[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2355 Introduced in Senate (IS)]
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118th CONGRESS
1st Session
S. 2355
To clarify the applicability of sanctions and antimoney laundering
compliance obligations to United States persons in the decentralized
finance technology sector and virtual currency kiosk operators, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 18, 2023
Mr. Reed (for himself, Mr. Rounds, Mr. Warner, and Mr. Romney)
introduced the following bill; which was read twice and referred to the
Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To clarify the applicability of sanctions and antimoney laundering
compliance obligations to United States persons in the decentralized
finance technology sector and virtual currency kiosk operators, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Crypto-Asset National Security
Enhancement and Enforcement Act of 2023''.
SEC. 2. DECENTRALIZED FINANCE NATIONAL SECURITY ENHANCEMENT.
(a) Definitions.--In this section:
(1) Control.--The term ``control'', with respect to a
digital asset protocol, includes the power, directly or
indirectly, to direct a change in the computer code or other
terms governing the operation of the protocol, as determined by
the Secretary of the Treasury. Such power may be exercised
through ownership of governance tokens, administrator
privileges, ability to alter or upgrade computer code, or
otherwise.
(2) Digital asset.--The term ``digital asset'' means any
digital representation of value that is recorded on a
cryptographically secured distributed ledger or any similar
technology or another implementation, which was designed and
built as part of a system to leverage or replace blockchain,
distributed ledger technology, or their derivatives.
(3) Digital asset protocol.--The term ``digital asset
protocol'' means any communication protocol, smart contract, or
other software--
(A) deployed through the use of distributed ledger
or similar technology; and
(B) that provides a mechanism for users to interact
and agree to the terms of a trade for digital assets.
(4) Digital asset protocol backer.--
(A) In general.--The term ``digital asset protocol
backer'' means any person that--
(i) holds governance tokens of a digital
asset protocol valued at more than $25,000,000
(subject to adjustment under subparagraph (B));
or
(ii) makes--
(I) an investment in the
development of a digital asset protocol
of $25,000,000 (subject to adjustment
under subparagraph (B)) or more; or
(II) any combination of investments
in the development of a digital asset
protocol if--
(aa) any such investment is
not less than $2,500,000
(subject to adjustment under
subparagraph (B)); and
(bb) such investments, in
the aggregate, equal or exceed
$25,000,000 (subject to
adjustment under subparagraph
(B)) in any 12-month period.
(B) Adjustment of thresholds.--The Secretary of the
Treasury may adjust any dollar amount specified in
clause (i) or (ii) of subparagraph (A) if, before the
increase takes effect, the Secretary notifies the
following committees of the increase:
(i) The Committee on Banking, Housing, and
Urban Affairs and the Committee on Foreign
Relations of the Senate.
(ii) The Committee on Financial Services
and the Committee on Foreign Affairs of the
House of Representatives.
(C) Valuation of governance tokens.--
(i) In general.--For purposes of
subparagraph (A), the procedures and criteria
to be used in determining the valuation of
governance tokens may, as determined by the
Securities and Exchange Commission in
regulations--
(I) require a minimum trading
period;
(II) rely on sales in a private
market; or
(III) rely on secondary market
trades through a financial institution
(as defined in section 1010.100(t) of
title 31, Code of Federal Regulations
(or a successor regulation)).
(ii) Consultation required.--The Securities
and Exchange Commission shall consult with the
Secretary of the Treasury before prescribing
regulations under clause (i).
(iii) Certification required.--Each digital
asset protocol backer described in paragraph
(4) or in section 5312(a)(2)(AA) of title 31,
United States Code, as amended by subsection
(c) of this section, shall submit to the
Securities and Exchange Commission and the
Secretary of the Treasury an annual
certification with respect to the value of the
governance tokens of the digital asset protocol
held by the digital asset protocol backer,
beginning on the earlier of--
(I) the date on which the value of
those governance tokens equals or
exceeds the dollar amount specified in
subparagraph (A)(i), as may be adjusted
by the Secretary of the Treasury; or
(II) the date on which the
Securities and Exchange Commission or
the Secretary of the Treasury request
information about the valuation of the
governance tokens.
(5) Digital asset transaction facilitator.--The term
``digital asset transaction facilitator'' means any person
that--
(A) controls a digital asset protocol, as
determined by the Secretary of the Treasury; or
(B) makes available an application designed to
facilitate transactions using a digital asset protocol.
(6) United states person.--The term ``United States
person'' means any United States citizen, permanent resident
alien, entity organized under the laws of the United States or
any jurisdiction within the United States (including foreign
branches), or any person in the United States.
(b) Applicability of Sanctions Compliance Obligations to United
States Persons in the Decentralized Finance Sector.--
(1) In general.--In the case of a violation described in
paragraph (2) that is conducted through the use of a digital
asset protocol, each person described in paragraph (3) shall be
subject to the penalties set forth in subsections (b) and (c)
of section 206 of the International Emergency Economic Powers
Act (50 U.S.C. 1705) to the same extent as a person that
commits an unlawful act described in subsection (a) of that
section.
(2) Violations described.--A violation described in this
paragraph is a violation of a license, order, regulation, or
prohibition issued to implement sanctions administered by the
Office of Foreign Assets Control.
(3) Persons described.--A person described in this
paragraph is a United States person that is a digital asset
transaction facilitator or a digital asset protocol backer of a
digital asset protocol used in a violation described in
paragraph (2).
(4) Exemption for controlled decentralized finance
protocols.--A digital asset protocol backer shall not be
subject to paragraph (1) for a violation described in paragraph
(2) if the Secretary has determined that the digital asset
protocol is controlled by a digital asset transaction
facilitator or by another person, who may be appointed by
contract or another means.
(5) Applicability.--Paragraph (1) shall apply with respect
to violations described in paragraph (2) that occur on or after
the date that is 90 days after the date of the enactment of
this Act.
(c) Bank Secrecy Act Application to the Decentralized Finance
Sector.--
(1) In general.--Section 5312(a)(2) of title 31, United
States Code, as amended by section 6110(a)(1) of the Anti-Money
Laundering Act of 2020 (division F of Public Law 116-283), is
amended--
(A) in subparagraph (Z), by striking ``or'' at the
end;
(B) by redesignating subparagraph (AA) as
subparagraph (BB); and
(C) by inserting after subparagraph (Z) the
following:
``(AA) a digital
asset transaction
facilitator or a
digital asset protocol
backer of a digital
asset protocol; or''.
(2) Effective date.--Subparagraph (AA) of section
5312(a)(2) of title 31, United States Code, as added by
subsection (a), shall take effect on the day after the
effective date of the final rules issued by the Secretary of
the Treasury pursuant to section 6110(b) of the Anti-Money
Laundering Act of 2020 (division F of Public Law 116-283).
(3) Exemption for controlled decentralized finance
protocols.--The Secretary of the Treasury may exercise the
exemptive authority under section 5318(a)(7) of title 31,
United States Code, with respect to a digital asset protocol
backer of a digital asset protocol, if--
(A) the Secretary of the Treasury finds that such
digital asset protocol is controlled by a digital asset
transaction facilitator or by another person, who may
be appointed through contract or other means; and
(B) the digital asset transaction facilitator or
other person described in subparagraph (A) is subject
to the requirements under this section and regulations
prescribed under this section for transactions
conducted through the use of such digital asset
protocol.
SEC. 3. PROHIBITIONS OR CONDITIONS ON CERTAIN TRANSMITTALS OF FUNDS.
Section 5318A of title 31, United States Code, is amended--
(1) in subsection (a)(2)(C), by striking ``subsection
(b)(5)'' and inserting ``paragraphs (5) and (6) of subsection
(b)''; and
(2) in subsection (b)--
(A) in paragraph (5), by striking ``for or on
behalf of a foreign banking institution''; and
(B) by adding at the end the following:
``(6) Prohibitions or conditions on certain transmittals of
funds.--If the Secretary finds a jurisdiction outside of the
United States, 1 or more financial institutions operating
outside of the United States, 1 or more types of accounts
within, or involving, a jurisdiction outside of the United
States, or 1 or more classes of transactions within, or
involving, a jurisdiction outside of the United States to be of
primary money laundering concern, the Secretary, in
consultation with the Secretary of State, the Attorney General,
and the Chairman of the Board of Governors of the Federal
Reserve System, may prohibit, or impose conditions upon,
certain transmittals of funds (to be defined by the Secretary),
to or from any domestic financial institution or domestic
financial agency if such transmittal of funds involves any such
jurisdiction, institution, class of transaction, or type of
account.''.
SEC. 4. VIRTUAL CURRENCY KIOSK NATIONAL SECURITY ENHANCEMENT.
(a) Definitions.--In this section:
(1) Virtual currency.--The term ``virtual currency'' means
any digital representation of value that is recorded on a
cryptographically secured distributed ledger or any similar
technology or another implementation, which was designed and
built as part of a system to leverage or replace blockchain,
distributed ledger technology, or their derivatives.
(2) Virtual currency transfer.--The term ``virtual currency
transfer'' means a withdrawal, exchange, or other payment or
transfer that involves a transaction in virtual currency.
(3) Virtual currency kiosk.--The term ``virtual currency
kiosk'' means a stand-alone machine that facilitates a virtual
currency transfer.
(4) Virtual currency kiosk operator.--The term ``virtual
currency kiosk operator'' means any person who operates a
virtual currency kiosk at which consumers initiate virtual
currency transfers.
(b) Antimoney Laundering.--
(1) In general.--Except as provided in paragraph (2),
before effecting any virtual currency transfer, a virtual
currency kiosk operator shall verify and record, at a minimum,
the name and physical address of the--
(A) consumer, which shall include review of an
official document evidencing nationality or residence
that includes a photograph of the consumer; and
(B) counterparty to such transfer.
(2) Exception.--Paragraph (1) shall not apply to a
counterparty described in paragraph (1)(B) that conducts a
virtual currency transfer using a wallet held at a financial
institution, as defined in section 5312 of title 31, United
States Code, that is subject to the requirements of subchapter
II of title 31, United States Code.
(c) Rulemaking.--Not later than 360 days after the date of
enactment of this Act, the Financial Crimes Enforcement Network shall
promulgate regulations requiring each virtual currency kiosk operator
to--
(1) furnish to the Financial Crimes Enforcement Network a
list of the locations, including physical addresses, of all
virtual currency kiosks that are owned or operated by such
operator; and
(2) update the list described in paragraph (1) every 90
days.
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