[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8373 Introduced in House (IH)]

<DOC>






116th CONGRESS
  2d Session
                                H. R. 8373

 To provide for orderly and secure digital commodity exchange markets, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 24, 2020

 Mr. Conaway (for himself, Mr. Austin Scott of Georgia, Mr. Johnson of 
 South Dakota, Mr. Emmer, Mr. Soto, and Mr. Schweikert) introduced the 
   following bill; which was referred to the Committee on Agriculture

_______________________________________________________________________

                                 A BILL


 
 To provide for orderly and secure digital commodity exchange markets, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Digital Commodity Exchange Act of 
2020''.

SEC. 2. AMENDMENTS TO THE COMMODITY EXCHANGE ACT.

    (a) Definitions.--Section 1a of the Commodity Exchange Act (7 
U.S.C. 1a) is amended--
            (1) in paragraph (40)--
                    (A) in subparagraph (E), by striking ``and'' at the 
                end; and
                    (B) by redesignating subparagraph (F) as 
                subparagraph (G) and inserting after subparagraph (E) 
                the following:
                    ``(F) a digital commodity exchange registered under 
                section 5i; and''; and
            (2) by adding at the end the following:
            ``(52) Digital commodity.--The term `digital commodity' 
        means any form of fungible intangible personal property that 
        can be exclusively possessed and transferred person to person 
        without necessary reliance on an intermediary, and which does 
        not represent a financial interest in a company, partnership, 
        or investment vehicle.
            ``(53) Digital commodity custodian.--The term `digital 
        commodity custodian' means an entity that holds, maintains, or 
        safeguards digital commodities and other assets on behalf of 
        digital commodity market participants.
            ``(54) Digital commodity exchange.--The term `digital 
        commodity exchange' means a trading facility that lists for 
        trading at least one digital commodity.
            ``(55) Digital commodity presale.--The term `digital 
        commodity presale' means the delivery of a unit of a digital 
        commodity, or any promise or right to a future unit of a 
        digital commodity, to a participant in a securities offering 
        conducted in compliance with the Securities Act of 1933 before 
        the listing of the digital commodity for trading on a 
        registered digital commodity exchange.''.
    (b) Commission Jurisdiction Over Retail Digital Commodity 
Transactions.--Section 2(c)(2) of such 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--
                                            ``(aa) results in actual 
                                        delivery within 2 days or such 
                                        other period as the Commission 
                                        may determine by rule or 
                                        regulation based upon the 
                                        typical commercial practice in 
                                        cash or spot markets for the 
                                        digital commodity involved; or
                                            ``(bb) is executed on or 
                                        subject to the rules of a 
                                        registered digital commodity 
                                        exchange;''; and
            (2) by adding at the end the following:
    ``(F) Commission Jurisdiction Over Digital Commodity 
Transactions.--
            ``(i) Notwithstanding any other provision of law, the 
        Commission shall have exclusive jurisdiction over any 
        agreement, contract, or transaction involving a contract of 
        sale of any digital commodity in interstate commerce which is 
        offered, solicited, traded, executed, or otherwise dealt in on 
        or subject to the rules of a registered entity, including the 
        conduct of any such office or business.
            ``(ii) Notwithstanding any other provision of law, the 
        Commission shall have exclusive jurisdiction over any 
        agreement, contract, or transaction involving a unit of a 
        digital commodity, or any promise or right to a future unit of 
        a digital commodity, obtained through a digital commodity 
        presale and subject to the restrictions in section 4c(h).
            ``(iii) Nothing in this subparagraph shall be construed to 
        limit the power of any State or other Federal regulatory 
        agency, or to provide the Commission with jurisdiction, with 
        respect to--
                    ``(I) custodial or depository activities for a 
                digital asset, or custodial or depository activities 
                for any promise or right to a future digital asset, of 
                an entity regulated by a State or another Federal 
                regulatory agency; or
                    ``(II) a securities offering or transaction 
                associated with--
                            ``(aa) a digital commodity presale; or
                            ``(bb) a sale described in section 
                        4c(h)(3)(A)(i).''.
    (c) Prohibited Transactions.--Section 4c of such Act (7 U.S.C. 6c) 
is amended by adding at the end the following:
    ``(h) Prohibited Digital Commodity Transactions.--
            ``(1) In general.--It shall be a violation of this Act for 
        any person who owns or controls a unit of a digital commodity, 
        or any promise or right to a future unit of a digital 
        commodity, obtained through a digital commodity presale and 
        subject to the restrictions in this subsection, to offer to 
        enter into, to enter into, or to execute a contract for the 
        purchase or sale of the unit, promise, or right, except as 
        provided in paragraph (3).
            ``(2) Unlawful facilitation of prohibited transaction.--It 
        shall be a violation of this Act for any person willfully to 
        execute, confirm the execution of, or conduct any office or 
        business for the purpose of soliciting, accepting any order 
        for, or otherwise dealing in, any transaction in, or in 
        connection with, a contract for the purchase or sale of a unit 
        of a digital commodity, or any promise or right to a future 
        unit of a digital commodity, which such person has reason to 
        believe is obtained through a digital commodity presale and 
        subject to the restrictions in this subsection, except as 
        provided in paragraph (3).
            ``(3) Exceptions.--
                    ``(A) Off-exchange transactions.--
                            ``(i) Sale of a promise or right.--A 
                        promise or right to a future unit of a digital 
                        commodity obtained through a digital commodity 
                        presale may be sold pursuant to a securities 
                        transaction conducted in compliance with the 
                        Securities Act of 1933.
                            ``(ii) Sale of a digital commodity.--A unit 
                        of a digital commodity obtained through a 
                        digital commodity presale may be sold to an 
                        accredited imvestor (as defined in section 
                        2(a)(15) of the Securities Act of 1933).
                            ``(iii) Treatment.--For purposes of this 
                        subsection, a unit of a digital commodity or 
                        any promise or right to a future unit of a 
                        digital commodity obtained through a 
                        transaction utilizing this exception shall 
                        continue to be considered to be obtained 
                        through a digital commodity presale.
                    ``(B) On-exchange transactions.--
                            ``(i) In general.--A unit of a digital 
                        commodity that is obtained through a digital 
                        commodity presale or a transaction described in 
                        subparagraph (A) may be offered for sale or 
                        exchange on a registered digital commodity 
                        exchange, subject to any limitations imposed by 
                        the exchange.
                            ``(ii) Treatment.--For purposes of this 
                        subsection, a unit of a digital commodity 
                        obtained through a transaction utilizing this 
                        exception shall not be considered to be 
                        obtained though a digital commodity presale.
                    ``(C) Utilization of presold digital commodities.--
                            ``(i) In general.--A unit of a digital 
                        commodity that is obtained through a digital 
                        commodity presale may be--
                                    ``(I) utilized for the purposes of 
                                receiving the non-financial rights or 
                                services associated with the digital 
                                commodity; or
                                    ``(II) exchanged or sold in such 
                                limited quantities as the Commission 
                                determines support the public use and 
                                functioning of services and rights 
                                associated with the digital commodity.
                            ``(ii) Treatment.--For purposes of this 
                        subsection, a unit of a digital commodity 
                        obtained through a transaction utilizing this 
                        exception shall not be considered to be 
                        obtained though a digital commodity presale.
                    ``(D) Prior digital commodities.--A unit of a 
                digital commodity shall not be subject to this 
                subsection if, before the date of the enactment of this 
                subsection, the digital commodity was publicly 
                available for trading on a trading facility licensed as 
                a money transmitter in a State or territory of the 
                United States.
            ``(4) Transition rules.--
                    ``(A) In general.--For the purpose of a transaction 
                described in paragraph (3)(B), the Commission shall 
                consider a trading facility to be a registered digital 
                commodity exchange if--
                            ``(i) the trading facility--
                                    ``(I) has been continuously 
                                licensed as a money transmitter in at 
                                least 20 States or territories of the 
                                United States since August 1, 2019;
                                    ``(II) is a designated contract 
                                market; or
                                    ``(III) is a swap execution 
                                facility;
                            ``(ii) the trading facility submits a 
                        listing notice to the Commission containing--
                                    ``(I) documentation demonstrating 
                                its licensing referred to in clause 
                                (i)(I); and
                                    ``(II) the determination made by 
                                the trading facility under section 
                                5i(c)(3) that the digital commodity 
                                that is the subject of the transaction 
                                is not readily susceptible to 
                                manipulation; and
                            ``(iii) the Commission has not issued a 
                        notice of disapproval of the listing notice.
                    ``(B) Disapproval process.--In making a disapproval 
                under subparagraph (A), the Commission shall--
                            ``(i) issue any disapproval within 20 
                        business days after receipt of a completed 
                        listing notice; and
                            ``(ii) identify the specific deficiencies 
                        with the listing notice that necessitated the 
                        disapproval.
                    ``(C) Extensions.--The Commission may extend the 
                time for disapproval under subparagraph (B)--
                            ``(i) once, for 20 days, through written 
                        notice to the digital commodity exchange given 
                        by a division director; and
                            ``(ii) once, for an additional 90 business 
                        days, through notice given by the Commission 
                        which includes a description of any 
                        deficiencies with the listing notice, including 
                        any--
                                    ``(I) novel or complex issues which 
                                require additional time to analyze;
                                    ``(II) missing information or 
                                inadequate explanations; or
                                    ``(III) potential inconsistencies 
                                with this Act.
                    ``(D) Expiration.--The authority provided by this 
                subparagraph shall expire 1 year after the date of the 
                final promulgation of the digital commodity exchange 
                registration requirements, or on the first registration 
                of a digital commodity exchange, whichever occurs 
                earlier.''.
    (d) Common Provisions Applicable to Registered Entities.--Section 
5c of such Act (7 U.S.C. 7a-2) is amended--
            (1) in subsection (a), by striking ``5(d) and 5b(c)(2)'' 
        and inserting ``5(d), 5b(c)(2), and 5i(c)'';
            (2) in subsection (b)--
                    (A) in each of paragraphs (1) and (2), by inserting 
                ``digital commodity exchange,'' before ``derivatives''; 
                and
                    (B) in paragraph (3), by inserting ``digital 
                commodity exchange,'' before ``derivatives'' each place 
                it appears; and
            (3) in subsection (c)--
                    (A) in paragraph (2), by inserting ``or 
                participants'' before ``(in'';
                    (B) in paragraph (4)(B), by striking ``1a(10)'' and 
                inserting ``1a(9)''; and
                    (C) in paragraph (5), by adding at the end the 
                following:
                    ``(D) Special rules for the listing of certain 
                digital commodities.--
                            ``(i) In general.--In the case of listing a 
                        digital commodity for trading which has not yet 
                        been listed for trading on another registered 
                        entity, paragraphs (2) and (3) shall apply as 
                        if the listing were a rule, and paragraph (2) 
                        shall be applied by substituting `20 business 
                        days' for `10 business days'.
                            ``(ii) Transitional extension.--For 1 year 
                        after the registration of the first digital 
                        commodity exchange, the Commission shall have 
                        an additional 20 business days review any 
                        certification under clause (i).
                            ``(iii) Digital commodity presales.--In 
                        conjunction with listing a digital commodity in 
                        which any unit of the digital commodity was 
                        obtained through a digital commodity presale, 
                        the Commission shall require the registered 
                        entity to prohibit the sale of any unit of the 
                        digital commodity that was obtained in 
                        violation of section 4c(h).''.
    (e) Registration of Digital Commodity Exchanges; Qualified Digital 
Commodity Custodians.--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) Voluntary registration.--
                    ``(A) In general.--Any trading facility that offers 
                or seeks to offer a market in digital commodities may 
                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 under subsections (c) and (e).
            ``(2) Deemed registration.--A registered designated 
        contract market or registered swap execution facility which 
        fulfills the requirements of this section shall be considered a 
        registered digital commodity exchange.
    ``(b) Trading.--
            ``(1) In general.--A digital commodity exchange that is 
        registered under subsection (a) may make available for trading 
        any digital commodity that is not readily subject to 
        manipulation, subject to this subsection.
            ``(2) Rules governing margined or leveraged trading.--The 
        Commission may make, promulgate, and enforce such rules 
        governing margined, leveraged, or financed transactions as are 
        reasonably necessary to protect market participants and promote 
        the orderly settlement of transactions with respect to--
                    ``(A) disclosure;
                    ``(B) recordkeeping;
                    ``(C) capital, margin, and other financial 
                resources;
                    ``(D) reporting;
                    ``(E) business conduct;
                    ``(F) documentation; and
                    ``(G) such other matters as the Commission 
                demonstrates to be necessary.
            ``(3) Prohibition on certain trading practices.--Sections 
        4b, 4c, and 6(c) shall apply to any agreement, contract, or 
        transaction in a digital commodity as if the agreement, 
        contract, or transaction were a contract of sale of a commodity 
        for future delivery.
            ``(4) Prohibition on trading derivatives products.--
        Registration as a digital commodity exchange shall not permit a 
        trading facility to offer any contract of sale of a commodity 
        for future delivery, option, or swap for trading without also 
        being registered as a designated contract market or swap 
        execution facility.
    ``(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, the 
                digital commodity exchange shall comply with--
                            ``(i) the core principles described in this 
                        subsection; and
                            ``(ii) any requirement that the Commission 
                        may impose by rule or regulation pursuant to 
                        section 8a(5).
                    ``(B) Reasonable discretion of a digital commodity 
                exchange.--Unless otherwise determined by the 
                Commission by rule or regulation, a digital commodity 
                exchange described in subparagraph (A) shall have 
                reasonable discretion in establishing the manner in 
                which the digital commodity exchange complies with the 
                core principles described in this subsection.
            ``(2) Compliance with rules.--A digital commodity exchange 
        shall--
                    ``(A) establish and enforce compliance with any 
                rule of the digital commodity exchange, including--
                            ``(i) the terms and conditions of the 
                        trades traded or processed on or through the 
                        digital commodity exchange; and
                            ``(ii) any limitation on access to the 
                        digital commodity exchange;
                    ``(B) establish and enforce trading, trade 
                processing, and participation rules that will deter 
                abuses and have the capacity to detect, investigate, 
                and enforce those rules, including means--
                            ``(i) to provide market participants with 
                        impartial access to the market; and
                            ``(ii) to capture information that may be 
                        used in establishing whether rule violations 
                        have occurred; and
                    ``(C) establish rules governing the operation of 
                the exchange, including rules specifying trading 
                procedures to be used in entering and executing orders 
                traded or posted on the facility.
            ``(3) Digital commodities not readily susceptible to 
        manipulation.--
                    ``(A) In general.--The digital commodity exchange 
                shall permit trading only in digital commodities that 
                are not readily susceptible to manipulation.
                    ``(B) Determinations.--Prior to offering trading in 
                any digital commodity, the digital commodity exchange 
                shall make a determination under this paragraph as to 
                whether the digital commodity is readily susceptible to 
                manipulation.
                    ``(C) Considerations.--In making a determination 
                under this paragraph, the exchange shall consider the 
                digital commodity's--
                            ``(i) purpose and use;
                            ``(ii) governance structure;
                            ``(iii) participation;
                            ``(iv) distribution;
                            ``(v) intended, current, and proposed 
                        functionality;
                            ``(vi) other relevant factors determined by 
                        the exchange; and
                            ``(vii) any other factor required by the 
                        Commission.
                    ``(D) Rules for digital commodity presales.--The 
                digital commodity exchange shall have in place such 
                rules as may be necessary to reasonably ensure the 
                orderly sale of any unit of a digital commodity 
                obtained through a digital commodity presale.
            ``(4) Treatment of customer assets.--
                    ``(A) Required standards and procedures.--Each 
                digital commodity exchange shall establish standards 
                and procedures that are designed to protect and ensure 
                the safety of customer money, assets, and property.
                    ``(B) Holding of customer assets.--
                            ``(i) In general.--Each digital commodity 
                        exchange shall hold customer money, assets, and 
                        property in a manner to minimize the customer's 
                        risk of loss or unreasonable delay in the 
                        access to the money, assets, and property of 
                        the customer.
                            ``(ii) Segregation of funds.--
                                    ``(I) In general.--A digital 
                                commodity exchange shall treat and deal 
                                with all money, assets, and property of 
                                any customer received as belonging to 
                                the customer.
                                    ``(II) Commingling prohibited.--
                                Money, assets, and property of a 
                                customer described in subclause (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.
                            ``(iii) Exceptions.--
                                    ``(I) Use of funds.--
                                            ``(aa) In general.--
                                        Notwithstanding clause (ii), 
                                        money, assets, and property of 
                                        customers of a described in 
                                        clause (ii) may, for 
                                        convenience, be commingled and 
                                        deposited in the same account 
                                        or accounts with any bank, 
                                        trust company, or qualified 
                                        digital commodity custodian.
                                            ``(bb) Withdrawal.--
                                        Notwithstanding clause (ii), 
                                        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 digital commodity 
                                        transaction 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 
                                        digital commodity transaction.
                                    ``(II) Commission action.--
                                Notwithstanding clause (ii), 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 clause (ii) 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.
                    ``(C) Permitted investments.--Money described in 
                clause (ii) 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.
                    ``(D) Customer property.--Assets held on behalf of 
                a customer by a digital commodity exchange shall be 
                considered to be customer property as such term is 
                defined in section 761 of title 11, United States Code, 
                with regard to all money, assets, and property of any 
                customer received by a digital commodity exchange for 
                trading or custody, or to margin, guarantee, or secure 
                digital commodity transactions (including money, 
                assets, or property accruing to the customer as the 
                result of such transactions).
                    ``(E) Misuse of customer property.--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 as 
                        belonging to the depositing digital commodity 
                        exchange or any person other than the customers 
                        of the digital commodity exchange.
                    ``(F) Customer right to opt out.--
                            ``(i) In general.--A customer shall have 
                        the right to waive the restrictions in 
                        subparagraph (B), by affirmatively electing, in 
                        writing to the digital commodity exchange, to 
                        waive the restrictions.
                            ``(ii) Limitations.--The Commission may, by 
                        rule, establish notice and disclosure 
                        requirements, segregation requirements, 
                        investment limitations, and other 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.
            ``(5) Monitoring of trading and trade processing.--
                    ``(A) In general.--The 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.--The digital commodity exchange shall 
                establish and enforce rules--
                            ``(i) to protect markets and market 
                        participants from abusive practices committed 
                        by any party, including abusive practices 
                        committed by a party acting as an agent for a 
                        participant; and
                            ``(ii) to promote fair and equitable 
                        trading on the exchange.
                    ``(C) The digital commodity exchange shall--
                            ``(i) establish and enforce rules or terms 
                        and conditions defining, or specifications 
                        detailing--
                                    ``(I) trading procedures to be used 
                                in entering and executing orders traded 
                                on or through the facilities of the 
                                digital commodity exchange; and
                                    ``(II) procedures for trade 
                                processing of digital commodities on or 
                                through the facilities of the digital 
                                commodity exchange; and
                            ``(ii) monitor trading in digital 
                        commodities to prevent manipulation, price 
                        distortion, and disruptions of the delivery or 
                        cash settlement process through surveillance, 
                        compliance, and disciplinary practices and 
                        procedures, including methods for conducting 
                        real-time monitoring of trading and 
                        comprehensive and accurate trade 
                        reconstructions.
            ``(6) Ability to obtain information.--The digital commodity 
        exchange shall--
                    ``(A) establish and enforce rules that will allow 
                the facility to obtain any necessary information to 
                perform any of the functions described in this section;
                    ``(B) provide the information to the Commission on 
                request; and
                    ``(C) have the capacity to carry out such 
                international information-sharing agreements as the 
                Commission may require.
            ``(7) Emergency authority.--The 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) Reporting requirements.--
                    ``(A) Duty of digital commodity exchange.--Each 
                digital commodity exchange shall provide to the 
                Commission all information that is determined by the 
                Commission to be necessary to perform each 
                responsibility of the Commission under this Act.
                    ``(B) Timely publication of trading information.--
                            ``(i) In general.--The digital commodity 
                        exchange shall make public timely information 
                        on price, trading volume, and other trading 
                        data on digital commodities to the extent 
                        prescribed by the Commission.
                            ``(ii) Capacity of digital commodity 
                        exchange.--The digital commodity exchange shall 
                        be required to have the capacity to 
                        electronically capture and transmit trade 
                        information with respect to transactions 
                        executed on the exchange.
            ``(9) Recordkeeping and reporting.--
                    ``(A) In general.--A digital commodity exchange 
                shall--
                            ``(i) maintain records of all activities 
                        relating to the business of the facility, 
                        including a complete audit trail, in a form and 
                        manner acceptable to the Commission for a 
                        period of 5 years;
                            ``(ii) report to the Commission, in a form 
                        and manner acceptable to the Commission, such 
                        information as the Commission determines to be 
                        necessary or appropriate for the Commission to 
                        perform the duties of the Commission under this 
                        Act; and
                            ``(iii) keep any such records of digital 
                        commodities which relate to a security open to 
                        inspection and examination by the Securities 
                        and Exchange Commission.
                    ``(B) Information-sharing.--Subject to section 8, 
                and on request, the Commission shall share information 
                collected under subparagraph (A) with--
                            ``(i) the Board;
                            ``(ii) the Securities and Exchange 
                        Commission;
                            ``(iii) each appropriate Federal banking 
                        agency;
                            ``(iv) each appropriate State bank 
                        supervisor (within the meaning of section 3 of 
                        the Federal Deposit Insurance Act);
                            ``(v) the Financial Stability Oversight 
                        Council;
                            ``(vi) the Department of Justice; and
                            ``(vii) any other person that the 
                        Commission determines to be appropriate, 
                        including--
                                    ``(I) foreign financial supervisors 
                                (including foreign futures 
                                authorities);
                                    ``(II) foreign central banks; and
                                    ``(III) foreign ministries.
                    ``(C) Confidentiality agreement.--Before the 
                Commission may share information with any entity 
                described in subparagraph (B), the Commission shall 
                receive a written agreement from each entity stating 
                that the entity shall abide by the confidentiality 
                requirements described in section 8 relating to the 
                information on digital commodity transactions that is 
                provided.
                    ``(D) Providing information.--Each digital 
                commodity exchange shall provide to the Commission 
                (including any designee of the Commission) information 
                under subparagraph (A) in such form and at such 
                frequency as is required by the Commission.
            ``(10) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the digital 
        commodity exchange shall not--
                    ``(A) adopt any rules or take any actions that 
                result in any unreasonable restraint of trade; or
                    ``(B) impose any material anticompetitive burden on 
                trading.
            ``(11) Conflicts of interest.--The digital commodity 
        exchange shall--
                    ``(A) establish and enforce rules to minimize 
                conflicts of interest in its decision-making process; 
                and
                    ``(B) establish a process for resolving the 
                conflicts of interest.
            ``(12) Financial resources.--
                    ``(A) In general.--Each digital commodity exchange 
                shall have adequate financial, operational, and 
                managerial resources, as determined by the Commission, 
                to discharge each responsibility of the digital 
                commodity exchange.
                    ``(B) Minimum amount of financial resources.--Each 
                digital commodity exchange shall possess financial 
                resources that, at a minimum, exceed the total amount 
                that would enable the digital commodity exchange to 
                conduct an orderly wind down of its activities.
                    ``(C) Additional financial resources for leverage 
                trading.--The Commission may require such additional 
                financial resources as are necessary to enable a 
                digital commodity exchange which offers margined, 
                leveraged, or financed transactions to fulfill its 
                customer obligations.
            ``(13) Governance fitness standards.--
                    ``(A) Governance arrangements.--Each digital 
                commodity exchange shall establish governance 
                arrangements that are transparent to fulfill public 
                interest requirements.
                    ``(B) Fitness standards.--Each digital commodity 
                exchange shall establish and enforce appropriate 
                fitness standards for--
                            ``(i) directors;
                            ``(ii) any individual or entity with direct 
                        access to the settlement activities of the 
                        digital commodity exchange;
                            ``(iii) any individual or entity with 
                        direct access to any affiliated digital 
                        commodity custodian;
                            ``(iv) any entity offering affiliated 
                        services for the digital commodity exchange; 
                        and
                            ``(v) any party affiliated with any 
                        individual or entity described in this clause.
            ``(14) System safeguards.--The digital commodity exchange 
        shall--
                    ``(A) establish and maintain a program of risk 
                analysis and oversight to identify and minimize sources 
                of operational and security risks, through the 
                development of appropriate controls and procedures, and 
                automated systems, that--
                            ``(i) are reliable and secure; and
                            ``(ii) have adequate scalable capacity;
                    ``(B) establish and maintain emergency procedures, 
                backup facilities, and a plan for disaster recovery 
                that allow for--
                            ``(i) the timely recovery and resumption of 
                        operations; and
                            ``(ii) the fulfillment of the 
                        responsibilities and obligations of the digital 
                        commodity exchange; and
                    ``(C) periodically conduct tests to verify that the 
                backup resources of the digital commodity exchange are 
                sufficient to ensure continued--
                            ``(i) order processing and trade matching;
                            ``(ii) price reporting;
                            ``(iii) market surveillance; and
                            ``(iv) maintenance of a comprehensive and 
                        accurate audit trail.
    ``(d) 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.
    ``(e) Qualified Digital Commodity Custodian.--A digital commodity 
exchange shall hold in a qualified digital commodity custodian each 
unit of a digital commodity that is--
            ``(1) the property of a customer of the digital commodity 
        exchange;
            ``(2) required to be held by the digital commodity exchange 
        under subsection (b)(2) or (c)(12) of this section; or
            ``(3) otherwise so required by the Commission to reasonably 
        protect customers or promote the public interest.
    ``(f) 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--
            ``(1) the exemption would be consistent with the public 
        interest and the purposes of this Act; and
            ``(2) the exemption will not have a material adverse effect 
        on the ability of the Commission or the digital commodity 
        exchange to discharge regulatory or self-regulatory duties 
        under this Act.
    ``(g) 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.
    ``(h) Fees.--
            ``(1) In general.--The Commission may, by rule, establish--
                    ``(A) an initial application fee to offset the cost 
                to review an application under this section and the 
                initial registration of a digital commodity exchange 
                under this section; and
                    ``(B) an annual supervisory fee to offset the cost 
                to provide ongoing supervision and oversight of a 
                digital commodity exchange under this section.
            ``(2) Imposition; collection.--The Commission may impose 
        on, and collect from applicants and entities registered under 
        this section fees established under paragraph (1), in 
        reasonable amounts to offset the costs described in paragraph 
        (1).
            ``(3) Retention of fees.--Any fees collected under this 
        section shall remain available for expenditure, without further 
        appropriation, until expended for the purpose of--
                    ``(A) implementing this section; and
                    ``(B) providing ongoing registration, supervision, 
                and oversight under this section.
    ``(i) Federal Preemption.--Notwithstanding any other provision of 
law, the Commission shall have exclusive jurisdiction over any digital 
commodity exchange registered under this section.

``SEC. 5J. QUALIFIED DIGITAL COMMODITY CUSTODIANS.

    ``(a) In General.--The Commission shall designate a digital 
commodity custodian as a qualified digital commodity custodian, if--
            ``(1) the Commission finds the digital commodity custodian 
        is subject to adequate supervision and appropriate regulation 
        by an appropriate Federal banking agency, a State bank 
        supervisor (within the meaning of section 3 of the Federal 
        Deposit Insurance Act), or an appropriate government authority 
        in the home country of the organization; and
            ``(2) the digital commodity custodian agrees to such 
        regular and periodic sharing of information 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) Rulemaking Authority.--For purposes of subsection (a), the 
Commission, by rule or order, shall define `adequate supervision' and 
`appropriate regulation' as any regulatory regime which meets such 
minimum standards for supervision and regulation as the Commission 
determines are reasonably necessary to protect the property of 
customers of a registered digital commodity exchange, including minimum 
standards relating to--
            ``(1) financial resources;
            ``(2) risk management requirements;
            ``(3) governance arrangements;
            ``(4) fitness standards;
            ``(5) recordkeeping;
            ``(6) information-sharing; and
            ``(7) conflicts of interest.
    ``(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.''.
                                 <all>