to
understand the financial and
operational risks of a digital
commodity, and to be in the public
interest or in furtherance of the
requirements of this Act.
``(iii) Format.--The Commission shall
prescribe rules and regulations for the
standardization and simplification of
disclosures under clause (ii), including
requiring that disclosures--
``(I) be conspicuous;
``(II) use plain language
comprehensible to customers; and
``(III) succinctly explain the
information that is required to be
communicated to the customer.
``(C) Additional listing considerations.--In
addition to the requirements of subparagraphs (A) and
(B), a digital commodity exchange shall consider--
``(i) if a sufficient percentage of the
units of the digital asset are units of a
digital commodity to permit robust price
discovery;
``(ii) if it is reasonably unlikely that
the transaction history can be fraudulently
altered by any person or group of persons
acting collectively;
``(iii) if the operating structure and
system of the digital commodity is secure from
cybersecurity threats;
``(iv) if the functionality of the digital
commodity will protect holders from operational
failures;
``(v) if sufficient public information
about the operation, functionality, and use of
the digital commodity is available; and
``(vi) any other factor which the
Commission has, by rule, determined to be in
the public interest or in furtherance of the
requirements of this Act.
``(D) Restricted digital assets.--A digital
commodity exchange shall not permit the trading of a
unit of a digital asset that is a restricted digital
asset.
``(4) Treatment of customer assets.--A digital commodity
exchange shall establish standards and procedures that are
designed to protect and ensure the safety of customer money,
assets, and property.
``(5) Monitoring of trading and trade processing.--
``(A) In general.--A digital commodity exchange
shall provide a competitive, open, and efficient market
and mechanism for executing transactions that protects
the price discovery process of trading on the exchange.
``(B) Protection of markets and market
participants.--A digital commodity exchange shall
establish and enforce rules--
``(i) to protect markets and market
participants from abusive practices committed
by any party, including abusive practices
committed by a party acting as an agent for a
participant; and
``(ii) to promote fair and equitable
trading on the exchange.
``(C) Trading procedures.--A digital commodity
exchange shall--
``(i) establish and enforce rules or terms
and conditions defining, or specifications
detailing--
``(I) trading procedures to be used
in entering and executing orders traded
on or through the facilities of the
digital commodity exchange; and
``(II) procedures for trade
processing of digital commodities on or
through the facilities of the digital
commodity exchange; and
``(ii) monitor trading in digital
commodities to prevent manipulation, price
distortion, and disruptions of the delivery or
cash settlement process through surveillance,
compliance, and disciplinary practices and
procedures, including methods for conducting
real-time monitoring of trading and
comprehensive and accurate trade
reconstructions.
``(6) Ability to obtain information.--A digital commodity
exchange shall--
``(A) establish and enforce rules that will allow
the facility to obtain any necessary information to
perform any of the functions described in this section;
``(B) provide the information to the Commission on
request; and
``(C) have the capacity to carry out such
international information-sharing agreements as the
Commission may require.
``(7) Emergency authority.--A digital commodity exchange
shall adopt rules to provide for the exercise of emergency
authority, in consultation or cooperation with the Commission
or a registered entity, as is necessary and appropriate,
including the authority to facilitate the liquidation or
transfer of open positions in any digital commodity or to
suspend or curtail trading in a digital commodity.
``(8) Timely publication of trading information.--
``(A) In general.--A digital commodity exchange
shall make public timely information on price, trading
volume, and other trading data on digital commodities
to the extent prescribed by the Commission.
``(B) Capacity of digital commodity exchange.--A
digital commodity exchange shall have the capacity to
electronically capture and transmit trade information
with respect to transactions executed on the exchange.
``(9) Recordkeeping and reporting.--
``(A) In general.--A digital commodity exchange
shall--
``(i) maintain records of all activities
relating to the business of the facility,
including a complete audit trail, in a form and
manner acceptable to the Commission for a
period of 5 years;
``(ii) report to the Commission, in a form
and manner acceptable to the Commission, such
information as the Commission determines to be
necessary or appropriate for the Commission to
perform the duties of the Commission under this
Act; and
``(iii) keep any such records of digital
commodities which relate to a security open to
inspection and examination by the Securities
and Exchange Commission.
``(B) Information-sharing.--Subject to section 8,
and on request, the Commission shall share information
collected under subparagraph (A) with--
``(i) the Board;
``(ii) the Securities and Exchange
Commission;
``(iii) each appropriate Federal banking
agency;
``(iv) each appropriate State bank
supervisor (within the meaning of section 3 of
the Federal Deposit Insurance Act);
``(v) the Financial Stability Oversight
Council;
``(vi) the Department of Justice; and
``(vii) any other person that the
Commission determines to be appropriate,
including--
``(I) foreign financial supervisors
(including foreign futures
authorities);
``(II) foreign central banks; and
``(III) foreign ministries.
``(C) Confidentiality agreement.--Before the
Commission may share information with any entity
described in subparagraph (B), the Commission shall
receive a written agreement from the entity stating
that the entity shall abide by the confidentiality
requirements described in section 8 relating to the
information on digital commodities that is provided.
``(D) Providing information.--A digital commodity
exchange shall provide to the Commission (including any
designee of the Commission) information under
subparagraph (A) in such form and at such frequency as
is required by the Commission.
``(10) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, a digital
commodity exchange shall not--
``(A) adopt any rules or take any actions that
result in any unreasonable restraint of trade; or
``(B) impose any material anticompetitive burden on
trading.
``(11) Conflicts of interest.--A registered digital
commodity exchange shall implement conflict-of-interest systems
and procedures that--
``(A) establish structural and institutional
safeguards--
``(i) to minimize conflicts of interest
that might potentially bias the judgment or
supervision of the digital commodity exchange
and contravene the principles of fair and
equitable trading and the business conduct
standards described in this Act, including
conflicts arising out of transactions or
arrangements with affiliates (including
affiliates engaging in digital commodity
activities) or between self-regulatory
obligations and commercial interests, which may
include information partitions, restrictions on
employees and directors, and the legal
separation of different persons or entities
involved in digital commodity activities; and
``(ii) to ensure that the activities of any
person within the digital commodity exchange or
any affiliated entity relating to research or
analysis of the price or market for any digital
commodity or acting in a role of providing
dealing, brokering, or advising activities are
separated by appropriate informational
partitions within the digital commodity
exchange or any affiliated entity from the
review, pressure, or oversight of persons whose
involvement in pricing, trading, exchange, or
clearing activities might potentially bias
their judgment or supervision and contravene
the core principles of open access and the
business conduct standards described in this
Act; and
``(B) address such other issues as the Commission
determines to be appropriate.
``(12) Financial resources.--
``(A) In general.--A digital commodity exchange
shall have adequate financial, operational, and
managerial resources, as determined by the Commission,
to discharge each responsibility of the digital
commodity exchange.
``(B) Minimum amount of financial resources.--A
digital commodity exchange shall possess financial
resources that, at a minimum, exceed the greater of--
``(i) the total amount that would enable
the digital commodity exchange to conduct an
orderly wind-down of its activities or
``(ii) the total amount that would enable
the digital commodity exchange to cover the
operating costs of the digital commodity
exchange for a 1-year period, as calculated on
a rolling basis.
``(13) Disciplinary procedures.--A digital commodity
exchange shall establish and enforce disciplinary procedures
that authorize the digital commodity exchange to discipline,
suspend, or expel members or market participants that violate
the rules of the digital commodity exchange, or similar methods
for performing the same functions, including delegation of the
functions to third parties.
``(14) Governance fitness standards.--
``(A) Governance arrangements.--A digital commodity
exchange shall establish governance arrangements that
are transparent to fulfill public interest
requirements.
``(B) Fitness standards.--A digital commodity
exchange shall establish and enforce appropriate
fitness standards for--
``(i) directors; and
``(ii) any individual or entity with direct
access to, or control of, customer assets.
``(15) System safeguards.--A digital commodity exchange
shall--
``(A) establish and maintain a program of risk
analysis and oversight to identify and minimize sources
of operational and security risks, through the
development of appropriate controls and procedures, and
automated systems, that--
``(i) are reliable and secure; and
``(ii) have adequate scalable capacity;
``(B) establish and maintain emergency procedures,
backup facilities, and a plan for disaster recovery
that allow for--
``(i) the timely recovery and resumption of
operations; and
``(ii) the fulfillment of the
responsibilities and obligations of the digital
commodity exchange; and
``(C) periodically conduct tests to verify that the
backup resources of the digital commodity exchange are
sufficient to ensure continued--
``(i) order processing and trade matching;
``(ii) price reporting;
``(iii) market surveillance; and
``(iv) maintenance of a comprehensive and
accurate audit trail.
``(d) Holding of Customer Assets.--
``(1) In general.--A digital commodity exchange shall hold
customer money, assets, and property in a manner to minimize
the risk of loss to the customer or unreasonable delay in the
access to the money, assets, and property of the customer.
``(A) Segregation of funds.--
``(i) In general.--A digital commodity
exchange shall treat and deal with all money,
assets, and property that is received by the
digital commodity exchange, or accrues to a
customer as the result of trading in digital
commodities, as belonging to the customer.
``(ii) Commingling prohibited.--Money,
assets, and property of a customer described in
clause (i) shall be separately accounted for
and shall not be commingled with the funds of
the digital commodity exchange or be used to
margin, secure, or guarantee any trades or
accounts of any customer or person other than
the person for whom the same are held.
``(B) Exceptions.--
``(i) Use of funds.--
``(I) In general.--Notwithstanding
subparagraph (A), money, assets, and
property of customers of a digital
commodity exchange described in
subparagraph (A) may, for convenience,
be commingled and deposited in the same
account or accounts with any bank,
trust company, derivatives clearing
organization, or qualified digital
commodity custodian.
``(II) Withdrawal.--Notwithstanding
subparagraph (A), such share of the
money, assets, and property described
in item (aa) as in the normal course of
business shall be necessary to margin,
guarantee, secure, transfer, adjust, or
settle a contract of sale of a digital
commodity with a registered entity may
be withdrawn and applied to such
purposes, including the payment of
commissions, brokerage, interest,
taxes, storage, and other charges,
lawfully accruing in connection with
the contract of sale of a digital
commodity.
``(ii) Commission action.--Notwithstanding
subparagraph (A), in accordance with such terms
and conditions as the Commission may prescribe
by rule, regulation, or order, any money,
assets, or property of the customers of a
digital commodity exchange described in
subparagraph (A) may be commingled and
deposited in customer accounts with any other
money, assets, or property received by the
digital commodity exchange and required by the
Commission to be separately accounted for and
treated and dealt with as belonging to the
customer of the digital commodity exchange.
``(2) Permitted investments.--Money described in
subparagraph (A) may be invested in obligations of the United
States, in general obligations of any State or of any political
subdivision of a State, and in obligations fully guaranteed as
to principal and interest by the United States, or in any other
investment that the Commission may by rule or regulation
prescribe, and such investments shall be made in accordance
with such rules and regulations and subject to such conditions
as the Commission may prescribe.
``(3) Customer protection during bankruptcy.--
``(A) Customer property.--All assets held on behalf
of a customer by a digital commodity exchange, and all
money, assets, and property of any customer received by
a digital commodity exchange for trading or custody, or
to facilitate, margin, guarantee, or secure contracts
of sale of a digital commodity (including money,
assets, or property accruing to the customer as the
result of the transactions), shall be considered
customer property for purposes of section 761 of title
11, United States Code.
``(B) Transactions.--A transaction involving a unit
of a digital commodity occurring on or subject to the
rules of a digital commodity exchange shall be
considered a `contract for the purchase or sale of a
commodity for future delivery, on or subject to the
rules of, a contract market or board of trade' for the
purposes of the definition of a `commodity contract' in
section 761 of title 11, United States Code.
``(C) Exchanges.--A digital commodity exchange
shall be considered a futures commission merchant for
purposes of section 761 of title 11, United States
Code.
``(D) Assets removed from segregation.--Assets
removed from segregation due to a customer election
under paragraph (5) shall not be considered customer
property for purposes of section 761 of title 11,
United States Code.
``(4) Misuse of customer property.--
``(A) In general.--It shall be unlawful--
``(i) for any digital commodity exchange
that has received any customer money, assets,
or property for custody to dispose of, or use
any such money, assets, or property as
belonging to the digital commodity exchange or
any person other than a customer of the digital
commodity exchange; or
``(ii) for any other person, including any
depository, other digital commodity exchange,
or digital commodity custodian that has
received any customer money, assets, or
property for deposit, to hold, dispose of, or
use any such money, assets, or property, or
property, as belonging to the depositing
digital commodity exchange or any person other
than the customers of the digital commodity
exchange.
``(B) Use further defined.--For purposes of this
section, `use' of a digital commodity includes
utilizing any unit of a digital asset to participate in
a blockchain service defined in paragraph (5) or a
decentralized governance system associated with the
digital commodity or the blockchain system to which the
digital commodity relates in any manner other than that
expressly directed by the customer from whom the unit
of a digital commodity was received.
``(5) Participation in blockchain services.--
``(A) In general.--A customer shall have the right
to waive the restrictions in paragraph (1) for any unit
of a digital commodity to be used under subparagraph
(B), by affirmatively electing, in writing to the
digital commodity exchange, to waive the restrictions.
``(B) Use of funds.--Customer digital commodities
removed from segregation under subparagraph (A) may be
pooled and used by the digital commodity exchange or
its designee to provide a blockchain service for a
blockchain system to which the unit of the digital
asset removed from segregation in subparagraph (A)
relates.
``(C) Limitations.--
``(i) In general.--The Commission may, by
rule, establish notice and disclosure
requirements, and any other limitations and
rules related to the waiving of any
restrictions under this paragraph that are
reasonably necessary to protect customers,
including eligible contract participants, non-
eligible contract participants, or any other
class of customers.
``(ii) Customer choice.--A digital
commodity exchange may not require a waiver
from a customer described in subparagraph (A)
as a condition of doing business on the
exchange.
``(D) Blockchain service defined.--In this
subparagraph, the term `blockchain service' means any
activity relating to validating transactions on a
blockchain system, providing security for a blockchain
system, or other similar activity required for the
ongoing operation of a blockchain system.
``(e) Market Access Requirements.--
``(1) In general.--A digital commodity exchange shall
require any person who is not an eligible contract participant
to access trading on the exchange through a digital commodity
broker.
``(2) Affiliated commodity brokers.--A registered digital
commodity exchange may permit an affiliated digital commodity
broker to facilitate access to the digital commodity exchange.
``(3) Direct access for eligible contract participants.--
Nothing in this section shall prohibit a digital commodity
exchange in compliance with this section from permitting direct
access for eligible contract participants.
``(4) Additional requirements.--The Commission may, by
rule, impose any additional requirements related to the
operations and activities of the digital commodity exchange and
an affiliated digital commodity broker necessary to protect
market participants, promote fair and equitable trading on the
digital commodity exchange, and promote responsible economic or
financial innovation.
``(f) Designation of Chief Compliance Officer.--
``(1) In general.--A digital commodity exchange shall
designate an individual to serve as a chief compliance officer.
``(2) Duties.--The chief compliance officer shall--
``(A) report directly to the board or to the senior
officer of the exchange;
``(B) review compliance with the core principles in
this subsection;
``(C) in consultation with the board of the
exchange, a body performing a function similar to that
of a board, or the senior officer of the exchange,
resolve any conflicts of interest that may arise;
``(D) establish and administer the policies and
procedures required to be established pursuant to this
section;
``(E) ensure compliance with this Act and the rules
and regulations issued under this Act, including rules
prescribed by the Commission pursuant to this section;
and
``(F) establish procedures for the remediation of
noncompliance issues found during compliance office
reviews, look backs, internal or external audit
findings, self-reported errors, or through validated
complaints.
``(3) Requirements for procedures.--In establishing
procedures under paragraph (2)(F), the chief compliance officer
shall design the procedures to establish the handling,
management response, remediation, retesting, and closing of
noncompliance issues.
``(4) Annual reports.--
``(A) In general.--In accordance with rules
prescribed by the Commission, the chief compliance
officer shall annually prepare and sign a report that
contains a description of--
``(i) the compliance of the digital
commodity exchange with this Act; and
``(ii) the policies and procedures,
including the code of ethics and conflict of
interest policies, of the digital commodity
exchange.
``(B) Requirements.--The chief compliance officer
shall--
``(i) submit each report described in
subparagraph (A) with the appropriate financial
report of the digital commodity exchange that
is required to be submitted to the Commission
pursuant to this section; and
``(ii) include in the report a
certification that, under penalty of law, the
report is accurate and complete.
``(g) Appointment of Trustee.--
``(1) In general.--If a proceeding under section 5e results
in the suspension or revocation of the registration of a
digital commodity exchange, or if a digital commodity exchange
withdraws from registration, the Commission, on notice to the
digital commodity exchange, may apply to the appropriate United
States district court where the digital commodity exchange is
located for the appointment of a trustee.
``(2) Assumption of jurisdiction.--If the Commission
applies for appointment of a trustee under paragraph (1)--
``(A) the court may take exclusive jurisdiction
over the digital commodity exchange and the records and
assets of the digital commodity exchange, wherever
located; and
``(B) if the court takes jurisdiction under
subparagraph (A), the court shall appoint the
Commission, or a person designated by the Commission,
as trustee with power to take possession and continue
to operate or terminate the operations of the digital
commodity exchange in an orderly manner for the
protection of customers subject to such terms and
conditions as the court may prescribe.
``(h) Qualified Digital Commodity Custodian.--A digital commodity
exchange shall hold in a qualified digital commodity custodian each
unit of a digital commodity that is--
``(1) the property of a customer of the digital commodity
exchange;
``(2) required to be held by the digital commodity exchange
under subsection (c)(12) of this section; or
``(3) otherwise so required by the Commission to reasonably
protect customers or promote the public interest.
``(i) Exemptions.--
``(1) In order to promote responsible economic or financial
innovation and fair competition, or protect customers, the
Commission may (on its own initiative or on application of the
registered digital commodity exchange) exempt, either
unconditionally or on stated terms or conditions or for stated
periods and either retroactively or prospectively, or both, a
registered digital commodity exchange from the requirements of
this section, if the Commission determines that--
``(A) the exemption would be consistent with the
public interest and the purposes of this Act; and
``(B) the exemption will not have a material
adverse effect on the ability of the Commission or the
digital commodity exchange to discharge regulatory or
self-regulatory duties under this Act.
``(2) The Commission may exempt, conditionally or
unconditionally, a digital commodity exchange from registration
under this section if the Commission finds that the digital
commodity exchange is subject to comparable, comprehensive
supervision and regulation on a consolidated basis by the
appropriate governmental authorities in the home country of the
facility.
``(j) Customer Defined.--In this section, the term `customer' means
any person that maintains an account for the trading of digital
commodities directly with a digital commodity exchange (other than a
person that is owned or controlled, directly or indirectly, by the
digital commodity exchange) for its own behalf or on behalf of any
other person.
``(k) Federal Preemption.--Notwithstanding any other provision of
law, the Commission shall have exclusive jurisdiction over any digital
commodity exchange registered under this section.
``(l) Withdrawal of Certification of a Blockchain System.--
``(1) In general.--
``(A) Determination by a digital commodity
exchange.--With respect to a certification of a
blockchain system that becomes effective pursuant to
section 44(f) of the Securities Exchange Act of 1934,
if a digital commodity exchange determines that the
blockchain system may not be a decentralized system,
the digital commodity exchange shall notify the
Commission of such determination.
``(B) Withdrawal process.--With respect to each
notification received under subparagraph (A), the
Commission shall initiate a withdrawal process under
which the Commission shall--
``(i) publish a notice announcing the
proposed withdrawal;
``(ii) provide a 30 day comment period with
respect to the proposed withdrawal; and
``(iii) after the end of the 30-day comment
required under clause (ii), publish either--
``(I) a notification of withdrawal
of the applicable certification; or
``(II) a notice that the Commission
is not withdrawing the certification.
``(C) Detailed analysis required.--The Commission
shall include, with each publication of a notification
of withdrawal described under subparagraph (B)(iii)(I),
a detailed analysis of the factors on which the
decision was based.
``(2) Recertification.--With respect to a blockchain system
for which a certification has been withdrawn under this
subsection, no person may make a certification under section
44(a) of the Securities Exchange Act of 1934 with respect to
such blockchain system during the 90-day period beginning on
the date of such withdrawal.
``(3) Appeal of withdrawal.--
``(A) In general.--If a certification is withdrawn
under this subsection, a person making may appeal the
decision to the United States Court of Appeals for the
District of Columbia, not later than 60 days after the
notice of withdrawal is made.
``(B) Review.--In an appeal under subparagraph (A),
the court shall have de novo review of the
determination to withdraw the certification.''.
SEC. 505. QUALIFIED DIGITAL COMMODITY CUSTODIANS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended by the
preceding provisions of this Act, is amended by inserting after section
5i the following:
``SEC. 5J. QUALIFIED DIGITAL COMMODITY CUSTODIANS.
``(a) In General.--A digital commodity custodian is a qualified
digital commodity custodian if the digital commodity custodian complies
with the requirements of this section.
``(b) Supervision Requirement.--A digital commodity custodian that
is not subject to supervision and examination by an appropriate Federal
banking agency, the National Credit Union Administration, the
Commission, or the Securities and Exchange Commission shall be subject
to adequate supervision and appropriate regulation by--
``(1) a State bank supervisor (within the meaning of
section 3 of the Federal Deposit Insurance Act);
``(2) a State credit union supervisor, as defined under
section 6003 of the Anti-Money Laundering Act of 2020; or
``(3) an appropriate foreign governmental authority in the
home country of the digital commodity custodian.
``(c) Other Requirements.--
``(1) Not otherwise prohibited.--The digital commodity
custodian has not been prohibited by a supervisor of the
digital commodity custodian from engaging in an activity with
respect to the custody and safekeeping of digital commodities.
``(2) Information sharing.--
``(A) In general.--A digital commodity custodian
shall share information with the Commission on request
and comply with such requirements for periodic sharing
of information regarding customer accounts that the
digital commodity custodian holds on behalf of an
entity registered with the Commission as the Commission
determines by rule are reasonably necessary to
effectuate any of the provisions, or to accomplish any
of the purposes, of this Act.
``(B) Provision of information.--Any entity that is
subject to regulation and examination by an appropriate
Federal banking agency may satisfy any information
request described in subparagraph (A) by providing the
Commission with a detailed listing, in writing, of the
digital commodities of a customer within the custody or
use of the entity.
``(d) Adequate Supervision and Appropriate Regulation.--
``(1) In general.--For purposes of subsection (b), the
terms `adequate supervision' and `appropriate regulation' mean
such minimum standards for supervision and regulation as are
reasonably necessary to protect the digital commodities of
customers of an entity registered with the Commission,
including standards relating to the licensing, examination, and
supervisory processes that require the digital commodity
custodian to, at a minimum--
``(A) receive a review and evaluation of ownership,
character and fitness, conflicts of interest, business
model, financial statements, funding resources, and
policies and procedures of the digital commodity
custodian;
``(B) hold capital sufficient for the financial
integrity of the digital commodity custodian;
``(C) protect customer assets;
``(D) establish and maintain books and records
regarding the business of the digital commodity
custodian;
``(E) submit financial statements and audited
financial statements to the applicable supervisor
described in subsection (b);
``(F) provide disclosures to the applicable
supervisor described in subsection (b) regarding
actions, proceedings, and other items as determined by
the supervisor;
``(G) maintain and enforce policies and procedures
for compliance with applicable State and Federal laws,
including those related to anti-money laundering and
cybersecurity;
``(H) establish a business continuity plan to
ensure functionality in cases of disruption; and
``(I) establish policies and procedures to resolve
complaints.
``(2) Rulemaking with respect to definitions.--
``(A) In general.--For purposes of this section,
the Commission may, by rule, further define the terms
`adequate supervision' and `appropriate regulation' as
necessary in the public interest, as appropriate for
the protection of investors, and consistent with the
purposes of this Act.
``(B) Conditional treatment of certain custodians
before rulemaking.--Before the effective date of a
rulemaking under subparagraph (A), a trust company is
deemed subject to adequate supervision and appropriate
regulation if--
``(i) the trust company is expressly
permitted by a State bank supervisor to engage
in the custody and safekeeping of digital
commodities;
``(ii) the State bank supervisor has
established licensing, examination, and
supervisory processes that require the trust
company to, at a minimum, meet the conditions
described in subparagraphs (A) through (I) of
paragraph (1); and
``(iii) the trust company is in good
standing with its State bank supervisor.
``(C) Transition period for certain custodians.--In
implementing the rulemaking under subparagraph (A), the
Commission shall provide a transition period of not
less than 2 years for any trust company that is deemed
subject to adequate supervision and appropriate
regulation under subparagraph (B) on the effective date
of the rulemaking.
``(e) Authority to Temporarily Suspend Standards.--The Commission
may, by rule or order, temporarily suspend, in whole or in part, any
requirement imposed under, or any standard referred to in, this section
if the Commission determines that the suspension would be consistent
with the public interest and the purposes of this Act.''.
SEC. 506. REGISTRATION AND REGULATION OF DIGITAL COMMODITY BROKERS AND
DEALERS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended by the
preceding provisions of this Act, is amended by inserting after section
4t the following:
``SEC. 4U. REGISTRATION AND REGULATION OF DIGITAL COMMODITY BROKERS AND
DEALERS.
``(a) Registration.--It shall be unlawful for any person to act as
a digital commodity broker or digital commodity dealer unless the
person is registered as such with the Commission.
``(b) Requirements.--
``(1) In general.--A person shall register as a digital
commodity broker or digital commodity dealer by filing a
registration application with the Commission.
``(2) Contents.--
``(A) In general.--The application shall be made in
such form and manner as is prescribed by the
Commission, and shall contain such information as the
Commission considers necessary concerning the business
in which the applicant is or will be engaged.
``(B) Continual reporting.--A person that is
registered as a digital commodity broker or digital
commodity dealer shall continue to submit to the
Commission reports that contain such information
pertaining to the business of the person as the
Commission may require.
``(3) Statutory disqualification.--Except to the extent
otherwise specifically provided by rule, regulation, or order,
it shall be unlawful for a digital commodity broker or digital
commodity dealer to permit any person who is associated with a
digital commodity broker or a digital commodity dealer and who
is subject to a statutory disqualification to effect or be
involved in effecting a contract of sale of a digital commodity
on behalf of the digital commodity broker or the digital
commodity dealer, respectively, if the digital commodity broker
or digital commodity dealer, respectively, knew, or in the
exercise of reasonable care should have known, of the statutory
disqualification.
``(4) Limitations on certain assets.--A digital commodity
broker or digital commodity dealer shall not offer, offer to
enter into, enter into, or facilitate any contract of sale of a
digital commodity that has not been certified under section
5c(d).
``(c) Additional Registrations.--
``(1) With the commission.--Any person required to be
registered as a digital commodity broker or digital commodity
dealer may also be registered as a futures commission merchant,
introducing broker, or swap dealer.
``(2) With the securities and exchange commission.--Any
person required to be registered as a digital commodity broker
or digital commodity dealer under this section may register
with the Securities and Exchange Commission as a digital asset
broker or digital asset dealer, pursuant to section 15(b) of
the Securities Exchange Act of 1934.
``(3) With membership in a registered futures
association.--Any person required to be registered as a digital
commodity broker or digital commodity dealer under this section
shall be a member of a registered futures association.
``(4) Registration required.--Any person required to be
registered as a digital commodity broker or digital commodity
dealer under this section shall register with the Commission as
such regardless of whether the person is registered with
another State or Federal regulator.
``(d) Rulemaking.--
``(1) In general.--The Commission shall prescribe such
rules applicable to registered digital commodity brokers and
registered digital commodity dealers as are appropriate to
carry out this section, including rules in the public interest
that limit the activities of digital commodity brokers and
digital commodity dealers.
``(2) Multiple registrants.--The Commission shall prescribe
rules or regulations permitting, or may otherwise authorize,
exemptions or additional requirements applicable to persons
with multiple registrations under this Act, including as
futures commission merchants, introducing brokers, digital
commodity brokers, digital commodity dealers, or swap dealers,
as may be in the public interest to reduce compliance costs and
promote customer protection.
``(e) Capital Requirements.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall meet such minimum capital
requirements as the Commission may prescribe to address the
risks associated with digital commodity trading and to ensure
that the digital commodity broker or digital commodity dealer,
respectively, is able to--
``(A) meet, and continue to meet, at all times, the
obligations of such a registrant; and
``(B) in the case of a digital commodity dealer,
fulfill the counterparty obligations of the digital
commodity dealer for any margined, leveraged, or
financed transactions.
``(2) Rule of construction.--Nothing in this section shall
limit, or be construed to limit, the authority of the
Securities and Exchange Commission to set financial
responsibility rules for a broker or dealer registered pursuant
to section 15(b) of the Securities Exchange Act of 1934 (15
U.S.C. 78o(b)) (except for section 15(b)(11) of such Act (15
U.S.C. 78o(b)(11)) in accordance with section 15(c)(3) of such
Act (15 U.S.C. 78o(c)(3)).
``(3) Futures commission merchants and other dealers.--Each
futures commission merchant, introducing broker, digital
commodity broker, digital commodity dealer, broker, and dealer
shall maintain sufficient capital to comply with the stricter
of any applicable capital requirements to which the futures
commission merchant, introducing broker, digital commodity
broker, digital commodity dealer, broker, or dealer,
respectively, is subject under this Act or the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.).
``(f) Reporting and Recordkeeping.--Each digital commodity broker
and digital commodity dealer--
``(1) shall make such reports as are required by the
Commission by rule or regulation regarding the transactions,
positions, and financial condition of the digital commodity
broker or digital commodity dealer, respectively;
``(2) shall keep books and records in such form and manner
and for such period as may be prescribed by the Commission by
rule or regulation; and
``(3) shall keep the books and records open to inspection
and examination by any representative of the Commission.
``(g) Daily Trading Records.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall maintain daily trading records
of the transactions of the digital commodity broker or digital
commodity dealer, respectively, and all related records
(including related forward or derivatives transactions) and
recorded communications, including electronic mail, instant
messages, and recordings of telephone calls, for such period as
the Commission may require by rule or regulation.
``(2) Information requirements.--The daily trading records
shall include such information as the Commission shall require
by rule or regulation.
``(3) Counterparty records.--Each digital commodity broker
and digital commodity dealer shall maintain daily trading
records for each customer or counterparty in a manner and form
that is identifiable with each digital commodity transaction.
``(4) Audit trail.--Each digital commodity broker and
digital commodity dealer shall maintain a complete audit trail
for conducting comprehensive and accurate trade
reconstructions.
``(h) Business Conduct Standards.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall conform with such business
conduct standards as the Commission, by rule or regulation,
prescribes related to--
``(A) fraud, manipulation, and other abusive
practices involving spot or margined, leveraged, or
financed digital commodity transactions (including
transactions that are offered but not entered into);
``(B) diligent supervision of the business of the
registered digital commodity broker or digital
commodity dealer, respectively; and
``(C) such other matters as the Commission deems
appropriate.
``(2) Business conduct requirements.--The Commission shall,
by rule, prescribe business conduct requirements which--
``(A) require disclosure by a registered digital
commodity broker and registered digital commodity
dealer to any counterparty to the transaction (other
than an eligible contract participant) of--
``(i) information about the material risks
and characteristics of the digital commodity;
``(ii) information about the material risks
and characteristics of the transaction;
``(B) establish a duty for such a digital commodity
broker and such a digital commodity dealer to
communicate in a fair and balanced manner based on
principles of fair dealing and good faith;
``(C) establish standards governing digital
commodity broker and digital commodity dealer marketing
and advertising, including testimonials and
endorsements; and
``(D) establish such other standards and
requirements as the Commission may determine are--
``(i) in the public interest;
``(ii) appropriate for the protection of
customers; or
``(iii) otherwise in furtherance of the
purposes of this Act.
``(3) Prohibition on fraudulent practices.--It shall be
unlawful for a digital commodity broker or digital commodity
dealer to--
``(A) employ any device, scheme, or artifice to
defraud any customer or counterparty;
``(B) engage in any transaction, practice, or
course of business that operates as a fraud or deceit
on any customer or counterparty; or
``(C) engage in any act, practice, or course of
business that is fraudulent, deceptive, or
manipulative.
``(i) Duties.--
``(1) Risk management procedures.--Each digital commodity
broker and digital commodity dealer shall establish robust and
professional risk management systems adequate for managing the
day-to-day business of the digital commodity broker or digital
commodity dealer, respectively.
``(2) Disclosure of general information.--Each digital
commodity broker and digital commodity dealer shall disclose to
the Commission information concerning--
``(A) the terms and conditions of the transactions
of the digital commodity broker or digital commodity
dealer, respectively;
``(B) the trading operations, mechanisms, and
practices of the digital commodity broker or digital
commodity dealer, respectively;
``(C) financial integrity protections relating to
the activities of the digital commodity broker or
digital commodity dealer, respectively; and
``(D) other information relevant to trading in
digital commodities by the digital commodity broker or
digital commodity dealer, respectively.
``(3) Ability to obtain information.--Each digital
commodity broker and digital commodity dealer shall--
``(A) establish and enforce internal systems and
procedures to obtain any necessary information to
perform any of the functions described in this section;
and
``(B) provide the information to the Commission, on
request.
``(4) Conflicts of interest.--Each digital commodity broker
and digital commodity dealer shall implement conflict-of-
interest systems and procedures that--
``(A) establish structural and institutional
safeguards--
``(i) to minimize conflicts of interest
that might potentially bias the judgment or
supervision of the digital commodity broker or
digital commodity dealer, respectively, and
contravene the principles of fair and equitable
trading and the business conduct standards
described in this Act, including conflicts
arising out of transactions or arrangements
with affiliates (including affiliates acting as
digital asset issuers, digital commodity
dealers, or qualified digital commodity
custodians), which may include information
partitions and the legal separation of
different persons involved in digital commodity
activities; and
``(ii) to ensure that the activities of any
person within the digital commodity broker or
digital commodity dealer relating to research
or analysis of the price or market for any
digital commodity or acting in a role of
providing exchange activities or making
determinations as to accepting exchange
customers are separated by appropriate
informational partitions within the digital
commodity broker or digital commodity dealer
from the review, pressure, or oversight of
persons whose involvement in pricing, trading,
exchange, or clearing activities might
potentially bias their judgment or supervision
and contravene the core principles of open
access and the business conduct standards
described in this Act; and
``(B) address such other issues as the Commission
determines to be appropriate.
``(5) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, a digital
commodity broker or digital commodity dealer shall not--
``(A) adopt any process or take any action that
results in any unreasonable restraint of trade; or
``(B) impose any material anticompetitive burden on
trading or clearing.
``(j) Designation of Chief Compliance Officer.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall designate an individual to serve
as a chief compliance officer.
``(2) Duties.--The chief compliance officer shall--
``(A) report directly to the board or to the senior
officer of the registered digital commodity broker or
registered digital commodity dealer;
``(B) review the compliance of the registered
digital commodity broker or registered digital
commodity dealer with respect to the registered digital
commodity broker and registered digital commodity
dealer requirements described in this section;
``(C) in consultation with the board of directors,
a body performing a function similar to the board, or
the senior officer of the organization, resolve any
conflicts of interest that may arise;
``(D) be responsible for administering each policy
and procedure that is required to be established
pursuant to this section;
``(E) ensure compliance with this Act (including
regulations), including each rule prescribed by the
Commission under this section;
``(F) establish procedures for the remediation of
noncompliance issues identified by the chief compliance
officer through any--
``(i) compliance office review;
``(ii) look-back;
``(iii) internal or external audit finding;
``(iv) self-reported error; or
``(v) validated complaint; and
``(G) establish and follow appropriate procedures
for the handling, management response, remediation,
retesting, and closing of noncompliance issues.
``(3) Annual reports.--
``(A) In general.--In accordance with rules
prescribed by the Commission, the chief compliance
officer shall annually prepare and sign a report that
contains a description of--
``(i) the compliance of the registered
digital commodity broker or registered digital
commodity dealer with respect to this Act
(including regulations); and
``(ii) each policy and procedure of the
registered digital commodity broker or
registered digital commodity dealer of the
chief compliance officer (including the code of
ethics and conflict of interest policies).
``(B) Requirements.--The chief compliance officer
shall ensure that a compliance report under
subparagraph (A)--
``(i) accompanies each appropriate
financial report of the registered digital
commodity broker or registered digital
commodity dealer that is required to be
furnished to the Commission pursuant to this
section; and
``(ii) includes a certification that, under
penalty of law, the compliance report is
accurate and complete.
``(k) Segregation of Digital Commodities.--
``(1) Holding of customer assets.--
``(A) In general.--Each digital commodity broker
and digital commodity dealer shall hold customer money,
assets, and property in a manner to minimize the risk
of loss to the customer or unreasonable delay in
customer access to the money, assets, and property of
the customer.
``(B) Qualified digital commodity custodian.--Each
digital commodity broker and digital commodity dealer
shall hold in a qualified digital commodity custodian
each unit of a digital commodity that is--
``(i) the property of a customer or
counterparty of the digital commodity broker or
digital commodity dealer, respectively;
``(ii) required to be held by the digital
commodity broker or digital commodity dealer
under subsection (e); or
``(iii) otherwise so required by the
Commission to reasonably protect customers or
promote the public interest.
``(2) Segregation of funds.--
``(A) In general.--Each digital commodity broker
and digital commodity dealer shall treat and deal with
all money, assets, and property that is received by the
digital commodity broker or digital commodity dealer,
or accrues to a customer as the result of trading in
digital commodities, as belonging to the customer.
``(B) Commingling prohibited.--
``(i) In general.--Except as provided in
clause (ii), each digital commodity broker and
digital commodity dealer shall separately
account for money, assets, and property of a
digital commodity customer, and shall not
commingle any such money, assets, or property
with the funds of the digital commodity broker
or digital commodity dealer, respectively, or
use any such money, assets, or property to
margin, secure, or guarantee any trades or
accounts of any customer or person other than
the person for whom the money, assets, or
property are held.
``(ii) Exceptions.--
``(I) Use of funds.--
``(aa) In general.--A
digital commodity broker or
digital commodity dealer may,
for convenience, commingle and
deposit in the same account or
accounts with any bank, trust
company, derivatives clearing
organization, or qualified
digital commodity custodian
money, assets, and property of
customers.
``(bb) Withdrawal.--The
share of the money, assets, and
property described in item (aa)
as in the normal course of
business shall be necessary to
margin, guarantee, secure,
transfer, adjust, or settle a
contract of sale of a digital
commodity with a registered
entity may be withdrawn and
applied to such purposes,
including the payment of
commissions, brokerage,
interest, taxes, storage, and
other charges, lawfully
accruing in connection with the
contract.
``(II) Commission action.--In
accordance with such terms and
conditions as the Commission may
prescribe by rule, regulation, or
order, any money, assets, or property
of the customers of a digital commodity
broker or digital commodity dealer may
be commingled and deposited in customer
accounts with any other money, assets,
or property received by the digital
commodity broker or digital commodity
dealer, respectively, and required by
the Commission to be separately
accounted for and treated and dealt
with as belonging to the customer of
the digital commodity broker or digital
commodity dealer, respectively.
``(3) Permitted investments.--Money described in paragraph
(2) may be invested in obligations of the United States, in
general obligations of any State or of any political
subdivision of a State, in obligations fully guaranteed as to
principal and interest by the United States, or in any other
investment that the Commission may by rule or regulation allow.
``(4) Customer protection during bankruptcy.--
``(A) Customer property.--All money, assets, or
property described in paragraph (2) shall be considered
customer property for purposes of section 761 of title
11, United States Code.
``(B) Transactions.--A transaction involving a unit
of a digital commodity occurring with a digital
commodity dealer shall be considered a `contract for
the purchase or sale of a commodity for future
delivery, on or subject to the rules of, a contract
market or board of trade' for purposes of the
definition of a `commodity contract' in section 761 of
title 11, United States Code.
``(C) Brokers and dealers.--A digital commodity
dealer and a digital commodity broker shall be
considered a futures commission merchant for purposes
of section 761 of title 11, United States Code.
``(D) Assets removed from segregation.--Assets
removed from segregation due to a customer election
under paragraph (6) shall not be considered customer
property for purposes of section 761 of title 11,
United States Code.
``(5) Misuse of customer property.--
``(A) In general.--It shall be unlawful--
``(i) for any digital commodity broker or
digital commodity dealer that has received any
customer money, assets, or property for custody
to dispose of, or use any such money, assets,
or property as belonging to the digital
commodity broker or digital commodity dealer,
respectively, or any person other than a
customer of the digital commodity broker or
digital commodity dealer, respectively; or
``(ii) for any other person, including any
depository, digital commodity exchange, other
digital commodity broker, other digital
commodity dealer, or digital commodity
custodian that has received any customer money,
assets, or property for deposit, to hold,
dispose of, or use any such money, assets, or
property, as belonging to the depositing
digital commodity broker or digital commodity
dealer or any person other than the customers
of the digital commodity broker or digital
commodity dealer, respectively.
``(B) Use further defined.--For purposes of this
section, `use' of a digital commodity includes
utilizing any unit of a digital asset to participate in
a blockchain service defined in paragraph (6) or a
decentralized governance system associated with the
digital commodity or the blockchain system to which the
digital commodity relates in any manner other than that
expressly directed by the customer from whom the unit
of a digital commodity was received.
``(6) Participation in blockchain services.--
``(A) In general.--A customer shall have the right
to waive the restrictions in paragraph (1) for any unit
of a digital commodity to be used under subparagraph
(B), by affirmatively electing, in writing to the
digital commodity broker or digital commodity dealer,
to waive the restrictions.
``(B) Use of funds.--Customer digital commodities
removed from segregation under subparagraph (A) may be
pooled and used by the digital commodity broker or
digital commodity dealer, or one of their designees, to
provide a blockchain service for a blockchain system to
which the unit of the digital asset removed from
segregation in subparagraph (A) relates.
``(C) Limitations.--
``(i) In general.--The Commission may, by
rule, establish notice and disclosure
requirements, and any other limitations and
rules related to the waiving of any
restrictions under this paragraph that are
reasonably necessary to protect customers,
including eligible contract participants, non-
eligible contract participants, or any other
class of customers.
``(ii) Customer choice.--A digital
commodity broker or digital commodity dealer
may not require a waiver from a customer
described in subparagraph (A) as a condition of
doing business with the broker or dealer.
``(D) Blockchain service defined.--In this
subparagraph, the term `blockchain service' means any
activity relating to validating transactions on a
blockchain system, providing security for a blockchain
system, or other similar activity required for the
ongoing operation of a blockchain system.
``(l) Federal Preemption.--Notwithstanding any other provision of
law, the Commission shall have exclusive jurisdiction over any digital
commodity broker or digital commodity dealer registered under this
section.
``(m) Exemptions.--In order to promote responsible economic or
financial innovation and fair competition, or protect customers, the
Commission may (on its own initiative or on application of the
registered digital commodity broker or registered digital commodity
dealer) exempt, unconditionally or on stated terms or conditions, or
for stated periods, and retroactively or prospectively, or both, a
registered digital commodity broker or registered digital commodity
dealer from the requirements of this section, if the Commission
determines that--
``(1)(A) the exemption would be consistent with the public
interest and the purposes of this Act; and
``(B) the exemption will not have a material adverse effect
on the ability of the Commission to discharge regulatory duties
under this Act; or
``(2) the registered digital commodity broker or registered
digital commodity dealer is subject to comparable,
comprehensive supervision and regulation by the appropriate
government authorities in the home country of the registered
digital commodity broker or registered digital commodity
dealer, respectively.''.
SEC. 507. REGISTRATION OF ASSOCIATED PERSONS.
(a) In General.--Section 4k of the Commodity Exchange Act (7 U.S.C.
6k) is amended--
(1) by redesignating subsections (4) through (6) as
subsections (5) through (7), respectively; and
(2) by inserting after subsection (3) the following:
``(4) It shall be unlawful for any person to act as an associated
person of a digital commodity broker or an associated person of a
digital commodity dealer unless the person is registered with the
Commission under this Act and such registration shall not have expired,
been suspended (and the period of suspension has not expired), or been
revoked. It shall be unlawful for a digital commodity broker or a
digital commodity dealer to permit such a person to become or remain
associated with the digital commodity broker or digital commodity
dealer if the digital commodity broker or digital commodity dealer knew
or should have known that the person was not so registered or that the
registration had expired, been suspended (and the period of suspension
has not expired), or been revoked.''; and
(3) in subsection (5) (as so redesignated), by striking
``or of a commodity trading advisor'' and inserting ``of a
commodity trading advisor, of a digital commodity broker, or of
a digital commodity dealer''.
(b) Conforming Amendments.--The Commodity Exchange Act (7 U.S.C. 1a
et seq.) is amended by striking ``section 4k(6)'' each place it appears
and inserting ``section 4k(7)''.
SEC. 508. REGISTRATION OF COMMODITY POOL OPERATORS AND COMMODITY
TRADING ADVISORS.
(a) In General.--Section 4m(3) of the Commodity Exchange Act (7
U.S.C. 6m(3)) is amended--
(1) in subparagraph (A)--
(A) by striking ``any commodity trading advisor''
and inserting ``a commodity pool operator or commodity
trading advisor''; and
(B) by striking ``acting as a commodity trading
advisor'' and inserting ``acting as a commodity pool
operator or commodity trading advisor''; and
(2) in subparagraph (C), by inserting ``digital
commodities,'' after ``physical commodities,''.
(b) Exemptive Authority.--Section 4m of such Act (7 U.S.C. 6m) is
amended by adding at the end the following:
``(4) Exemptive Authority.--The Commission shall promulgate rules
to provide appropriate exemptions for commodity pool operators and
commodity trading advisors, to provide relief from duplicative,
conflicting, or unduly burdensome requirements or to promote
responsible innovation, to the extent the exemptions foster the
development of fair and orderly cash or spot digital commodity markets,
are necessary or appropriate in the public interest, and are consistent
with the protection of customers.''.
SEC. 509. EXCLUSION FOR DECENTRALIZED FINANCE ACTIVITIES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended by the
preceding provisions of this Act, is amended by inserting after section
4u the following:
``SEC. 4V. DECENTRALIZED FINANCE ACTIVITIES NOT SUBJECT TO THIS ACT.
``(a) In General.--Notwithstanding any other provision of this Act,
a person shall not be subject to this Act and the regulations
promulgated under this Act based on the person directly or indirectly
engaging in any of the following activities, whether singly or in
combination, in relation to the operation of a blockchain system or in
relation to decentralized finance (as defined in section 605(d) of the
Financial Innovation and Technology for the 21st Century Act):
``(1) Compiling network transactions, operating or
participating in a liquidity pool, relaying, searching,
sequencing, validating, or acting in a similar capacity with
respect to contract of sale of a digital asset.
``(2) Providing computational work, operating a node, or
procuring, offering, or utilizing network bandwidth, or other
similar incidental services with respect to a contract of sale
of a digital asset.
``(3) Providing a user-interface that enables a user to
read, and access data about a blockchain system, send messages,
or otherwise interact with a blockchain system.
``(4) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing a blockchain system.
``(5) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing software or systems that
create or deploy hardware or software, including wallets or
other systems, facilitating an individual user's own personal
ability to keep, safeguard, or custody the user's digital
commodities or related private keys.
``(b) Exceptions.--Subsection (a) shall not be interpreted to apply
to the anti-fraud, anti-manipulation, or false reporting enforcement
authorities of the Commission.''.
SEC. 510. FUNDING FOR IMPLEMENTATION AND ENFORCEMENT.
(a) Collection of Fees.--
(1) In general.--The Commodity Futures Trading Commission
(in this section referred to as the ``Commission'') shall
charge and collect a filing fee from each person who files with
the Commission a notice of intent to register as a digital
commodity exchange, digital commodity broker, or digital
commodity dealer pursuant to section 106.
(2) Amount.--The fees authorized under paragraph (1) may be
collected and available for obligation only in the amounts
provided in advance in an appropriation Act.
(3) Authority to adjust fees.--Notwithstanding the
preceding provisions of this subsection, to promote fair
competition or innovation, the Commission, in its sole
discretion, may reduce or eliminate any fee otherwise required
to be paid by a small or medium filer under this subsection.
(b) Fee Schedule.--
(1) In general.--The Commission shall publish in the
Federal Register a schedule of the fees to be charged and
collected under this section.
(2) Content.--The fee schedule for a fiscal year shall
include a written analysis of the estimate of the Commission of
the total costs of carrying out the functions of the Commission
under this Act during the fiscal year.
(3) Submission to congress.--Before publishing the fee
schedule for a fiscal year, the Commission shall submit a copy
of the fee schedule to the Congress.
(4) Timing.--
(A) 1st fiscal year.--The Commission shall publish
the fee schedule for the fiscal year in which this Act
is enacted, within 30 days after the date of the
enactment of this Act.
(B) Subsequent fiscal years.--The Commission shall
publish the fee schedule for each subsequent fiscal
year, not less than 90 days before the due date
prescribed by the Commission for payment of the annual
fee for the fiscal year.
(c) Late Payment Penalty.--
(1) In general.--The Commission may impose a penalty
against a person that fails to pay an annual fee charged under
this section, within 30 days after the due date prescribed by
the Commission for payment of the fee.
(2) Amount.--The amount of the penalty shall be--
(A) 5 percent of the amount of the fee due;
multiplied by
(B) the whole number of consecutive 30-day periods
that have elapsed since the due date.
(d) Reimbursement of Excess Fees.--To the extent that the total
amount of fees collected under this section during a fiscal year that
begins after the date of the enactment of this Act exceeds the amount
provided under subsection (a)(2) with respect to the fiscal year, the
Commission shall reimburse the excess amount to the persons who have
timely paid their annual fees, on a pro-rata basis that excludes
penalties, and shall do so within 60 days after the end of the fiscal
year.
(e) Deposit of Fees Into the Treasury.--All amounts collected under
this section shall be credited to the currently applicable
appropriation, account, or fund of the Commission as discretionary
offsetting collections, and shall be available for the purposes
authorized in subsection (f) only to the extent and in the amounts
provided in advance in appropriations Acts.
(f) Authorization of Appropriations.--In addition to amounts
otherwise authorized to be appropriated to the Commission, there is
authorized to be appropriated to the Commission amounts collected under
this section to cover the costs the costs of carrying out the functions
of the Commission under this Act.
(g) Sunset.--The authority to charge and collect fees under this
section shall expire at the end of the 4th fiscal year that begins
after the date of the enactment of this Act.
SEC. 511. EFFECTIVE DATE.
Unless otherwise provided in this title, this title and the
amendments made by this title shall take effect 360 days after the date
of enactment of this Act, except that, to the extent a provision of
this title requires a rulemaking, the provision shall take effect on
the later of--
(1) 360 days after the date of enactment of this Act; or
(2) 60 days after the publication in the Federal Register
of the final rule implementing the provision.
SEC. 512. SENSE OF THE CONGRESS.
It is the sense of the Congress that nothing in this Act or any
amendment made by this Act should be interpreted to authorize any
entity to regulate any commodity, other than a digital commodity, on
any spot market.
TITLE VI--INNOVATION AND TECHNOLOGY IMPROVEMENTS
SEC. 601. FINDINGS; SENSE OF CONGRESS.
(a) Findings.--Congress finds the following:
(1) Entrepreneurs and innovators are building and deploying
this next generation of the internet.
(2) Digital asset networks represent a new way for people
to join together and cooperate with one another to undertake
certain activities.
(3) Digital assets have the potential to be the
foundational building blocks of these networks, aligning the
economic incentive for individuals to cooperate with one
another to achieve a common purpose.
(4) The digital asset ecosystem has the potential to grow
our economy and improve everyday lives of Americans by
facilitating collaboration through the use of technology to
manage activities, allocate resources, and facilitate decision
making.
(5) Blockchain networks and the digital assets they empower
provide creator control, enhance transparency, reduce
transaction costs, and increase efficiency if proper
protections are put in place for investors, consumers, our
financial system, and our national security.
(6) Blockchain technology facilitates new types of network
participation which businesses in the United States may utilize
in innovative ways.
(7) Other digital asset companies are setting up their
operations outside of the United States, where countries are
establishing frameworks to embrace the potential of blockchain
technology and digital assets and provide safeguards for
consumers.
(8) Digital assets, despite the purported anonymity,
provide law enforcement with an exceptional tracing tool to
identify illicit activity and bring criminals to justice.
(9) The Financial Services Committee of the House of
Representatives has held multiple hearings highlighting various
risks that digital assets can pose to the financial markets,
consumers, and investors that must be addressed as we seek to
harness the benefits of these innovations.
(b) Sense of Congress.--It is the sense of Congress that--
(1) the United States should seek to prioritize
understanding the potential opportunities of the next
generation of the internet;
(2) the United States should seek to foster advances in
technology that have robust evidence indicating they can
improve our financial system and create more fair and equitable
access to financial services for everyday Americans while
protecting our financial system, investors, and consumers;
(3) the United States must support the responsible
development of digital assets and the underlying technology in
the United States or risk the shifting of the development of
such assets and technology outside of the United States, to
less regulated countries;
(4) Congress should consult with public and private sector
stakeholders to understand how to enact a functional framework
tailored to the specific risks and unique benefits of different
digital asset-related activities, distributed ledger
technology, distributed networks, and decentralized systems;
and
(5) Congress should enact a functional framework tailored
to the specific risks of different digital asset-related
activities and unique benefits of distributed ledger
technology, distributed networks, and decentralized systems;
and
(6) consumers and market participants will benefit from a
framework for digital assets consistent with longstanding
investor protections in securities and commodities markets, yet
tailored to the unique benefits and risks of the digital asset
ecosystem.
SEC. 602. CODIFICATION OF THE SEC STRATEGIC HUB FOR INNOVATION AND
FINANCIAL TECHNOLOGY.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is
amended by adding at the end the following:
``(l) Strategic Hub for Innovation and Financial Technology.--
``(1) Office established.--There is established within the
Commission the Strategic Hub for Innovation and Financial
Technology (referred to in this section as the `FinHub').
``(2) Purposes.--The purposes of FinHub are as follows:
``(A) To assist in shaping the approach of the
Commission to technological advancements.
``(B) To examine financial technology innovations
among market participants.
``(C) To coordinate the response of the Commission
to emerging technologies in financial, regulatory, and
supervisory systems.
``(3) Director of finhub.--FinHub shall have a Director who
shall be appointed by the Commission, from among individuals
having experience in both emerging technologies and Federal
securities laws and serve at the pleasure of the Commission.
The Director shall report directly to the Commission and
perform such functions and duties as the Commission may
prescribe.
``(4) Responsibilities.--FinHub shall--
``(A) foster responsible technological innovation
and fair competition within the Commission, including
around financial technology, regulatory technology, and
supervisory technology;
``(B) provide internal education and training to
the Commission regarding financial technology;
``(C) advise the Commission regarding financial
technology that would serve the Commission's functions;
``(D) analyze technological advancements and the
impact of regulatory requirements on financial
technology companies;
``(E) advise the Commission with respect to
rulemakings or other agency or staff action regarding
financial technology;
``(F) provide businesses working in emerging
financial technology fields with information on the
Commission, its rules and regulations; and
``(G) encourage firms working in emerging
technology fields to engage with the Commission and
obtain feedback from the Commission on potential
regulatory issues.
``(5) Access to documents.--The Commission shall ensure
that FinHub has full access to the documents and information of
the Commission and any self-regulatory organization, as
necessary to carry out the functions of FinHub.
``(6) Report to congress.--
``(A) In general.--Not later than October 31 of
each year after 2024, FinHub shall submit to the
Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services of the
House of Representatives a report on the activities of
FinHub during the immediately preceding fiscal year.
``(B) Contents.--Each report required under
subparagraph (A) shall include--
``(i) the total number of persons that met
with FinHub;
``(ii) the total number of market
participants FinHub met with, including the
classification of those participants;
``(iii) a summary of general issues
discussed during meetings with persons;
``(iv) information on steps FinHub has
taken to improve Commission services, including
responsiveness to the concerns of persons;
``(v) recommendations--
``(I) with respect to the
regulations of the Commission and the
guidance and orders of the Commission;
and
``(II) for such legislative actions
as FinHub determines appropriate; and
``(vi) any other information, as determined
appropriate by the Director of FinHub.
``(C) Confidentiality.--A report under subparagraph
(A) may not contain confidential information.
``(7) Systems of records.--
``(A) In general.--The Commission shall establish a
detailed system of records (as defined under section
552a of title 5, United States Code) to assist FinHub
in communicating with interested parties.
``(B) Entities covered by the system.--Entities
covered by the system required under subparagraph (A)
include entities or persons submitting requests or
inquiries and other information to Commission through
FinHub.
``(C) Security and storage of records.--FinHub
shall store--
``(i) electronic records--
``(I) in the system required under
subparagraph (A); or
``(II) on the secure network or
other electronic medium, such as
encrypted hard drives or back-up media,
of the Commission; and
``(ii) paper records in secure facilities.
``(8) Effective date.--This subsection shall take effect on
the date that is 180 days after the date of the enactment of
this subsection.''.
SEC. 603. CODIFICATION OF LABCFTC.
(a) In General.--Section 18 of the Commodity Exchange Act (7 U.S.C.
22) is amended by adding at the end the following:
``(c) LabCFTC.--
``(1) Establishment.--There is established in the
Commission LabCFTC.
``(2) Purpose.--The purposes of LabCFTC are to--
``(A) promote responsible financial technology
innovation and fair competition for the benefit of the
American public;
``(B) serve as an information platform to inform
the Commission about new financial technology
innovation; and
``(C) provide outreach to financial technology
innovators to discuss their innovations and the
regulatory framework established by this Act and the
regulations promulgated thereunder.
``(3) Director.--LabCFTC shall have a Director, who shall
be appointed by the Commission and serve at the pleasure of the
Commission. Notwithstanding section 2(a)(6)(A), the Director
shall report directly to the Commission and perform such
functions and duties as the Commission may prescribe.
``(4) Duties.--LabCFTC shall--
``(A) advise the Commission with respect to
rulemakings or other agency or staff action regarding
financial technology;
``(B) provide internal education and training to
the Commission regarding financial technology;
``(C) advise the Commission regarding financial
technology that would bolster the Commission's
oversight functions;
``(D) engage with academia, students, and
professionals on financial technology issues, ideas,
and technology relevant to activities under this Act;
``(E) provide persons working in emerging
technology fields with information on the Commission,
its rules and regulations, and the role of a registered
futures association; and
``(F) encourage persons working in emerging
technology fields to engage with the Commission and
obtain feedback from the Commission on potential
regulatory issues.
``(5) Access to documents.--The Commission shall ensure
that LabCFTC has full access to the documents and information
of the Commission and any self-regulatory organization or
registered futures association, as necessary to carry out the
functions of LabCFTC.
``(6) Report to congress.--
``(A) In general.--Not later than October 31 of
each year after 2024, LabCFTC shall submit to the
Committee on Agriculture of the House of
Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report on its
activities.
``(B) Contents.--Each report required under
paragraph (1) shall include--
``(i) the total number of persons that met
with LabCFTC;
``(ii) a summary of general issues
discussed during meetings with the person;
``(iii) information on steps LabCFTC has
taken to improve Commission services, including
responsiveness to the concerns of persons;
``(iv) recommendations made to the
Commission with respect to the regulations,
guidance, and orders of the Commission and such
legislative actions as may be appropriate; and
``(v) any other information determined
appropriate by the Director of LabCFTC.
``(C) Confidentiality.--A report under paragraph
(A) shall abide by the confidentiality requirements in
section 8.
``(7) Systems of records.--
``(A) In general.--The Commission shall establish a
detailed system of records (as defined in section 552a
of title 5, United States Code) to assist LabCFTC in
communicating with interested parties.
``(B) Persons covered by the system.--The persons
covered by the system of records shall include persons
submitting requests or inquiries and other information
to the Commission through LabCFTC.
``(C) Security and storage of records.--The system
of records shall store records electronically or on
paper in secure facilities, and shall store electronic
records on the secure network of the Commission and on
other electronic media, such as encrypted hard drives
and back-up media, as needed.''.
(b) Conforming Amendments.--Section 2(a)(6)(A) of such Act (7
U.S.C. 2(a)(6)(A)) is amended--
(1) by striking ``paragraph and in'' and inserting
``paragraph,''; and
(2) by inserting ``and section 18(c)(3),'' before ``the
executive''.
(c) Effective Date.--The Commodity Futures Trading Commission shall
implement the amendments made by this section (including complying with
section 18(c)(7) of the Commodity Exchange Act) within 180 days after
the date of the enactment of this Act.
SEC. 604. CFTC-SEC JOINT ADVISORY COMMITTEE ON DIGITAL ASSETS.
(a) Establishment.--The Commodity Futures Trading Commission and
the Securities and Exchange Commission (in this section referred to as
the ``Commissions'') shall jointly establish the Joint Advisory
Committee on Digital Assets (in this section referred to as the
``Committee'').
(b) Purpose.--
(1) In general.--The Committee shall--
(A) provide the Commissions with advice on the
rules, regulations, and policies of the Commissions
related to digital assets;
(B) further the regulatory harmonization of digital
asset policy between the Commissions;
(C) examine and disseminate methods for describing,
measuring, and quantifying digital asset--
(i) decentralization;
(ii) functionality;
(iii) information asymmetries; and
(iv) transaction and network security;
(D) examine the potential for digital assets,
blockchain systems, and distributed ledger technology
to improve efficiency in the operation of financial
market infrastructure and better protect financial
market participants, including services and systems
which provide--
(i) improved customer protections;
(ii) public availability of information;
(iii) greater transparency regarding
customer funds;
(iv) reduced transaction cost; and
(v) increased access to financial market
services; and
(E) discuss the implementation by the Commissions
of this Act and the amendments made by this Act.
(2) Review by agencies.--Each Commission shall--
(A) review the findings and recommendations of the
Committee;
(B) promptly issue a public statement each time the
Committee submits a finding or recommendation to a
Commission--
(i) assessing the finding or recommendation
of the Committee;
(ii) disclosing the action or decision not
to take action made by the Commission in
response to a finding or recommendation; and
(iii) explaining the reasons for the action
or decision not to take action; and
(C) each time the Committee submits a finding or
recommendation to a Commission, provide the Committee
with a formal response to the finding or recommendation
not later than 3 months after the date of the
submission of the finding or recommendation.
(c) Membership and Leadership.--
(1) Non-federal members.--
(A) In general.--The Commissions shall appoint at
least 20 nongovernmental stakeholders who represent a
broad spectrum of interests, equally divided between
the Commissions, to serve as members of the Committee.
The appointees shall include--
(i) digital asset issuers;
(ii) persons registered with the
Commissions and engaged in digital asset
related activities;
(iii) individuals engaged in academic
research relating to digital assets; and
(iv) digital asset users.
(B) Members not commission employees.--Members
appointed under subparagraph (A) shall not be deemed to
be employees or agents of a Commission solely by reason
of membership on the Committee.
(2) Co-designated federal officers.--
(A) Number; appointment.--There shall be 2 co-
designated Federal officers of the Committee, as
follows:
(i) The Director of LabCFTC of the
Commodity Futures Trading Commission.
(ii) The Director of the Strategic Hub for
Innovation and Financial Technology of the
Securities and Exchange Commission.
(B) Duties.--The duties required by chapter 10 of
title 5, United States Code, to be carried out by a
designated Federal officer with respect to the
Committee shall be shared by the co-designated Federal
officers of the Committee.
(3) Committee leadership.--
(A) Composition; election.--The Committee members
shall elect, from among the Committee members--
(i) a chair;
(ii) a vice chair;
(iii) a secretary; and
(iv) an assistant secretary.
(B) Term of office.--Each member elected under
subparagraph (A) in a 2-year period referred to in
section 1013(b)(2) of title 5, United States Code,
shall serve in the capacity for which the member was so
elected, until the end of the 2-year period.
(d) No Compensation for Committee Members.--
(1) Non-federal members.--All Committee members appointed
under subsection (c)(1) shall--
(A) serve without compensation; and
(B) while away from the home or regular place of
business of the member in the performance of services
for the Committee, be allowed travel expenses,
including per diem in lieu of subsistence, in the same
manner as persons employed intermittently in the
Government service are allowed expenses under section
5703(b) of title 5, United States Code.
(2) No compensation for co-designated federal officers.--
The co-designated Federal officers shall serve without
compensation in addition to that received for their services as
officers or employees of the United States.
(e) Frequency of Meetings.--The Committee shall meet--
(1) not less frequently than twice annually; and
(2) at such other times as either Commission may request.
(f) Duration.--Section 1013(a)(2) of title 5, United States Code,
shall not apply to the Committee.
(g) Time Limits.--The Commissions shall--
(1) adopt a joint charter for the Committee within 90 days
after the date of the enactment of this section;
(2) appoint members to the Committee within 120 days after
such date of enactment; and
(3) hold the initial meeting of the Committee within 180
days after such date of enactment.
(h) Funding.--Subject to the availability of funds, the Commissions
shall jointly fund the Committee.
SEC. 605. STUDY ON DECENTRALIZED FINANCE.
(a) In General.--The Commodity Futures Trading Commission and the
Securities and Exchange Commission shall jointly carry out a study on
decentralized finance that analyzes--
(1) the nature, size, role, and use of decentralized
finance blockchain protocols;
(2) the operation of blockchain protocols that comprise
decentralized finance;
(3) the interoperability of blockchain protocols and
blockchain systems;
(4) the interoperability of blockchain protocols and
software-based systems, including websites and wallets;
(5) the decentralized governance systems through which
blockchain protocols may be developed, published, constituted,
administered, maintained, or otherwise distributed, including--
(A) whether the systems enhance or detract from--
(i) the decentralization of the
decentralized finance; and
(ii) the inherent benefits and risks of the
decentralized governance system; and
(B) any procedures, requirements, or best practices
that would mitigate the risks identified in
subparagraph (A)(ii);
(6) the benefits of decentralized finance, including--
(A) operational resilience and availability of
blockchain systems;
(B) interoperability of blockchain systems;
(C) market competition and innovation;
(D) transaction efficiency;
(E) transparency and traceability of transactions;
and
(F) disintermediation;
(7) the risks of decentralized finance, including--
(A) pseudonymity of users and transactions;
(B) disintermediation; and
(C) cybersecurity vulnerabilities;
(8) the extent to which decentralized finance has
integrated with the traditional financial markets and any
potential risks or improvements to the stability of the
markets;
(9) how the levels of illicit activity in decentralized
finance compare with the levels of illicit activity in
traditional financial markets;
(10) methods for addressing illicit activity in
decentralized finance and traditional markets that are tailored
to the unique attributes of each;
(11) how decentralized finance may increase the
accessibility of cross-border transactions; and
(12) the feasibility of embedding self-executing compliance
and risk controls into decentralized finance.
(b) Consultation.--In carrying out the study required under
subsection (a), the Commodity Futures Trading Commission and the
Securities and Exchange Commission shall consult with the Secretary of
the Treasury on the factors described under paragraphs (7) through (10)
of subsection (a).
(c) Report.--Not later than 1 year after the date of enactment of
this Act, the Commodity Futures Trading Commission and the Securities
and Exchange Commission shall jointly submit to the relevant
congressional committees a report that includes the results of the
study required by subsection (a).
(d) GAO Study.--The Comptroller General of the United States
shall--
(1) carry out a study on decentralized finance that
analyzes the information described under paragraphs (1) through
(12) of subsection (a); and
(2) not later than 1 year after the date of enactment of
this Act, submit to the relevant congressional committees a
report that includes the results of the study required by
paragraph (1).
(e) Definitions.--In this section:
(1) Decentralized finance.--
(A) In general.--The term ``decentralized finance''
means blockchain protocols that allow users to engage
in financial transactions in a self-directed manner so
that a third-party intermediary does not effectuate the
transactions or take custody of digital assets of a
user during any part of the transactions.
(B) Relationship to excluded activities.--The term
``decentralized finance'' shall not be interpreted to
limit or exclude any activity from the activities
described in section 15I(a) of the Securities Exchange
Act of 1934 or section 4v(a) of the Commodity Exchange
Act.
(2) Relevant congressional committees.--The term ``relevant
congressional committees'' means--
(A) the Committees on Financial Services and
Agriculture of the House of Representatives; and
(B) the Committees on Banking, Housing, and Urban
Affairs and Agriculture, Nutrition, and Forestry of the
Senate.
SEC. 606. STUDY ON NON-FUNGIBLE DIGITAL ASSETS.
(a) In General.--The Comptroller General of the United States shall
carry out a study of non-fungible digital assets that analyzes--
(1) the nature, size, role, purpose, and use of non-
fungible digital assets;
(2) the similarities and differences between non-fungible
digital assets and other digital assets, including digital
commodities and payment stablecoins, and how the markets for
those digital assets intersect with each other;
(3) how non-fungible digital assets are minted by issuers
and subsequently administered to purchasers;
(4) how non-fungible digital assets are stored after being
purchased by a consumer;
(5) the interoperability of non-fungible digital assets
between different blockchain systems;
(6) the scalability of different non-fungible digital asset
marketplaces;
(7) the benefits of non-fungible digital assets, including
verifiable digital ownership;
(8) the risks of non-fungible tokens, including--
(A) intellectual property rights;
(B) cybersecurity risks; and
(C) market risks;
(9) whether and how non-fungible digital assets have
integrated with traditional marketplaces, including those for
music, real estate, gaming, events, and travel;
(10) whether non-fungible tokens can be used to facilitate
commerce or other activities through the representation of
documents, identification, contracts, licenses, and other
commercial, government, or personal records;
(11) any potential risks to traditional markets from such
integration; and
(12) the levels and types of illicit activity in non-
fungible digital asset markets.
(b) Report.--Not later than 1 year after the date of the enactment
of this Act, the Comptroller General, shall make publicly available a
report that includes the results of the study required by subsection
(a).
SEC. 607. STUDY ON EXPANDING FINANCIAL LITERACY AMONGST DIGITAL ASSET
HOLDERS.
(a) In General.-- The Commodity Futures Trading Commission with the
Securities and Exchange Commission shall jointly conduct a study to
identify--
(1) the existing level of financial literacy among retail
digital asset holders, including subgroups of investors
identified by the Commodity Futures Trading Commission with the
Securities and Exchange Commission;
(2) methods to improve the timing, content, and format of
financial literacy materials regarding digital assets provided
by the Commodity Futures Trading Commission and the Securities
and Exchange Commission;
(3) methods to improve coordination between the Securities
and Exchange Commission and the Commodity Futures Trading
Commission with other agencies, including the Financial
Literacy and Education Commission as well as nonprofit
organizations and State and local jurisdictions, to better
disseminate financial literacy materials;
(4) the efficacy of current financial literacy efforts with
a focus on rural communities and communities with majority
minority populations;
(5) the most useful and understandable relevant information
that retail digital asset holders need to make informed
financial decisions before engaging with or purchasing a
digital asset or service that is typically sold to retail
investors of digital assets;
(6) the most effective public-private partnerships in
providing financial literacy regarding digital assets to
consumers;
(7) the most relevant metrics to measure successful
improvement of the financial literacy of an individual after
engaging with financial literacy efforts; and
(8) in consultation with the Financial Literacy and
Education Commission, a strategy (including to the extent
practicable, measurable goals and objectives) to increase
financial literacy of investors regarding digital assets.
(b) Report.--Not later than 1 year after the date of the enactment
of this Act, the Commodity Futures Trading Commission and the
Securities and Exchange Commission shall jointly submit a written
report on the study required by subsection (a) to the Committees on
Financial Services and on Agriculture of the House of Representatives
and the Committees on Banking, Housing, and Urban Affairs and on
Agriculture, Nutrition, and Forestry of the Senate.
SEC. 608. STUDY ON FINANCIAL MARKET INFRASTRUCTURE IMPROVEMENTS.
(a) In General.--The Commodity Futures Trading Commission and the
Securities and Exchange Commission shall jointly conduct a study to
assess whether additional guidance or rules are necessary to facilitate
the development of tokenized securities and derivatives products, and
to the extent such guidance or rules would foster the development of
fair and orderly financial markets, be necessary or appropriate in the
public interest, and be consistent with the protection of investors and
customers.
(b) Report.--
(1) Time limit.--Not later than 1 year after the date of
enactment of this Act, the Commodity Futures Trading Commission
and the Securities and Exchange Commission shall jointly submit
to the relevant congressional committees a report that includes
the results of the study required by subsection (a).
(2) Relevant congressional committees defined.--In this
section, the term ``relevant congressional committees'' means--
(A) the Committees on Financial Services and on
Agriculture of the House of Representatives; and
(B) the Committees on Banking, Housing, and Urban
Affairs and on Agriculture, Nutrition, and Forestry of
the Senate.
Passed the House of Representatives May 22, 2024.
Attest:
KEVIN F. MCCUMBER,
Clerk.