Union Calendar No. 401
118th CONGRESS 2d Session |
[Report No. 118–484, Parts I and II]
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.
July 20, 2023
Mr. Thompson of Pennsylvania (for himself, Mr. Hill, Mr. Johnson of South Dakota, Mr. Davidson, and Mr. Emmer) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned
May 6, 2024
Additional sponsors: Mr. Molinaro, Mr. Cuellar, Mr. Nickel, Mr. Curtis, Mr. Banks, Mr. McHenry, and Mr. Torres of New York
May 6, 2024
Reported from the Committee on Agriculture with an amendment
[Strike out all after the enacting clause and insert the part printed in italic]
May 6, 2024
Reported from the Committee on Financial Services with an amendment; committed to the Committee of the Whole House on the State of the Union and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in boldface roman]
[For text of introduced bill, see copy of bill as introduced on July 20, 2023]
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,
(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.
Sec. 101. Definitions under the Securities Act of 1933.
Sec. 102. Definitions under the Commodity Exchange Act.
Sec. 103. Definitions under this Act.
Sec. 104. Joint rulemakings.
Sec. 105. Notice of intent to register for digital commodity exchanges, brokers, and dealers.
Sec. 106. Notice of intent to register for digital asset brokers, dealers, and trading systems.
Sec. 107. Commodity Exchange Act savings provisions.
Sec. 108. International harmonization.
Sec. 109. Implementation.
Sec. 201. Exempted transactions in digital assets.
Sec. 202. Requirements to transact in certain digital assets.
Sec. 203. Enhanced disclosure requirements.
Sec. 204. Certification of certain digital assets.
Sec. 205. Effective date.
Sec. 301. Treatment of digital commodities and other digital assets.
Sec. 302. Antifraud authority over permitted payment stablecoins.
Sec. 303. Registration of digital asset trading systems.
Sec. 304. Requirements for digital asset trading systems.
Sec. 305. Registration of digital asset brokers and digital asset dealers.
Sec. 306. Requirements of digital asset brokers and digital asset dealers.
Sec. 307. Rules related to conflicts of interest.
Sec. 308. Treatment of certain digital assets in connection with federally regulated intermediaries.
Sec. 309. Dual registration.
Sec. 310. Exclusion for ancillary activities.
Sec. 311. Registration and requirements for notice-registered digital asset clearing agencies.
Sec. 312. Treatment of custody activities by banking institutions.
Sec. 401. Commission jurisdiction over digital commodity transactions.
Sec. 402. Requiring futures commission merchants to use qualified digital commodity custodians.
Sec. 403. Trading certification and approval for digital commodities.
Sec. 404. Registration of digital commodity exchanges.
Sec. 405. Qualified digital commodity custodians.
Sec. 406. Registration and regulation of digital commodity brokers and dealers.
Sec. 407. Registration of associated persons.
Sec. 408. Registration of commodity pool operators and commodity trading advisors.
Sec. 409. Exclusion for ancillary activities.
Sec. 410. Funding for implementation, administration, and enforcement.
Sec. 411. Effective date.
Sec. 501. Codification of the SEC Strategic Hub for Innovation and Financial Technology.
Sec. 502. Codification of LabCFTC.
Sec. 503. CFTC-SEC Joint Advisory Committee on Digital Assets.
Sec. 504. Modernization of the Securities and Exchange Commission mission.
Sec. 505. Study on decentralized finance.
Sec. 506. Study on non-fungible digital assets.
Sec. 507. Study on financial market infrastructure improvements.
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 PERSONS.—The term ‘affiliated person’ means a person (including a related person) that—
“(21) BLOCKCHAIN.—The term ‘blockchain’ means any technology—
“(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.
“(24) DECENTRALIZED NETWORK.—With respect to a blockchain system to which a digital asset relates, the term ‘decentralized network’ 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
“(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—
“(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—
“(25) 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—
“(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—
“(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 this Act, the Financial Innovation and Technology for the 21st Century Act, or the Commodity Exchange Act.
“(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, or transferable share; or
“(ii) any asset which represents, operates as the functional equivalent of, or otherwise has embedded functionality or characteristics which make it 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;
“(C) 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—
“(D) TREATMENT OF CERTAIN DIGITAL ASSETS SOLD PURSUANT TO AN INVESTMENT CONTRACT.—A digital asset sold or transferred or intended to be sold or transferred 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.—With respect to a digital asset, the term ‘digital asset issuer’—
“(A) means—
“(28) DIGITAL ASSET MATURITY DATE.—The term ‘digital asset maturity date’ means, with respect to any units of a 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—
“(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.—The term ‘end user distribution’ means an issuance of a unit of a digital asset that—
“(A) does not involve an exchange of more than a nominal value of cash, property, or other assets; and
“(B) 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—
“(31) FUNCTIONAL NETWORK.—With respect to a blockchain system to which a digital asset relates, the term ‘functional network’ means the network allows network participants to use such digital asset for—
“(32) PERMITTED PAYMENT STABLECOIN.—The term ‘permitted payment stablecoin’—
“(B) that is not—
“(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)).
“(33) RELATED PERSON.—With respect to a digital asset issuer, the term ‘related person’ means—
“(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;
“(34) RESTRICTED DIGITAL ASSET.—
“(A) IN GENERAL.—The term ‘restricted digital asset’ means—
“(i) any unit of a digital asset held by a person, other than a digital asset issuer, a related person, or an affiliated person, prior to the first date on which each blockchain system to which the digital asset relates is a functional network and certified to be a decentralized network under section 44 of the Securities Exchange Act of 1934, that was—
“(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)).
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended—
(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—
“(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—
“(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 network and certified to be a decentralized network under section 44 of the Securities Exchange Act of 1934, that was—
“(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 network and certified to be a decentralized network under section 44 of the Securities Exchange Act of 1934; and
“(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;
“(B) EXCEPTIONS.—The term ‘digital commodity broker’ does not include a person solely because the person—
“(57) DIGITAL COMMODITY CUSTODIAN.—The term ‘digital commodity custodian’ means an entity in the business of holding, maintaining, or safeguarding digital commodities.
“(58) DIGITAL COMMODITY DEALER.—
“(A) IN GENERAL.—The term ‘digital commodity dealer’ means any person who—
“(i) in digital commodity cash or spot markets—
“(B) EXCEPTION.—The term ‘digital commodity dealer’ does not include a person solely because the person—
“(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;
“(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 network’, ‘digital asset’, ‘digital asset issuer’, ‘end user distribution’, ‘functional network’, ‘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’ has the meaning given that term under section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).”.
In this Act:
(1) DEFINITIONS UNDER THE 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).
(2) DEFINITIONS UNDER THE SECURITIES ACT OF 1933.—The terms “affiliated person”, “blockchain”, “blockchain system”, “blockchain protocol”, “decentralized network”, “digital asset”, “digital asset issuer”, “digital asset maturity date”, “digital asset trading system”, “end user distribution”, “functional network”, “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”, “mixed digital asset transaction”, 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)).
(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 network”, “decentralized governance system”, “digital asset”, “digital asset issuer”, “digital asset maturity date”, “end user distribution”, “functional network”, “related person”, “restricted digital asset”, and “source code”, as defined under section 2(a) of the Securities Act of 1933.
(b) Joint rulemaking for exchanges.—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 as a digital commodity exchange and with the Securities and Exchange Commission as a digital asset trading system 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.
(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;
(b) Disclosure of general information.—A person filing a notice of intent to register under subsection (a) shall disclose to the Commission the following:
(c) Asset and 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—.
(d) Requirements.—A person filing a notice of intent to register under subsection (a) shall comply with the following requirements:
(1) REGISTERED FUTURES ASSOCIATION.—The person shall be a member of a futures association registered under section 17 of the Commodity Exchange Act, and shall comply with the rules of the association, including the rules of the association pertaining to customer disclosures and protection of customer assets.
(2) BOOKS AND RECORDS.—The person shall keep their books and records open to inspection and examination by the Commission.
(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;
(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.
(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 deemed a security.
(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 or the Securities and Exchange Commission.
(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) Final 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 FINAL REGISTRATION.—Subsection (e)(1) shall not apply to a person who has submitted a notice of intent to register if—
(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.
(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 subsection 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) Disclosure of general information.—A person filing a notice of intent to register under subsection (a) shall disclose to the Commission the following:
(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 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) BOOKS AND RECORDS.—The person shall keep their books and records open to inspection and examination by the Commission.
(2) CUSTOMER DISCLOSURES.—The person shall disclose to consumers—
(3) 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 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 prevent the account of a customer from becoming under-segregated.
(e) Compliance and enforcement.—
(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 not be subject to an enforcement action by the Commission for—
(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) ANTIFRAUD AND ANTIMANIPULATION.—Paragraph (1) shall not be construed to limit any antimanipulation, antifraud, or false reporting enforcement authority of the Commission or the Commodity Futures Trading Commission.
(4) DELISTING.—Paragraph (1) shall not be construed to limit the authority of the Commission or the Commodity Futures Trading Commission to require a person to delist an asset for trading if the Commission or 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) Final 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, and digital asset trading systems, as appropriate.
(2) TRANSITION TO FINAL REGISTRATION.—
(A) ONGOING DEFERRAL FOR ENTITIES REGISTERED WITH THE COMMISSION.—Subsection (e)(1) shall continue to apply to a person who has submitted a notice of intent to register while the person is registered with the Commission as a digital asset broker, digital asset dealer, or digital asset trading system, as appropriate.
(B) END OF DEFERRAL.—Subsection (e)(1) shall not apply to a person who has submitted a notice of intent to register if—
(ii) the digital asset broker, digital asset dealer, or digital asset trading system that filed a notice of intent to register failed to register as such with the Commission within 180 days after the Commission finalized the rules of the Commission for the registration of digital asset brokers, digital asset dealers, and digital asset trading systems, as appropriate.
(a) In general.—Nothing in this Act shall affect or apply to, or be interpreted to affect or apply to—
(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.
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—
(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.
(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—
“(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;
“(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;
(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) A certification that the digital asset issuer meets the relevant requirements described under section 4(a)(8).
“(E) A description of the plan of distribution of any unit of a digital asset that is to be offered.
“(G) A description of exempt offerings conducted within the past three years by the digital asset issuer.
“(H) A description of the digital asset issuer and the current number of employees of the digital asset issuer.
“(2) INFORMATION REQUIRED FOR PURCHASERS.—A digital asset issuer 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 network and a decentralized network;
“(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 network and certified to be a decentralized network 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 broker under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)); 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) 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)—
“(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 antifraud 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;
“(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).
(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—
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 to transact in certain digital assets.
“(a) Transactions in 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 an alternative 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 network 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.
“(b) Transactions in certain digital commodities.—
“(1) IN GENERAL.—Subject to paragraph (2), a digital commodity may be offered and sold by any person other than a digital asset issuer.
“(2) RULES FOR RELATED AND AFFILIATED PERSONS.—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 owned the digital commodity while it was a restricted digital asset for 12 months after the later of—
“(c) Sales restrictions for affiliated persons.—A digital asset may be offered or 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 of the digital assets then outstanding during any 3-month period, reports the sale to—
“(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—
“(2) NOT A SECURITY.—For purposes of the securities laws, an end user distribution described under paragraph (1) shall not be a transaction in a security.
“(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.”.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), as amended by section 202, 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:
“(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;
“(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 network and decentralized network.
“(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.—Where appropriate, provide under the caption ‘Risk Factors’ a description of the material risks surrounding ownership of a unit of a digital asset. This discussion shall be organized logically with relevant headings and each risk factor shall be set forth under a subcaption that adequately describes the risk.
“(b) Certification.—With respect to a digital asset and any blockchain system to which the digital asset relates, the information required to be made available 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.”.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), as amended by section 203, 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 network.
“(b) Filing requirements.—A certification described under subsection (a) shall be filed with the Commission, and include—
“(2) a description of the blockchain system and the digital asset which relates to such blockchain system, including—
“(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;
“(4) an analysis of the factors on which such person based the certification that the blockchain system is a decentralized network, including—
“(A) an explanation of the protections and prohibitions available during the previous 12 months against any one person being able to—
“(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;
“(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 30 days of receiving such certification, determines that the blockchain system is not a decentralized network.
“(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 network 30 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—
“(e) Stay of certification.—
“(f) Disposition of certification.—
“(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.
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—
(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, blockchain protocol, or any person or group of persons solely because of their development of 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.”;
(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”;
(7) in paragraph (10), by adding at the end the following: “Subject to subsection (i), the term does not include a digital commodity or permitted payment stablecoin.”;
(9) by adding at the end the following:
“(81) 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.
“(82) DIGITAL ASSET BROKER.—The term ‘digital asset broker’—
“(83) DIGITAL ASSET DEALER.—The term ‘digital asset dealer’—
“(A) means any person engaged in the business of buying and selling digital assets for such person’s own account through a broker or otherwise; and
“(84) 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 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
“(85) MIXED DIGITAL ASSET TRANSACTION.—The term ‘mixed digital asset transaction’ means an agreement, contract, or transaction involving a restricted digital asset and a digital commodity.
“(86) 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).
“(87) ADDITIONAL DIGITAL ASSET-RELATED TERMS.—
“(A) SECURITIES ACT OF 1933.—The terms ‘affiliated person’, ‘blockchain system’, ‘decentralized governance system’, ‘decentralized network’, ‘digital asset’, ‘digital asset issuer’, ‘digital asset maturity date’, ‘end user distribution’, ‘functional network’, ‘mixed digital asset transaction’, ‘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).”.
(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.”;
(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)).”.
Section 10 of the Securities Exchange Act of 1934 (15 U.S.C. 78j) is amended—
(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 to permitted payment stablecoins with respect to those circumstances in which the permitted payment stablecoins are 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 platform to the same extent as they apply to securities.
“(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 with respect to those circumstances in which the permitted payment stablecoins are brokered, traded, or custodied by a digital asset broker, digital asset dealer, or digital asset trading platform 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, requirement, or obligation on a permitted payment stablecoin issuer regarding the operations of a permitted payment stablecoin issuer or a permitted payment stablecoin, including requirements or obligations regarding—
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 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 digital asset shall not be required to register under this section (and subparagraph (A) shall not apply to such digital asset trading system) if the trading system satisfies any of the exemptions set forth in section 240.3b–16(b) of title 17, Code of Federal Regulations.”.
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) IN GENERAL.—Subject to paragraph (2), a digital asset trading system, in its capacity as such, may not hold custody of customer money, assets, or property.
“(2) CUSTODY IN OTHER CAPACITY.—Nothing in this Act shall 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 or digital asset dealer, in compliance with the requirements of section 15H.
“(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.
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 digital asset broker or 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 any facility of a digital asset trading platform) 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 digital asset unless such digital asset broker or digital asset dealer is registered in accordance with this section.
“(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) EXCEPTION.—A digital asset broker or digital asset dealer may register under this section without obtaining membership in a national securities association until the end of the 360-day period beginning on the date the first national securities association adopts rules to admit digital asset brokers or digital asset dealers as members.
“(c) Additional registrations with the Commodity Futures Trading Commission.—A registered digital asset broker or digital asset dealer shall be permitted to maintain any other registration with the Commodity Futures Trading Commission relating to the other activities of the registered digital asset broker or registered digital asset dealer, including as a digital commodity broker or digital commodity dealer, to list or trade contracts of sale for digital commodities.”.
Section 15H of the Securities Exchange Act of 1934, as added by section 205, is amended by adding at the end the following:
“(d) Antifraud.—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 digital asset that is not a digital commodity by means of any manipulative, deceptive, or other fraudulent device or contrivance.
“(e) 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) RULEMAKING.—Not later than 180 days after the date of enactment of this section, the Commission shall issue rules to provide that a registered digital asset broker or digital asset dealer will be considered to satisfy the requirements of paragraph (1), with respect to digital assets, so long as the digital asset broker or digital asset dealer—
“(A) holds such digital asset at a bank that—
“(i) is recognized by the appropriate Federal banking agency or State bank supervisor (as such terms are defined, respectively, in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) as having custody over such assets;
“(B) establishes, maintains, and enforces written policies, procedures, and controls reasonably designed to demonstrate that the digital asset broker or digital asset dealer—
“(i) has control over the digital asset that the digital asset broker or digital asset dealer holds in custody to protect against the theft, loss, or unauthorized use of the private keys necessary to access and transfer such digital asset;
“(ii) has identified the steps that will be taken in the wake of certain events that could affect the custody of the digital assets by the digital asset broker or digital asset dealer;
“(iv) has established arrangements to allow for the transfer of the digital asset held by such digital asset broker or digital asset dealer to another digital asset broker or digital asset dealer, a trustee, receiver, liquidator, or person performing a similar function, or to another appropriate person, in the event such digital asset broker or digital asset dealer can no longer continue as a going concern and self-liquidates or is subject to a formal bankruptcy, receivership, liquidation, or similar proceeding; or
“(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 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 (3), money, assets, and property of customers of a digital asset broker or digital asset dealer described in paragraph (3) may be maintained and deposited in the same account or accounts with any bank, trust company, digital asset broker, or digital asset dealer, 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 (3), such share of the money, assets, and property described in paragraph (3) as in the normal course of business shall be necessary to transfer, adjust, or settle a 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 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 (3) 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 (3) for any unit of a digital asset, 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.
“(5) FURTHER LIMITATIONS.—No person shall treat or deal with a digital asset held on behalf of any customer pursuant to paragraph (3) by utilizing any unit of such digital asset to participate in a blockchain service (as defined in paragraph (4)(B)(iv)) or a decentralized governance system associated with the digital asset or the blockchain system to which the digital asset relates in any manner other than that which is expressly directed by the customer from which such unit of a digital asset was received.
“(f) Capital requirements.—
“(1) IN GENERAL.—Each registered digital asset broker and registered digital asset dealer shall meet such minimum requirements as the Commission may prescribe to ensure that the digital asset broker or digital asset dealer is able to—
“(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 (e)(2) shall not be required to include the value of such digital assets as assets or liabilities of the digital asset broker or digital asset dealer.
“(3) COORDINATION OF CAPITAL REQUIREMENTS.—
“(A) COMMISSION RULE.—The Commission shall, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations, including as a broker, dealer, digital asset broker, or digital asset dealer.
“(B) JOINT RULE.—The Commission and the Commodity Futures Trading Commission shall jointly, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations, including as a digital asset broker, digital asset dealer, digital asset trading system, digital commodity broker, digital commodity dealer, or digital commodity exchange.
“(g) 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;
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.”.
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 digital asset is a covered security with respect to a transaction that is exempt from registration under this Act when—
Any person that is registered with the Securities and Exchange Commission as a digital asset broker, digital asset dealer, or digital asset trading system may register with the Commodity Futures Trading Commission, as appropriate, as—
(1) a digital commodity exchange under section 5i of the Commodity Exchange Act (7 U.S.C. 1 et seq.), as added by this Act, if the person offers or seeks to offer a cash or spot market in at least one digital commodity;
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 15G the following:
“SEC. 15H. Exclusion for ancillary activities.
“(a) In general.—Notwithstanding any other provision of this Act, a person shall not be subject to this Act and the regulations thereunder solely based on the person undertaking any ancillary activities.
“(b) Exceptions.—Subsection (a) shall not be construed to apply to the antimanipulation and antifraud authorities of the Commission.
“(c) Ancillary activities defined.—In this section, the term ‘ancillary activities’ means any of the following activities related to the operation of a blockchain system:
“(1) Compiling network transactions, operating a pool, relaying, searching, sequencing, validating, or acting in a similar capacity with respect to a restricted 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 restricted 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 the user’s restricted digital assets or related private keys.”.
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 “(other than a notice-registered digital asset clearing agency)” after “unlawful for any clearing agency”; 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—
(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 a depository institution, national bank, Federal credit union, State credit union, or trust company, or any affiliate thereof—
(1) to include assets held in custody as a liability on any financial statement or balance sheet, including payment stablecoin custody or safekeeping activities;
(2) to hold additional regulatory capital against assets in custody or safekeeping, except as necessary to mitigate against operational risks inherent with the custody or safekeeping services, as determined by—
(C) a State bank supervisor (as defined under section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)); or
(a) In general.—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—
(b) In general.—Section 2(c)(1) of the Commodity Exchange Act (7 U.S.C. 2(c)(1)) is amended—
(c) In general.—Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) is amended—
(1) in subparagraph (D)(ii)—
(A) in subclause (III), in the matter that precedes item (aa), by inserting “of a commodity, other than a digital commodity,” before “that”; and
(B) by redesignating subclauses (IV) and (V) as subclauses (V) and (VI) and inserting after subclause (III) the following:
“(IV) a contract of sale of a digital commodity that—
(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—
“(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.—
“(II) OVERSIGHT OF MIXED DIGITAL ASSET TRANSACTIONS.—A mixed digital asset transaction shall be subject to the exclusive jurisdiction of the Securities and Exchange Commission.
“(III) 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—
“(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 clause (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, including any aspect of such an operation or such a 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”.
Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended—
Section 5c of the Commodity Exchange Act (7 U.S.C. 7a–2) is amended—
(2) in subsection (b)—
(3) in subsection (c)—
(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 regulations thereunder).
“(2) CONTENTS OF THE CERTIFICATION.—
“(3) MODIFICATIONS.—
“(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.
“(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
“(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—
“(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.—
“(A) NEW REGISTRANTS.—A digital commodity exchange may only list, as of the effective date of approval of the registration of the digital commodity exchange, the digital commodity for which the digital commodity exchange has received prior approval under this subsection.
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.
“(2) ADDITIONAL REGISTRATIONS.—
“(A) WITH THE COMMISSION.—
“(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
“(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 digital assets deemed securities.
“(C) WITH A REGISTERED FUTURES ASSOCIATION.—
“(b) Trading.—
“(1) PROHIBITION ON CERTAIN TRADING PRACTICES.—
“(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.
“(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.
“(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—
“(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—
“(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:
“(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;
“(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;
“(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—
“(C) TRADING PROCEDURES.—A digital commodity exchange shall—
“(i) establish and enforce rules or terms and conditions defining, or specifications detailing—
“(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—
“(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.—
“(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;
“(B) INFORMATION-SHARING.—Subject to section 8, and on request, the Commission shall share information collected under subparagraph (A) with—
“(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.
“(10) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this Act, a digital commodity exchange shall not—
“(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) which may include information partitions 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
“(12) FINANCIAL RESOURCES.—
“(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.—
“(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—
“(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.
“(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
“(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.
“(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 allow an affiliated digital commodity broker to facilitate access to the digital commodity exchange, if—
“(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.—
“(A) IN GENERAL.—The Commission may, by rule, impose any additional requirements related to the operations and activities of the digital commodity exchange and the 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.
“(B) DELEGATION OF AUTHORITY.—The Commission may delegate to a registered futures association such oversight and regulatory requirements as the Commission determines are necessary to—
“(C) COMPETITIVE ACCESS RULE.—Notwithstanding paragraph (2)(A), the Commission shall, by rule, adopt standards that permit a digital commodity exchange to allow both affiliated and unaffiliated digital commodity brokers to facilitate access to the digital commodity exchange. The Commission rule shall address—
“(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—
“(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;
“(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—
“(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—
“(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—
“(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) Treatment under the Bank Secrecy Act.—A registered digital commodity exchange shall be treated as a financial institution for purposes of the Bank Secrecy Act.
“(m) 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 network, the digital commodity exchange shall notify the Commission of such determination.
“(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.
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.—For purposes of this Act, a qualified digital commodity custodian is a digital commodity custodian who meets the following conditions:
“(1) SUPERVISION.—The digital commodity custodian is subject to adequate supervision and appropriate regulation.
“(2) NO PROHIBITION.—The digital commodity custodian is—
“(3) INFORMATION-SHARING.—
“(A) IN GENERAL.—The digital commodity custodian agrees to such periodic sharing of information regarding customer accounts the digital commodity custodian holds on behalf of an entity registered with the Commission, as the Commission determines by rule shall be reasonably necessary to effectuate any of the provisions, or to accomplish any of the purposes, of this Act.
“(B) PROVISION OF INFORMATION.—Any person 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 person.
“(b) Adequate supervision and appropriate regulation further defined.—
“(1) IN GENERAL.—In subsection (a), 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 minimum standards relating to—
“(c) 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.”.
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.—
“(3) TRANSITION.—Within 180 days after the date of the enactment of this section, the Commission shall prescribe rules providing for the registration of digital commodity brokers and digital commodity dealers under this section.
“(4) 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.
“(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, as applicable, if the digital asset broker or digital asset dealer limits its solicitation of orders, acceptance of orders, or execution of orders, or placing of orders on behalf of others involving any contract of sale of digital assets.
“(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—
“(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.—
“(A) IN GENERAL.—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.).
“(B) COORDINATION OF CAPITAL REQUIREMENTS.—
“(i) COMMISSION RULE.—The Commission shall, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations as a digital commodity dealer, digital commodity broker, futures commission merchant, or introducing broker.
“(ii) JOINT RULE.—The Commission and the Securities and Exchange Commission shall jointly, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations as a digital commodity dealer, digital commodity broker, futures commission merchant, introducing broker, broker, or dealer.
“(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;
“(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.
“(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);
“(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—
“(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;
“(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;
“(3) ABILITY TO OBTAIN INFORMATION.—Each digital commodity broker and digital commodity dealer shall—
“(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
“(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;
“(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—
“(B) REQUIREMENTS.—The chief compliance officer shall ensure that a compliance report under subparagraph (A)—
“(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;
“(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 registered digital commodity broker or registered 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.
“(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
“(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.
“(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
“(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.
(a) In general.—Section 4k of the Commodity Exchange Act (7 U.S.C. 6k) is amended—
(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
(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)”.
Section 4m(3) of the Commodity Exchange Act (7 U.S.C. 6m(3)) is amended—
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. Exclusion for ancillary activities.
“(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 solely based on the person undertaking any ancillary activities.
“(b) Exceptions.—Subsection (a) shall not be construed to apply to the anti-fraud, anti-manipulation, or false reporting enforcement authorities of the Commission.
“(c) Ancillary activities defined.—In this section, the term ‘ancillary activities’ means any of the following activities related to the operation of a blockchain system:
“(1) Compiling network transactions, operating or participating in a 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 a user’s digital commodities or related private keys.”.
Out of any money in the Treasury of the United States not otherwise appropriated, there are appropriated $120,000,000 to the Commodity Futures Trading Commission for the implementation, administration, and enforcement of the provisions of this Act to be administered by the Commodity Futures Trading Commission, which amounts shall remain available through the 5-year period that begins with the date of the enactment of this Act.
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—
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 in the financial industry.
“(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 law 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;
“(C) advise the Commission regarding financial technology that would serve the Commission’s oversight 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;
“(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—
“(ii) the total number of market participants FinHub met with, including the classification of those participants;
“(iv) information on steps FinHub has taken to improve Commission services, including responsiveness to the concerns of persons;
“(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.
(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.—
“(2) PURPOSE.—The purposes of LabCFTC are to—
“(A) promote responsible financial technology innovation and fair competition for the benefit of the American public;
“(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;
“(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;
“(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—
“(iii) information on steps LabCFTC has taken to improve Commission services, including responsiveness to the concerns of persons;
“(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) Conforming amendments.—Section 2(a)(6)(A) of such Act (7 U.S.C. 2(a)(6)(A)) is amended—
(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;
(c) Membership and leadership.—
(1) NON-FEDERAL MEMBERS.—
(A) IN GENERAL.—The Commissions shall appoint at least 20 nongovernmental stakeholders with a wide diversity of opinion and who represent a broad spectrum of interests representing the digital asset ecosystem, equally divided between the Commissions, to serve as members of the Committee. The appointees shall include—
(2) CO-DESIGNATED FEDERAL OFFICERS.—
(A) NUMBER; APPOINTMENT.—There shall be 2 co-designated Federal officers of the Committee, as follows:
(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.
(d) No compensation for Committee members.—
(1) NON-FEDERAL MEMBERS.—All Committee members appointed under subsection (d)(1) shall—
(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.
(a) Securities Act of 1933.—Section 2(b) of the Securities Act of 1933 (15 U.S.C. 77(b)) is amended—
(b) Securities Exchange act of 1934.—Section 3(f) of the Securities Exchange Act of 1934 (15 U.S.C. 78(c)) is amended—
(c) Investment Advisers Act of 1940.—Section 202(c) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2) is amended—
(d) Investment Company Act of 1940.—Section 2(c) of the Investment Company Act of 1940 (15 U.S.C. 80a–2) is amended—
(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—
(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—
(8) the extent to which decentralized finance has integrated with the traditional financial markets and any potential risks to stability of the markets;
(b) 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).
(c) GAO Study.—The Comptroller General of the United States shall—
(d) 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.
(a) The Comptroller General of the United States shall carry out a study of non-fungible digital assets that analyzes—
(2) the similarities and differences between non-fungible digital assets and other digital assets, including digital commodities and payments 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;
(9) whether and how non-fungible digital assets have integrated with traditional marketplaces, including those for music, real estate, gaming, events, and travel;
(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).
(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.
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. Joint 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. International harmonization.
Sec. 110. Implementation.
Sec. 201. Exempted transactions in digital assets.
Sec. 202. Requirements for offers and sales of certain digital assets.
Sec. 203. Enhanced disclosure requirements.
Sec. 204. Certification of certain digital assets.
Sec. 205. Effective date.
Sec. 301. Treatment of digital commodities and other digital assets.
Sec. 302. Anti-fraud authority over permitted payment stablecoins.
Sec. 303. Registration of digital asset trading systems.
Sec. 304. Requirements for digital asset trading systems.
Sec. 305. Registration of digital asset brokers and digital asset dealers.
Sec. 306. Requirements of digital asset brokers and digital asset dealers.
Sec. 307. Rules related to conflicts of interest.
Sec. 308. Treatment of certain digital assets in connection with federally regulated intermediaries.
Sec. 309. Exclusion for ancillary activities.
Sec. 310. Registration and requirements for notice-registered digital asset clearing agencies.
Sec. 311. Treatment of custody activities by banking institutions.
Sec. 312. Effective date; administration.
Sec. 401. Commission jurisdiction over digital commodity transactions.
Sec. 402. Requiring futures commission merchants to use qualified digital commodity custodians.
Sec. 403. Trading certification and approval for digital commodities.
Sec. 404. Registration of digital commodity exchanges.
Sec. 405. Qualified digital commodity custodians.
Sec. 406. Registration and regulation of digital commodity brokers and dealers.
Sec. 407. Registration of associated persons.
Sec. 408. Registration of commodity pool operators and commodity trading advisors.
Sec. 409. Exclusion for ancillary activities.
Sec. 410. Effective date.
Sec. 501. Codification of the SEC Strategic Hub for Innovation and Financial Technology.
Sec. 502. Codification of LabCFTC.
Sec. 503. CFTC-SEC Joint Advisory Committee on Digital Assets.
Sec. 504. Study on decentralized finance.
Sec. 505. Study on non-fungible digital assets.
Sec. 506. Study on expanding financial literacy amongst digital asset holders.
Sec. 507. Study on financial market infrastructure improvements.
Sec. 601. Findings; sense of Congress.
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.—The term ‘affiliated person’ means a person (including a related person) that—
“(21) Blockchain.—The term ‘blockchain’ means any technology—
“(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.
“(24) Decentralized network.—With respect to a blockchain system to which a digital asset relates, the term ‘decentralized network’ 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
“(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—
“(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—
“(25) 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—
“(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—
“(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.
“(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, or transferable share; 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;
“(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;
“(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—
“(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—
“(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—
“(31) Functional network.—With respect to a blockchain system to which a digital asset relates, the term ‘functional network’ means the network allows network participants to use such digital asset for—
“(32) Permitted payment stablecoin.—The term ‘permitted payment stablecoin’—
“(B) that is not—
“(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)).
“(33) Related person.—With respect to a digital asset issuer, the term ‘related person’ means—
“(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;
“(34) Restricted digital asset.—
“(A) IN GENERAL.—The term ‘restricted digital asset’ 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, prior to the first date on which each blockchain system to which the digital asset relates is a functional network and certified to be a decentralized network under section 44 of the Securities Exchange Act of 1934, that was—
“(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)).
Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended—
(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’—
“(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.
“(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
“(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 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
“(87) Mixed digital asset transaction.—The term ‘mixed digital asset transaction’ means an agreement, contract, or transaction involving a restricted digital asset and a digital commodity.
“(88) 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).
“(89) Additional digital asset-related terms.—
“(A) SECURITIES ACT OF 1933.—The terms ‘affiliated person’, ‘blockchain system’, ‘decentralized governance system’, ‘decentralized network’, ‘digital asset’, ‘digital asset issuer’, ‘digital asset maturity date’, ‘end user distribution’, ‘functional network’, ‘mixed digital asset transaction’, ‘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).”.
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended—
(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—
“(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—
“(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 a 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 network and certified to be a decentralized network under section 44 of the Securities Exchange Act of 1934, that was—
“(ii) any unit of a digital asset held by a person, other than a 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 network and certified to be a decentralized network under section 44 of the Securities Exchange Act of 1934; and
“(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 customer that is not an eligible contract participant;
“(B) EXCEPTIONS.—The term ‘digital commodity broker’ does not include a person solely because the person—
“(57) Digital commodity custodian.—The term ‘digital commodity custodian’ means a bank or trust company in the business of holding, maintaining, or safeguarding digital commodities.
“(58) Digital commodity dealer.—
“(A) IN GENERAL.—The term ‘digital commodity dealer’ means any person who—
“(i) in digital commodity cash or spot markets—
“(B) EXCEPTION.—The term ‘digital commodity dealer’ does not include a person solely because the person—
“(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;
“(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 network’, ‘digital asset’, ‘digital asset issuer’, ‘end user distribution’, ‘functional network’, ‘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’ has the meaning given that term under section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).”.
In this Act:
(1) Definitions under the 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).
(2) Definitions under the Securities Act of 1933.—The terms “affiliated person”, “blockchain”, “blockchain system”, “blockchain protocol”, “decentralized network”, “digital asset”, “digital asset issuer”, “digital asset maturity date”, “digital asset trading system”, “end user distribution”, “functional network”, “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”, “mixed digital asset transaction”, 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)).
(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 network”, “decentralized governance system”, “digital asset”, “digital asset issuer”, “digital asset maturity date”, “end user distribution”, “functional network”, “related person”, “restricted digital asset”, and “source code”, as defined under section 2(a) of the Securities Act of 1933.
(b) Joint rulemaking for exchanges.—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 as a digital commodity exchange and with the Securities and Exchange Commission as a digital asset trading system 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.
(d) Protection of self-custody.—
(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.
(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) Disclosure of general information.—A person filing a notice of intent to register under subsection (a) shall disclose to the Commission the following:
(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 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) Books and records.—The person shall keep their books and records open to inspection and examination by the Commission.
(2) Customer disclosures.—The person shall disclose to consumers—
(3) 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 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 prevent the account of a customer from becoming under-segregated.
(e) Compliance and enforcement.—
(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 not be subject to an enforcement action by the Securities and Exchange Commission for—
(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-manipulation, anti-fraud, or false reporting enforcement authority of the Commission or the Securities and Exchange Commission.
(4) Delisting.—Paragraph (1) shall not be construed to limit the authority of the Commission or the Securities and Exchange Commission to require a person to delist an asset for trading if the Commission or 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) Final 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 final registration.—
(A) ONGOING DEFERRAL FOR ENTITIES REGISTERED WITH THE COMMISSION.—Subsection (e)(1) shall continue to apply to a person who has submitted a notice of intent to register while the person is registered with the Commission as a digital commodity exchange, a digital commodity broker, or a digital commodity dealer, as appropriate.
(B) END OF DEFERRAL.—Subsection (e)(1) shall not apply to a person who has submitted a notice of intent to register if—
(ii) the digital commodity exchange, digital commodity broker, or digital commodity dealer that filed a notice of intent to register failed to register as such with the Commission within 180 days after the Commission finalized the rules of the Commission for the registration of digital commodity exchanges, digital commodity brokers, or digital commodity dealers, as appropriate.
(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) Disclosure of general information.—A person filing a notice of intent to register under subsection (a) shall disclose to the Commission the following:
(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 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) National securities association.—The person shall 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), and shall comply with the rules of the association, including the rules of the association pertaining to customer disclosures and protection of customer assets.
(2) Books and records.—The person shall keep their books and records open to inspection and examination by the Commission.
(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;
(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.
(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 deemed a security.
(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 or the Commodity Futures Trading Commission.
(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) Final 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 final registration.—Subsection (e)(1) shall not apply to a person who has submitted a notice of intent to register if—
(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.
(a) In general.—Nothing in this Act shall affect or apply to, or be interpreted to affect or apply to—
(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.
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—
(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.
(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—
“(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;
“(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;
(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.
“(C) A certification that the digital asset issuer meets the relevant requirements described under section 4(a)(8).
“(F) A description of the plan of distribution of any unit of a digital asset that is to be offered.
“(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.
“(2) Information required for purchasers.—A digital asset issuer 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 network and a decentralized network;
“(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 network and certified to be a decentralized network 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—
“(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) 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)—
“(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;
“(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).
(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—
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 network 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.
“(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 owned the digital commodity while it was a restricted digital asset for 12 months after the later of—
“(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—
“(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—
“(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.”.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), as amended by section 202, 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:
“(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;
“(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 network and decentralized network.
“(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.—Where appropriate, provide under the caption ‘Risk Factors’ a description of the material risks surrounding ownership of a unit of a digital asset. This discussion shall be organized logically with relevant headings and each risk factor shall be set forth under a subcaption that adequately describes the risk.
“(b) Certification.—With respect to a digital asset and any blockchain system to which the digital asset relates, the information required to be made available 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.”.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), as amended by section 203, 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 network.
“(b) Filing requirements.—A certification described under subsection (a) shall be filed with the Commission, and include—
“(2) a description of the blockchain system and the digital asset which relates to such blockchain system, including—
“(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;
“(4) an analysis of the factors on which such person based the certification that the blockchain system is a decentralized network, including—
“(A) an explanation of the protections and prohibitions available during the previous 12 months against any one person being able to—
“(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;
“(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 network.
“(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 network 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—
“(e) Stay of certification.—
“(f) Disposition of certification.—
“(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.
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—
(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, blockchain protocol, or any person or group of persons solely because of their development of 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.”;
(5) in paragraph (26) by inserting “(other than a notice-registered digital asset clearing agency)” after “or registered clearing agency”;
(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.”;
(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)).”.
(a) In general.—Section 10 of the Securities Exchange Act of 1934 (15 U.S.C. 78j) is amended—
(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 to permitted payment stablecoins with respect to those circumstances in which the permitted payment stablecoins are 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 platform to the same extent as they apply to securities.
“(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 with respect to those circumstances in which the permitted payment stablecoins are brokered, traded, or custodied by a digital asset broker, digital asset dealer, 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, requirement, or obligation on a permitted payment stablecoin issuer regarding the operations of a permitted payment stablecoin issuer or a permitted payment stablecoin, including any aspect of the operation of a permitted payment stablecoin issuer or permitted payment stablecoin.”.
(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 304, 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 platform.
“(b) Commission jurisdiction.—The Commission shall 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—
“(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—
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 subparagraph (A) 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—
“(ii) RULEMAKING.—The Commission shall prescribe rules for an entity with multiple registrations described under subparagraph (A) 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.
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) In general.—A digital asset trading system 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.
“(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.
“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.—
“(1) In general.—A digital asset custodian shall—
“(2) Adequate supervision and appropriate regulation.—For purposes of paragraph (1), 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 minimum standards relating to—
“(3) Deemed compliance.—A digital asset custodian shall be deemed to be subject to adequate supervision and appropriate regulation, if—
“(4) Rulemaking with respect to definitions.—For purposes of this subsection, 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.
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 digital asset broker or 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 any facility of a digital asset trading platform) 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.
“(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.—
“(B) CLARIFICATION.—Notwithstanding subparagraph (A), a national securities association shall only examine for and enforce against a digital asset broker and digital asset dealer rules of such national securities association written specifically for digital asset brokers and a digital asset dealers.
“(3) Exception.—A digital asset broker or digital asset dealer may register under this section without obtaining membership in a national securities association until the end of the 360-day period beginning on the date the first national securities association adopts rules to admit digital asset brokers or digital asset dealers as members.
“(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—
“(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.”.
Section 15H of the Securities Exchange Act of 1934, as added by section 305, 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 (3), money, assets, and property of customers of a digital asset broker or digital asset dealer described in paragraph (3) 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 (3), such share of the money, assets, and property described in paragraph (3) 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 (3) 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 (3) 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.
“(5) Further Limitations.—No person shall treat or deal with a restricted digital asset held on behalf of any customer pursuant to paragraph (3) by utilizing any unit of such restricted digital asset to participate in a blockchain service (as defined in paragraph (4)(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—
“(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 value of such digital assets as assets or liabilities of the digital asset broker or digital asset dealer.
“(3) Coordination of capital requirements.—
“(A) COMMISSION RULE.—The Commission shall, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations, including as a broker, dealer, digital asset broker, or digital asset dealer.
“(B) JOINT RULE.—The Commission and the Commodity Futures Trading Commission shall jointly, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations, including as a digital asset broker, digital asset dealer, digital asset trading system, digital commodity broker, digital commodity dealer, or digital commodity exchange.
“(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;
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.”.
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 a covered security with respect to a transaction that is exempt from registration under this Act when—
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), as amended by section 305, is further amended by inserting after section 15H the following:
“SEC. 15I. EXCLUSION FOR ANCILLARY ACTIVITIES.
“(a) In general.—Notwithstanding any other provision of this Act, a person shall not be subject to this Act and the regulations thereunder solely based on the person undertaking any ancillary activities.
“(b) Exceptions.—Subsection (a) shall not be construed to apply to the anti-fraud and anti-manipulation authorities of the Commission.
“(c) Ancillary activities defined.—In this section, the term ‘ancillary activities’ means any of the following activities related to the operation of a blockchain system:
“(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 the user’s digital assets or related private keys.”.
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 “(other than a notice-registered digital asset clearing agency)” after “unlawful for any clearing agency”; 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—
“(B) REGISTRATION.—A person may register with the Commission as a notice-registered digital asset clearing agency by providing the Commission with notice of the activities of the person or planned activities in such form as the Commission determines appropriate. Such notice shall include information describing the person’s policies and procedures relating to the holding of customer assets.
(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—
(C) a State bank supervisor (as defined under section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)); or
(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.
(a) In general.—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—
(a) In general.—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—
(b) In general.—Section 2(c)(1) of the Commodity Exchange Act (7 U.S.C. 2(c)(1)) is amended—
(c) In general.—Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) is amended—
(1) in subparagraph (D)(ii)—
(A) in subclause (III), in the matter that precedes item (aa), by inserting “of a commodity, other than a digital commodity,” before “that”; and
(B) by redesignating subclauses (IV) and (V) as subclauses (V) and (VI) and inserting after subclause (III) the following:
“(IV) a contract of sale of a digital commodity that—
(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—
“(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.—
“(II) OVERSIGHT OF MIXED DIGITAL ASSET TRANSACTIONS.—
“(aa) ON A CFTC REGULATED PLATFORM.—A mixed digital asset transaction that occurs on or subject to the rules of a registered entity or by any other entity registered with the Commission—
“(AA) shall not occur except on or subject to the rules of a registered entity or by any other entity that is dually registered with the Commission and the Securities and Exchange Commission; and
“(BB) shall be subject to the jurisdiction of the Commission and the Securities and Exchange Commission.
“(III) 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.—Except as provided in clauses (ii) and (iii), the Commission shall only 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—
“(ii) PERMITTED PAYMENT STABLECOIN TRANSACTION RULES.—This Act shall only apply to a transaction described in clause (i) for the purposes of regulating the offer, execution, solicitation, or acceptance of a cash or spot permitted payment stablecoin transaction on a registered entity or other entity registered by the Commission with respect to requirements imposed with respect to—
“(IX) any other transaction level requirement imposed on the registered entity or other entity registered by the Commission that the Commission by rule determines 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.
“(iii) NO AUTHORITY OVER PERMITTED PAYMENT STABLECOINS.—Notwithstanding clause (ii), the Commission shall not make a rule or regulation, impose a requirement or obligation on a registered entity or other entity registered by 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, including a requirement or obligation regarding—
(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 “subsection (c)(2)(F) of this section or” before “section 19”.
Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended—
Section 5c of the Commodity Exchange Act (7 U.S.C. 7a–2) is amended—
(2) in subsection (b)—
(3) in subsection (c)—
(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 regulations thereunder).
“(2) Contents of the certification.—
“(3) Modifications.—
“(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.
“(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
“(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—
“(6) Certification required.—Notwithstanding any other requirement 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 asset, unless a certification has been made under this section for the digital asset.
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.
“(2) Additional registrations.—
“(A) WITH THE COMMISSION.—
“(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
“(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 digital assets deemed securities.
“(C) WITH A REGISTERED FUTURES ASSOCIATION.—
“(b) Trading.—
“(1) Prohibition on certain trading practices.—
“(2) Prohibition on acting as a counterparty.—A registered digital commodity exchange or any affiliate of such an exchange shall not act as counterparty to any transaction executed on or subject to the rules of the registered digital commodity exchange.
“(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—
“(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—
“(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:
“(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;
“(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;
“(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—
“(C) TRADING PROCEDURES.—A digital commodity exchange shall—
“(i) establish and enforce rules or terms and conditions defining, or specifications detailing—
“(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—
“(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.—
“(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;
“(B) INFORMATION SHARING.—Subject to section 8, and on request, the Commission shall share information collected under subparagraph (A) with—
“(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.
“(10) Antitrust considerations.—Unless necessary or appropriate to achieve the purposes of this Act, a digital commodity exchange shall not—
“(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) which may include information partitions 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
“(12) Financial resources.—
“(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.—
“(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—
“(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 registered under section 5i of this Act 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.
“(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
“(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, 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.—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.
“(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 maintain an affiliated digital commodity broker to facilitate access to the digital commodity exchange, if—
“(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.—
“(A) IN GENERAL.—The Commission may, by rule, impose any additional requirements related to the operations and activities of the digital commodity exchange and the 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—
“(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;
“(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—
“(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—
“(i) 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 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—
“(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 other any person.
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.—For purposes of this Act, a qualified digital commodity custodian is a digital commodity custodian who meets the following conditions:
“(1) Supervision.—The digital commodity custodian is subject to adequate supervision and appropriate regulation.
“(2) No prohibition.—The digital commodity custodian is—
“(3) Information sharing.—
“(A) IN GENERAL.—The digital commodity custodian agrees to such periodic sharing of information regarding customer accounts the digital commodity custodian holds on behalf of an entity registered with the Commission, as the Commission determines by rule shall be reasonably necessary to effectuate any of the provisions, or to accomplish any of the purposes, of this Act.
“(B) PROVISION OF INFORMATION.—Any person that is subject to regulation and examination by a prudential regulator 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 person.
“(b) Adequate supervision and appropriate regulation further defined.—
“(1) In general.—In subsection (a), 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 minimum standards relating to—
“(2) Deemed compliance.—For purposes of subsection (a), a bank subject to the supervision of an appropriate Federal banking agency or a State bank supervisor (within the meaning of section 3 of the Federal Deposit Insurance Act) is deemed to be subject to adequate supervision and appropriate regulation.
“(3) Rulemaking authority.—For purposes of subsection (a), the Commission, by rule or order, may further define the terms ‘adequate supervision’ and ‘appropriate regulation’ as necessary in the public interest, as appropriate for the protection of customers, and consistent with the purposes of this Act.
“(c) 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.”.
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.—
“(3) Transition.—Within 180 days after the date of the enactment of this section, the Commission shall prescribe rules providing for the registration of digital commodity brokers and digital commodity dealers under this section.
“(4) 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 for 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.
“(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, as applicable, if the digital asset broker or digital asset dealer limits its solicitation of orders, acceptance of orders, or execution of orders, or placing of orders on behalf of others involving any contract of sale of digital assets.
“(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 registered digital commodity broker and registered digital commodity dealer shall meet such minimum capital requirements as the Commission may prescribe to ensure that the digital commodity broker or digital commodity dealer, respectively, is able to—
“(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.—
“(A) IN GENERAL.—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.).
“(B) COORDINATION OF CAPITAL REQUIREMENTS.—
“(i) COMMISSION RULE.—The Commission shall, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations as a digital commodity dealer, digital commodity broker, futures commission merchant, or introducing broker.
“(ii) JOINT RULE.—The Commission and the Securities and Exchange Commission shall jointly, by rule, provide appropriate offsets to any applicable capital requirement for a person with multiple registrations as a digital commodity dealer, digital commodity broker, futures commission merchant, introducing broker, broker, or dealer.
“(f) Reporting and recordkeeping.—Each registered digital commodity broker and registered 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;
“(g) Daily trading records.—
“(1) In general.—Each registered digital commodity broker and registered 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.
“(h) Business conduct standards.—
“(1) In general.—Each registered digital commodity broker and registered 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);
“(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—
“(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;
“(i) Duties.—
“(1) Risk management procedures.—Each registered digital commodity broker and registered 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 registered digital commodity broker and registered 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;
“(3) Ability to obtain information.—Each registered digital commodity broker and registered digital commodity dealer shall—
“(4) Conflicts of interest.—Each registered 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 digital commodity transaction intermediaries; 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
“(j) Designation of chief compliance officer.—
“(1) In general.—Each registered digital commodity broker and registered 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;
“(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—
“(B) REQUIREMENTS.—The chief compliance officer shall ensure that a compliance report under subparagraph (A)—
“(k) Segregation of digital commodities.—
“(1) Holding of customer assets.—
“(A) IN GENERAL.—Each registered digital commodity broker and registered 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 registered digital commodity broker and registered digital commodity dealer shall hold in a qualified digital commodity custodian each unit of a digital commodity that is—
“(2) Segregation of funds.—
“(A) IN GENERAL.—Each registered digital commodity broker and registered digital commodity dealer shall treat and deal with all money, assets, and property that is received by the registered digital commodity broker or registered 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 registered digital commodity broker and registered 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 registered digital commodity broker or registered 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 for 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 registered digital commodity broker or registered 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.
“(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
“(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 (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.
“(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, 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.—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.
“(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
“(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.
(a) In general.—Section 4k of the Commodity Exchange Act (7 U.S.C. 6k) is amended—
(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
(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)”.
Section 4m(3) of the Commodity Exchange Act (7 U.S.C. 6m(3)) is amended—
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. EXCLUSION FOR ANCILLARY ACTIVITIES.
“(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 solely based on the person undertaking any ancillary activities.
“(b) Exceptions.—Subsection (a) shall not be construed to apply to the antimanipulation, antifraud, or false reporting enforcement authorities of the Commission.
“(c) Ancillary activities defined.—In this section, the term ‘ancillary activities’ means any of the following activities related to the operation of a blockchain system:
“(1) Compiling network transactions, operating a pool, relaying, searching, sequencing, validating, or acting in a similar capacity with respect to a digital commodity transaction.
“(2) Providing computational work, operating a node, or procuring, offering, or utilizing network bandwidth, or other similar incidental services with respect to a digital commodity transaction.
“(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 a user’s digital commodities or related private keys.”.
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—
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 in the financial industry.
“(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 law 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;
“(C) advise the Commission regarding financial technology that would serve the Commission’s oversight 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;
“(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—
“(ii) the total number of market participants FinHub met with, including the classification of those participants;
“(iv) information on steps FinHub has taken to improve Commission services, including responsiveness to the concerns of persons;
“(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.
(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.—
“(2) Purpose.—The purposes of LabCFTC are to—
“(A) promote responsible financial technology innovation and fair competition for the benefit of the American public;
“(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;
“(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;
“(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—
“(iii) information on steps LabCFTC has taken to improve Commission services, including responsiveness to the concerns of persons;
“(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) Conforming amendments.—Section 2(a)(6)(A) of such Act (7 U.S.C. 2(a)(6)(A)) is amended—
(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;
(c) Membership and leadership.—
(1) Non-federal members.—
(A) IN GENERAL.—The Commissions shall appoint at least 20 nongovernmental stakeholders with a wide diversity of opinion and who represent a broad spectrum of interests representing the digital asset ecosystem, equally divided between the Commissions, to serve as members of the Committee. The appointees shall include—
(2) Co-designated Federal officers.—
(A) NUMBER; APPOINTMENT.—There shall be 2 co-designated Federal officers of the Committee, as follows:
(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.
(d) No compensation for Committee members.—
(1) Non-Federal members.—All Committee members appointed under subsection (c)(1) shall—
(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.
(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—
(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—
(8) the extent to which decentralized finance has integrated with the traditional financial markets and any potential risks to stability of the markets;
(b) 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).
(c) GAO Study.—The Comptroller General of the United States shall—
(d) 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.
(a) The Comptroller General of the United States shall carry out a study of non-fungible digital assets that analyzes—
(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;
(9) whether and how non-fungible digital assets have integrated with traditional marketplaces, including those for music, real estate, gaming, events, and travel;
(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;
(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.
(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).
(a) Findings.—Congress finds the following:
(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.
(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
Union Calendar No. 401 | |||||
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[Report No. 118–484, Parts I and II] | |||||
A BILL | |||||
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. | |||||
May 6, 2024 | |||||
Reported from the Committee on Agriculture with an amendment | |||||
May 6, 2024 | |||||
Reported from the Committee on Financial Services with an amendment; committed to the Committee of the Whole House on the State of the Union and ordered to be printed |