[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 4356 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
2d Session
S. 4356
To provide for responsible financial innovation and to bring digital
assets within the regulatory perimeter.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 7, 2022
Ms. Lummis (for herself and Mrs. Gillibrand) introduced the following
bill; which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide for responsible financial innovation and to bring digital
assets within the regulatory perimeter.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Lummis-Gillibrand
Responsible Financial Innovation Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
TITLE I--DEFINITIONS
Sec. 101. Definitions.
TITLE II--RESPONSIBLE TAXATION OF DIGITAL ASSETS
Sec. 201. Gain from disposition of digital assets.
Sec. 202. Information reporting requirements imposed on brokers with
respect to digital assets.
Sec. 203. Sources of income.
Sec. 204. Decentralized autonomous organizations.
Sec. 205. Tax treatment of digital asset lending agreements and related
matters.
Sec. 206. Implementing effective IRS guidance.
Sec. 207. Analysis of retirement investing in digital assets.
Sec. 208. Digital asset mining and staking.
Sec. 209. Conforming amendments.
TITLE III--RESPONSIBLE SECURITIES INNOVATION
Sec. 301. Securities offerings involving certain intangible assets.
Sec. 302. Termination of specified periodic disclosure requirements.
Sec. 303. Guidance relating to satisfactory control location.
Sec. 304. Custody and customer protection rules.
TITLE IV--RESPONSIBLE COMMODITIES INNOVATION
Sec. 401. Definitions.
Sec. 402. Reporting and recordkeeping.
Sec. 403. CFTC jurisdiction over digital asset transactions.
Sec. 404. Registration of digital asset exchanges.
Sec. 405. Violations.
Sec. 406. Market reports.
Sec. 407. Bankruptcy treatment of digital assets.
Sec. 408. Identified banking products.
Sec. 409. Financial institutions definition.
Sec. 410. Offsetting the costs of digital asset regulation.
TITLE V--RESPONSIBLE CONSUMER PROTECTION
Sec. 501. Responsible consumer protection.
Sec. 502. Source code version of digital assets.
Sec. 503. Settlement finality.
Sec. 504. Notice to customers; enforcement.
Sec. 505. Right to individual management of digital assets.
Sec. 506. Technical and conforming amendments.
TITLE VI--RESPONSIBLE PAYMENTS INNOVATION
Sec. 601. Issuance of payment stablecoins.
Sec. 602. Sanctions compliance responsibilities of payment stablecoin
issuers.
Sec. 603. Use of the official digital currency of the People's Republic
of China on Government devices.
Sec. 604. Certificate of authority to commence banking.
Sec. 605. Holding company supervision of covered depository
institutions.
Sec. 606. Implementation rules to preserve adequate competition in
payment stablecoins.
Sec. 607. Financial Crimes Enforcement Network Innovation Laboratory.
TITLE VII--RESPONSIBLE BANKING INNOVATION
Sec. 701. Study on use of distributed ledger technology for reduction
of risk in depository institutions.
Sec. 702. Eligibility for Federal Reserve services to depository
institutions.
Sec. 703. Routing transit number issuance.
Sec. 704. Clarifying application review times with respect to the
Federal banking agencies.
Sec. 705. Examination standards for digital asset activities.
Sec. 706. Asset custody for depository institutions and certain other
entities.
Sec. 707. Reputation risk; requirements for account termination
requests and orders.
Sec. 708. Conforming amendments.
TITLE VIII--RESPONSIBLE INTERAGENCY COORDINATION
Sec. 801. Timeline for interpretive guidance issued by Federal
financial agencies.
Sec. 802. Interstate sandbox activities.
Sec. 803. State money transmission coordination relating to digital
assets.
Sec. 804. Information sharing among Federal and State financial
regulators.
Sec. 805. Analysis of decentralized finance markets and technologies.
Sec. 806. Analysis of energy consumption in digital asset markets.
Sec. 807. Analysis of self-regulation and registered digital asset
associations.
Sec. 808. Cybersecurity standards for digital asset intermediaries.
Sec. 809. Advisory Committee on Financial Innovation.
SEC. 2. DEFINITIONS.
In this Act:
(1) Commodity.--The term ``commodity'' has the meaning
given the term in section 1a of the Commodity Exchange Act (7
U.S.C. 1a).
(2) Digital asset; digital asset intermediary; distributed
ledger technology; payment stablecoin; smart contract; virtual
currency.--The terms ``digital asset'', ``digital asset
intermediary'', ``distributed ledger technology'', ``payment
stablecoin'', ``smart contract'', and ``virtual currency'' have
the meanings given the terms in section 9801 of title 31,
United States Code, as added by section 101 of this Act.
(3) Security.--Except as otherwise expressly provided, the
term ``security'' has the meaning given the term in section
3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
TITLE I--DEFINITIONS
SEC. 101. DEFINITIONS.
(a) In General.--Subtitle VI of title 31, United States Code, is
amended by adding after chapter 97 the following:
``CHAPTER 98--DIGITAL ASSETS
``Sec.
``9801. Definitions.
``Sec. 9801. Definitions
``In this chapter:
``(1) Depository institution.--The term `depository
institution' has the meaning given the term in section 19(b)(1)
of the Federal Reserve Act (12 U.S.C. 461(b)(1)).
``(2) Digital asset.--The term `digital asset'--
``(A) means a natively electronic asset that--
``(i) confers economic, proprietary, or
access rights or powers; and
``(ii) is recorded using cryptographically
secured distributed ledger technology, or any
similar analogue; and
``(B) includes--
``(i) virtual currency and ancillary assets
in accordance with section 2(c)(2)(F) of the
Commodity Exchange Act;
``(ii) payment stablecoins in accordance
with section 403 of the Commodity Futures
Modernization Act of 2000 (7 U.S.C. 27a); and
``(iii) any other security or commodity
that meets the requirements of subparagraph
(A).
``(3) Digital asset intermediary.--The term `digital asset
intermediary'--
``(A) means--
``(i) a person who holds a license,
registration, or other similar authorization,
as specified by this chapter, the Commodity
Exchange Act (7 U.S.C. 1 et seq.), the
Securities Act of 1933 (15 U.S.C. 77a et seq.),
the Corporation of Foreign Bondholders Act,
1933 (15 U.S.C. 77bb et seq.), the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa et
seq.), the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.), the Securities Investor
Protection Act of 1970 (15 U.S.C. 78aaa et
seq.), the Investment Company Act of 1940 (15
U.S.C. 80a-1 et seq.), the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1), and the Omnibus
Small Business Capital Formation Act of 1980
(15 U.S.C. 80c), that may conduct market
activities relating in digital assets; or
``(ii) a person who is required by law to
hold a license, registration, or other similar
authorization described in clause (i);
``(B) includes--
``(i) a person who holds a license,
registration, or other similar authorization
under State or Federal law that issues a
payment stablecoin; and
``(ii) a person who is required by law to
hold a license, registration, or other similar
authorization described in clause (i); and
``(C) does not include a depository institution.
``(4) Distributed ledger technology.--The term `distributed
ledger technology' means technology that enables the operation
and use of a ledger that--
``(A) is shared across a set of distributed nodes
that participate in a network and store a complete or
partial replica of the ledger;
``(B) is synchronized between the nodes;
``(C) has data appended to the ledger by following
the specified consensus mechanism of the ledger;
``(D) may be accessible to anyone or restricted to
a subset of participants; and
``(E) may require participants to have
authorization to perform certain actions or require no
authorization.
``(5) Payment stablecoin.--The term `payment stablecoin'
means a digital asset that is--
``(A) redeemable, on demand, on a 1-to-1 basis for
instruments denominated in United States dollars;
``(B) defined as legal tender under section 5103 or
under the laws of a foreign country (excluding digital
assets);
``(C) issued by a business entity;
``(D) accompanied by a statement from the issuer
that the asset is redeemable, as specified in
subparagraph (A), from the issuer or another identified
person;
``(E) backed by 1 or more financial assets
(excluding other digital assets), consistent with
subparagraph (A); and
``(F) intended to be used as a medium of exchange.
``(6) Person who provides digital asset services.--The term
`person who provides digital asset services' means--
``(A) a digital asset intermediary;
``(B) a financial institution, as defined in
section 1a of the Commodity Exchange Act (7 U.S.C. 1a);
``(C) any other person conducting digital asset
activities pursuant to a Federal or State charter,
license, registration, or other similar authorization;
and
``(D) any person who is required by law to hold a
license, registration, or other similar authorization
described in subparagraph (C).
``(7) Security.--The term `security' has the meaning given
the term in section 3(a) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)).
``(8) Smart contract.--The term `smart contract'--
``(A) means--
``(i) computer code deployed to a
distributed ledger technology network that
executes an instruction based on the occurrence
or nonoccurrence of specified conditions; or
``(ii) any similar analogue; and
``(B) includes taking possession or control of a
digital asset and transferring the asset or issuing
executable instructions for these actions.
``(9) Source code version.--The term `source code
version'--
``(A) means the source code version comprising a
digital asset; and
``(B) does not include software used to manage or
facilitate transactions in a digital asset.
``(10) Virtual currency.--The term `virtual currency'--
``(A) means a digital asset that--
``(i) is used primarily as a medium of
exchange, unit of account, store of value, or
any combination of such functions;
``(ii) is not legal tender, as described in
section 5103; and
``(iii) does not derive value from or is
backed by an underlying financial asset (except
other digital assets); and
``(B) includes a digital asset, consistent with
subparagraph (A) that is accompanied by a statement
from the issuer that a denominated or pegged value will
be maintained and be available upon redemption from the
issuer or other identified person, based solely on a
smart contract.''.
(b) Technical and Conforming Amendment.--The table of contents for
subtitle VI of title 31, United States Code, is amended by adding at
the end the following:
``98. Digital assets........................................ 9801''.
TITLE II--RESPONSIBLE TAXATION OF DIGITAL ASSETS
SEC. 201. GAIN FROM DISPOSITION OF DIGITAL ASSETS.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139I the following new section:
``SEC. 139J. GAIN OR LOSS FROM SALE OR EXCHANGE OF VIRTUAL CURRENCY.
``(a) In General.--Gross income shall not include gain or loss from
the sale or exchange of virtual currency in a personal transaction (as
defined in section 988(e)(3)) for goods and services.
``(b) Limitation.--
``(1) In general.--The amount of gain or loss excluded from
gross income under subsection (a) with respect to a sale or
exchange shall not exceed $200.
``(2) Aggregation rule.--For purposes of this subsection,
all sales or exchanges which are part of the same transaction
(or a series of related transactions) shall be treated as one
sale or exchange.
``(c) Other Sales or Exchanges.--Subsection (a) shall not apply to
sales or exchanges in which virtual currency is sold or exchanged for
cash, cash equivalents, digital assets (as defined in section 9801 of
title 31, United States Code), or other securities or commodities.
``(d) Virtual Currency.--For purposes of this section, the term
`virtual currency' has the meaning given such term in section 9801 of
title 31, United States Code.
``(e) Inflation Adjustment.--In the case of any taxable year
beginning in a calendar year after 2023, the dollar amount in
subsection (b) shall be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, determined by substituting `calendar year 2022' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded
to the nearest multiple of $50.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by inserting after the item relating to section 139I the
following new item:
``Sec. 139J. Gain or loss from sale or exchange of virtual currency.''.
(c) Reporting of Gains or Losses.--The Secretary shall issue
regulations providing for information returns on virtual currency
transactions for which gain or loss is recognized.
(d) Effective Date.--The amendments made by this section shall
apply to transactions entered into after December 31, 2022.
SEC. 202. INFORMATION REPORTING REQUIREMENTS IMPOSED ON BROKERS WITH
RESPECT TO DIGITAL ASSETS.
(a) Clarification of Definition of Broker.--Section 6045(c)(1)(D)
of the Internal Revenue Code of 1986 is amended to read as follows:
``(D) any person who (for consideration) stands
ready in the ordinary course of a trade or business to
effect sales of digital assets at the direction of
their customers.''.
(b) Reporting of Digital Assets.--
(1) Brokers.--
(A) Definition of digital asset.--Section
6045(g)(3)(D) of the Internal Revenue Code of 1986 is
amended to read as follows:
``(D) Digital asset.--The term `digital asset' has
the meaning given such term in section 9801 of title
31, United States Code.''.
(B) Applicable date.--Section 6045(g)(3)(C)(iii) of
such Code is amended to read as follows:
``(iii) January 1, 2025, in the case of any
specified security which is a digital asset,
and''.
(2) Furnishing of information.--Section 6045A(d) of such
Code is amended to read as follows:
``(d) Return Requirement for Certain Transfers of Digital Assets
Not Otherwise Subject to Reporting.--Any broker, with respect to any
transfer (which is not part of a sale or exchange executed by such
broker) during a calendar year of a covered security which is a digital
asset from an account wholly controlled and maintained by such broker
to an account which is not maintained by, or an address not associated
with, a person that such broker knows or has reason to know is also a
broker, shall make a return for such calendar year, in such form as
determined by the Secretary, showing the information otherwise required
to be furnished with respect to transfers subject to subsection (a).
Information reported by brokers under this section shall be limited to
customer information that is voluntarily provided by the customer and
held by the broker for a legitimate business purpose.''.
(c) Effective Dates.--The amendments made by this section shall
apply to returns required to be filed and statements required to be
furnished after December 31, 2025.
SEC. 203. SOURCES OF INCOME.
(a) In General.--Paragraph (2) of section 864(b) of the Internal
Revenue Code of 1986 is amended by redesignating subparagraph (C) as
subparagraph (D) and by inserting after subparagraph (B) the following
new subparagraph:
``(C) Digital assets.--
``(i) In general.--Trading in digital
assets through a resident broker, commission
agent, custodian, digital asset exchange, or
other independent agent.
``(ii) Trading for taxpayer's own
account.--Trading in digital assets for the
taxpayer's own account, whether by the taxpayer
or the taxpayer's employees or through a
resident broker, commission agent, custodian,
digital asset exchange, or other agent, and
whether or not any such employee or agent has
discretionary authority to make decisions in
effecting the transactions. This clause shall
not apply in the case of a dealer in digital
assets.
``(iii) Definitions.--For purposes of this
subparagraph--
``(I) Digital asset exchange.--The
term `digital asset exchange' means a
centralized or decentralized platform
which facilitates the transfer of
digital assets.
``(II) Digital asset.--The term
`digital asset' has the meaning given
such term in section 9801 of title 31,
United States Code.
``(iv) Limitation.--This subparagraph shall
apply only if the digital assets are of a kind
customarily dealt in on a digital asset
exchange and if the transaction is of a kind
customarily consummated at such exchange.''.
(b) Conforming Amendment.--Subparagraph (D) of section 864(b)(2) of
the Internal Revenue Code of 1986, as redesignated by subsection (a),
is amended by striking ``(A)(i) and (B)(i)'' and inserting ``(A)(i),
(B)(i), and (C)(i)''.
(c) Effective Date.--The amendments made by this section shall
apply to sales and exchanges after December 31, 2022.
SEC. 204. DECENTRALIZED AUTONOMOUS ORGANIZATIONS.
(a) In General.--Section 7701(a) of the Internal Revenue Code of
1986 is amended by adding at the end the following new paragraph:
``(51) Decentralized autonomous organizations.--
``(A) In general.--The default classification of a
decentralized autonomous organization shall be as a
business entity which is not a disregarded entity.
``(B) Classification of other activities.--The
following shall not be considered a business activity
of such organization for purposes of determining
whether such organization is described in section
501(c)(7):
``(i) Treasury management, including mining
and staking of digital assets (as defined in
section 9801 of title 31, United States Code).
``(ii) Raising funds for a charitable
purpose.
``(C) Decentralized autonomous organization.--The
term `decentralized autonomous organization' means an
organization--
``(i) which utilizes smart contracts (as
defined in section 9801 of title 31, United
States Code) to effectuate collective action
for a business, commercial, charitable, or
similar entity,
``(ii) governance of which is achieved
primarily on a distributed basis, and
``(iii) which is properly incorporated or
organized under the laws of a State or foreign
jurisdiction as a decentralized autonomous
organization, cooperative, foundation, or any
similar entity.''.
(b) Effective Date.--Except as provided by subsection (c), the
amendments made by this section shall apply to taxable years beginning
after December 31, 2022.
SEC. 205. TAX TREATMENT OF DIGITAL ASSET LENDING AGREEMENTS AND RELATED
MATTERS.
(a) In General.--Subsection (a) of section 1058 of the Internal
Revenue Code of 1986 is amended by striking ``(as defined in section
1236(c))''.
(b) Fixed Term.--Paragraph (1) of subsection (b) of section 1058 of
the Internal Revenue Code of 1986 is amended by inserting ``, including
a fixed-term transfer that occurs in the ordinary course of a
securities lending or investment management business'' after
``transferred''.
(c) Basis.--Subsection (c) of section 1058 of the Internal Revenue
Code of 1986 is amended by adding at the end the following: ``All
appropriate basis adjustments to an agreement under subsection (b)
shall be made, as determined by the Secretary, including upon the
return of the lent securities to the taxpayer.''.
(d) Securities.--Section 1058 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsections:
``(d) Securities.--For purposes of this section, the term
`securities' has the meaning given such term by section 1236(c), except
that such term includes any digital asset (as defined in section 9801
of title 31, United States Code) and, with respect to a digital asset,
does not require a call option.
``(e) Income.--An amount equal to the income which would otherwise
accrue to the lender but for a lending transaction under this section
shall be included in gross income of the lender.''.
(e) Rule of Construction.--Nothing in this section shall be
construed to create any inference with respect to the classification of
any digital asset as security under the Securities Act of 1933 (15
U.S.C. 77a et seq.) or the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.).
(f) Rulemaking Authority.--The Secretary of the Treasury (or the
Secretary's delegate) may adopt rules to implement this section,
including the application of this section to forks, airdrops, and
similar subsidiary value.
(g) Effective Date.--The amendments made by this section shall
apply to sales and exchanges after December 31, 2022.
SEC. 206. IMPLEMENTING EFFECTIVE IRS GUIDANCE.
(a) In General.--Not later than 1 year after the date of the
enactment of this Act, the Secretary of the Treasury (or the
Secretary's delegate) shall adopt guidance relating to the following:
(1) Classification of forks, airdrops, and similar
subsidiary value as taxable, contingent upon the affirmative
claim and disposition of the subsidiary value by a taxpayer.
Such guidance shall also permit a taxpayer to provide
notification through an annual return or other appropriate
means to the Internal Revenue Service relating to claim and
disposition of, or disclaimer of, subsidiary value.
(2) Merchant acceptance of digital assets and the tax
treatment of payments and receipts, consistent with the
amendments made by section 80603 of the Infrastructure
Investment and Jobs Act, as amended by section 203.
(3) Treatment of digital asset mining and staking,
including mining and staking rewards, in which income is not
realized until disposition of the assets produced or received
in connection with such activity, in accordance with section
451(l) of the Internal Revenue Code of 1986 (as added by this
Act).
(4) Classification of charitable contributions greater than
$5,000 of digital assets which are traded on established
financial markets as contributions of readily valued property
not requiring a qualified appraisal for purposes of section
170(f)(11)(A) of the Internal Revenue Code of 1986, as amended
by this Act.
(5) Characterization of payment stablecoins (as defined in
section 9801 of title 31, United States Code) as indebtedness.
(b) Effective Date.--The guidance adopted under this section shall
be applicable on a prospective basis for taxable years beginning after
December 31, 2023.
SEC. 207. ANALYSIS OF RETIREMENT INVESTING IN DIGITAL ASSETS.
(a) Not later than March 1, 2023, the Comptroller General of the
United States shall conduct a study and provide a report to the
entities specified in subsection (b) regarding the following issues
relating to retirement investing in digital assets:
(1) Potential benefits to diversification and return of an
investor's retirement portfolio.
(2) Appropriate asset allocations, including among other
alternative investments.
(3) Consumer education, financial literacy and investment
advisor training relating to digital assets.
(4) Risk.
(5) Legal and operational barriers to effective retirement
investing in digital assets.
(6) Any other topic determined to be material by the
Comptroller General relating to retirement investing in digital
assets.
(b) The Comptroller General shall provide the report required by
subsection (a) to the following:
(1) The Committee on Banking, Housing, and Urban Affairs of
the Senate.
(2) The Committee on Finance of the Senate.
(3) The Committee on Health, Education, Labor, and Pensions
of the Senate.
(4) The Committee on Financial Services of the House of
Representatives.
(5) The Committee on Ways and Means of the House of
Representatives.
(6) The Committee on Education and Labor of the House of
Representatives.
(7) The Secretary of the Treasury.
(8) The Secretary of Labor.
SEC. 208. DIGITAL ASSET MINING AND STAKING.
(a) In General.--Section 451 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(l) Deferral of Income Recognition for Digital Asset
Activities.--In the case of a taxpayer who conducts digital asset
mining or staking activities, the amount of income relating to such
activities shall not be included in the gross income of the taxpayer
until the taxable year of the disposition of the assets produced or
received in connection with the mining or staking activities.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2022.
SEC. 209. CONFORMING AMENDMENTS.
(a) Charitable Contributions.--
(1) In general.--Subclause (I) of section 170(f)(11)(A)(ii)
of the Internal Revenue Code of 1986 is amended by inserting
``, digital assets (as defined in section 9801 of title 31,
United States Code)'' after ``6050L(a)(2)(B))''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31, 2022.
(b) Other Conforming Amendments.--
(1) In general.--Title 31, United States Code, is amended--
(A) in section 5312(a)(2)--
(i) by redesignating subparagraphs (A)
through (Z) as clauses (i) through (xxvi),
respectively;
(ii) in the matter preceding clause (i), as
so designated, by striking ```institution'
means--'' and inserting ```institution'--
``(A) means--'';
(iii) in clause (xxvi), as so designated,
by striking the period at the end and inserting
``; and''; and
(iv) by adding at the end the following:
``(B) does not include a decentralized autonomous
organization, as defined in section 7701(a) of the
Internal Revenue Code of 1986.''; and
(B) in section 5336(a)(11)(B)(2)--
(i) by redesignating clause (xxv) as clause
(xxvi); and
(ii) by adding after clause (xxv) the
following:
``(xxv) A decentralized autonomous
organization, as defined in section 7701(a) of
the Internal Revenue Code of 1986; and''.
(2) Anti-money laundering act of 2020.--Section 6110(a) of
the Anti-Money Laundering Act of 2020 (division F of Public Law
116-283) is amended by striking paragraph (1) and inserting the
following:
``(A) by redesignating clauses (xxv) and (xxvi) as
clauses (xxvi) and (xxvii), respectively, and adjust
the margins accordingly; and
``(B) by inserting after clause (xxiv) the
following:
```(Y) a person engaged in the trade of
antiquities, including an advisor, consultant, or any
other person who engages as a business in the
solicitation or the sale of antiquities, subject to
regulations prescribed by the Secretary;'.''.
TITLE III--RESPONSIBLE SECURITIES INNOVATION
SEC. 301. SECURITIES OFFERINGS INVOLVING CERTAIN INTANGIBLE ASSETS.
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. 41. SECURITIES OFFERINGS INVOLVING CERTAIN INTANGIBLE ASSETS.
``(a) Definitions.--In this section:
``(1) Ancillary asset.--
``(A) In general.--The term `ancillary asset' means
an intangible, fungible asset that is offered, sold, or
otherwise provided to a person in connection with the
purchase and sale of a security through an arrangement
or scheme that constitutes an investment contract, as
that term is used in section 2(a)(1) of the Securities
Act of 1933 (15 U.S.C. 77b(a)(1)).
``(B) Exclusion.--The term `ancillary asset' does
not include an asset that provides the holder of the
asset with any of the following rights in a business
entity:
``(i) A debt or equity interest in that
entity.
``(ii) Liquidation rights with respect to
that entity.
``(iii) An entitlement to an interest or
dividend payment from that entity.
``(iv) A profit or revenue share in that
entity solely from the entrepreneurial or
managerial efforts of others.
``(v) Any other financial interest in that
entity.
``(2) Foreign private issuer.--The term `foreign private
issuer' means a foreign issuer, other than a foreign
government, except that the term does not include a foreign
issuer that, as of the last business day of the most recently
completed fiscal quarter of the issuer, satisfies the following
conditions:
``(A) More than 50 percent of the outstanding
voting securities of the issuer are directly or
indirectly owned by residents of the United States.
``(B) Any of the following:
``(i) The majority of the executive
officers or directors of the issuer are
citizens or residents of the United States.
``(ii) More than 50 percent of the assets
of the issuer are located in the United States.
``(iii) The business of the issuer is
principally administered in the United States.
``(b) Disclosure Requirements.--
``(1) Initial compliance with specified periodic disclosure
requirements.--Subject to paragraphs (4) and (5), an issuer
engaged in business in or affecting interstate commerce, or
that is organized outside of the United States and is not a
foreign private issuer, that offers, sells, or otherwise
provides a security through an arrangement or scheme that
constitutes an investment contract, as that term is used in
section 2(a)(1) of the Securities Act of 1933 (15 U.S.C.
77b(a)(1)), and that provides or proposes to provide any holder
of the security with an ancillary asset, shall be subject to
the periodic disclosure requirements under subsection (c) for
the 1-year period beginning on the date that is 180 days after
the first date on which the security is offered, sold, or
otherwise provided by the issuer, if--
``(A) the average daily aggregate value of all
ancillary assets offered, sold, or otherwise provided
by the issuer in relation to the offer, sale, or
provision of the security in all spot markets open to
the public in the United States (based on the knowledge
of the issuer after due inquiry) is greater than
$5,000,000 for the 180-day period immediately
succeeding the date of that first offer, sale, or
provision; and
``(B) during the 180-day period described in
subparagraph (A), the issuer, or any person owning not
less than 10 percent of any class of equity securities
of the issuer, engaged in entrepreneurial or managerial
efforts that primarily determined the value of the
ancillary asset.
``(2) Ongoing compliance with specified periodic disclosure
requirements.--Subject to paragraphs (4) and (5), an issuer
that is engaged in business in or affecting interstate
commerce, or that is organized outside of the United States and
is not a foreign private issuer, that offers, sells, or
otherwise provides a security through an arrangement or scheme
that constitutes an investment contract, as that term is used
in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C.
77b(a)(1)), and that provides the holder of the security with
an ancillary asset in connection with the acquisition of the
security, shall be subject to the periodic disclosure
requirements under subsection (c) for a given fiscal year of
that issuer, if, in the immediately preceding fiscal year of
the issuer (or any portion thereof)--
``(A) the average daily aggregate value of all
trading in the ancillary asset in all spot markets open
to the public in the United States was greater than
$5,000,000, based on the knowledge of the issuer after
due inquiry; and
``(B) the issuer, or any person owning not less
than 10 percent of any class of equity securities of
the issuer, engaged in entrepreneurial or managerial
efforts that primarily determined the value of the
ancillary asset.
``(3) Transition rule.--Subject to paragraphs (4) and (5),
an issuer that is engaged in business in or affecting
interstate commerce, or that is organized outside of the United
States and is not a foreign private issuer, that offers, sells,
or otherwise provides a security through an arrangement or
scheme that constitutes an investment contract, as that term is
used in section 2(a)(1) of the Securities Act of 1933 (15
U.S.C. 77b(a)(1)), and that provides the holder of the security
with an ancillary asset before January 1, 2023, in connection
with the acquisition of the security shall be subject to the
periodic disclosure requirements under subsection (c) beginning
in the first fiscal year of the issuer that begins on or after
that date, if, in the immediately preceding fiscal year of the
issuer--
``(A) the average daily aggregate value of trading
in the ancillary asset in all spot markets open to the
public for which trading volume is generally available
was greater than $5,000,000, based on the knowledge of
the issuer after due inquiry; and
``(B) the issuer, or any person owning not less
than 10 percent of any class of equity securities of
the issuer, engaged in entrepreneurial or managerial
efforts that primarily determined the value of the
ancillary asset.
``(4) Treatment of ancillary assets.--
``(A) In general.--Notwithstanding any other
provision of law, if an issuer issues a security
through an arrangement or scheme that constitutes an
investment contract, as that term is used in section
2(a)(1) of the Securities Act of 1933 (15 U.S.C.
77b(a)(1)), is subject to paragraph (1), (2), or (3),
and is in compliance with the periodic disclosure
requirements under subsection (c), an ancillary asset
provided directly or indirectly by the issuer shall be
presumed--
``(i) to be a commodity, consistent with
section 2(c)(2)(F) of the Commodity Exchange
Act (7 U.S.C. 2(c)(2)(F)); and
``(ii) not to be a security under--
``(I) section 3(a);
``(II) such section 2(a)(1);
``(III) section 2(a) of the
Investment Company Act of 1940 (15
U.S.C. 80a-2(a));
``(IV) section 202(a) of the
Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)); or
``(V) any applicable provision of
State law.
``(B) Other persons.--A person who is not an
issuer, an entity controlled by an issuer (including a
person that acquires an ancillary asset from such an
issuer for the purpose of resale or distribution of the
ancillary asset), or a person acting at the direction
or on the behalf of an issuer shall be not required to
treat an ancillary asset provided by an issuer as a
security under this Act or any provision of law
described in subparagraph (A)(ii).
``(C) Exception.--
``(i) In general.--Subparagraph (A) shall
not apply to an ancillary asset if a court of
the United States of competent jurisdiction,
after an appropriate proceeding, issues an
order finding that there is not a substantial
basis for the presumption that the ancillary
asset is a commodity and not a security under
subparagraph (A).
``(ii) Rules of construction.--Nothing in
this subparagraph shall be construed to
preclude the Commission from entering into a
settlement agreement relating to violations or
alleged violations of this section. Compliance
under this section shall not be used in any
administrative or judicial proceeding that an
ancillary asset is a security.
``(5) Calculation.--For the purposes of paragraphs (1),
(2), and (3), the calculation of daily aggregate value shall be
based on data disclosed by spot markets or otherwise available
to the public for inspection.
``(c) Specified Periodic Disclosure Requirements.--If an issuer is
subject to paragraph (1), (2), or (3) of subsection (b), the issuer
shall furnish, or cause the relevant affiliate to furnish, to the
Commission, on a semi-annual basis, information that the Commission
may, by rule, require relating to the issuer and any relevant ancillary
asset, as necessary or appropriate in the public interest or for the
protection of investors, which shall be exclusively comprised of the
following:
``(1) Basic corporate information regarding the issuer,
including the following:
``(A) The experience of the issuer in developing
assets similar to the ancillary asset.
``(B) If the issuer has previously provided
ancillary assets to purchasers of securities,
information on the subsequent history of those
previously provided ancillary assets, including price
history, if the information is publicly available.
``(C) The activities that the issuer has taken in
the relevant disclosure period, and is projecting to
take in the 1-year period following the submission of
the disclosure, with respect to promoting the use,
value, or resale of the ancillary asset (including any
activity to facilitate the creation or maintenance of a
trading market for the ancillary asset and any network
or system that utilizes the ancillary asset).
``(D) The anticipated cost of the activities of the
issuer in subparagraph (C) and whether the issuer has
unencumbered, liquid funds equal to that amount.
``(E) To the extent the ancillary asset involves
the use of a particular technology, the experience of
the issuer with the use of that technology.
``(F) The backgrounds of the board of directors (or
equivalent body), senior management, and key employees
of the issuer, the experience or functions of whom are
material to the value of the ancillary asset, as well
as any personnel changes relating to the issuer during
the period covered by the disclosure.
``(G) A description of the assets and liabilities
of the issuer, to the extent material to the value of
the ancillary asset.
``(H) A description of any legal proceedings in
which the issuer is engaged (including inquiries by
governmental agencies into the activities of the
issuer), to the extent material to the value of the
ancillary asset.
``(I) Risk factors relating to the impact of the
issuer on, or unique knowledge relating to, the value
of the ancillary asset.
``(J) Information relating to ownership of the
ancillary asset by--
``(i) persons owning not less than 10
percent of any class of equity security of the
issuer; and
``(ii) the management of the issuer.
``(K) Information relating to transactions
involving the ancillary asset by the issuer with
related persons, promoters, and control persons.
``(L) Recent sales or similar dispositions of
ancillary assets by the issuer and affiliates of the
issuer.
``(M) Purchases or similar dispositions of
ancillary assets by the issuer and affiliates of the
issuer.
``(N) A going concern statement from the chief
financial officer of the issuer or equivalent official,
signed under penalty of perjury, stating whether the
issuer maintains the financial resources to continue
business as a going concern for the 1-year period
following the submission of the disclosure, absent a
material change in circumstances.
``(2) Information relating to the ancillary asset,
including the following:
``(A) A general description of the ancillary asset,
including the standard unit of measure with respect to
the ancillary asset, the intended or known
functionality and uses of the ancillary asset, the
market for the ancillary asset, other assets or
services that may compete with the ancillary asset, and
the total supply of the ancillary asset or the manner
and rate of the ongoing production or creation of the
ancillary asset.
``(B) If ancillary assets have been offered, sold,
or otherwise provided by the issuer to investors,
intermediaries, or resellers, a description of the
amount of assets offered, sold, or provided, the terms
of each such transaction, and any contractual or other
restrictions on the resale of the assets by
intermediaries.
``(C) If ancillary assets were distributed without
charge, a description of each distribution, including
the identity of any recipient that received more than 5
percent of the total amount of the ancillary assets in
any such distribution.
``(D) The amount of ancillary assets owned by the
issuer.
``(E) For the 1-year period following the
submission of the disclosure, a description of the
plans of the issuer to support (or to cease supporting)
the use or development of the ancillary asset,
including markets for the ancillary asset and each
platform or system that uses the ancillary asset.
``(F) Each third party not affiliated with the
issuer, the activities of which may have a material
impact on the value of the ancillary asset.
``(G) Risk factors known to the issuer that may
limit demand for, or interest in, the ancillary asset.
``(H) The names and locations of the markets in
which the ancillary asset is known by the issuer to be
available for sale or purchase.
``(I) To the extent available to the issuer, the
average daily price for a constant unit of value of the
ancillary asset during the relevant reporting period,
as well as the 12-month high and low prices for the
ancillary asset.
``(J) If applicable, information relating to any
external audit of the code and functionality of the
ancillary asset, including the entity performing the
audit and the experience of the entity in conducting
similar audits.
``(K) If applicable, any third-party valuation
report or economic analysis regarding the ancillary
asset or the projected market of the ancillary asset,
which shall include the entity performing the valuation
or analysis and the experience of the entity in
conducting similar reports or analyses.
``(L) If the ancillary asset is intangible,
information relating to custody by the owner of the
ancillary asset or a third party.
``(M) Information on intellectual property rights
claimed or disputed relating to the ancillary asset.
``(N) A description of the technology underlying
the ancillary asset.
``(O) Any material tax considerations applicable to
owning, storing, using, or trading the ancillary asset.
``(P) Any material legal or regulatory
considerations applicable to owning, storing, using, or
trading the ancillary asset, including any legal
proceeding that may impact the value of the ancillary
asset.
``(Q) Any other material factor or information that
may impact the value of the ancillary asset and about
which the issuer is reasonably aware.
``(d) Application to Successor Entities and Certain Affiliates.--
``(1) In general.--If an issuer would otherwise be subject
to specified periodic disclosure requirements under subsection
(c) and is no longer in operation, any successor entity that
directly or indirectly received not less than 50 percent of the
proceeds raised by the sale of the related securities of that
issuer, and that is engaged in entrepreneurial or managerial
efforts that primarily determine the value of the applicable
ancillary asset, shall furnish, or cause to be furnished, to
the Commission the information required under that subsection.
``(2) Certain affiliates.--If an entity controlled by an
issuer is subject to specified periodic disclosure requirements
under subsection (c) and is engaged in entrepreneurial or
managerial efforts that primarily determine the value of an
ancillary asset, the entity may furnish to the Commission the
information required under that subsection.
``(e) Voluntary Disclosure.--An issuer that is not subject to the
specified periodic disclosure requirements under subsection (c) and
that offers or sells a security through an arrangement or scheme that
constitutes an investment contract, as that term is used in section
2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)), and that
provides the holder of that security with an ancillary asset in
connection with the acquisition of the security may voluntarily furnish
to the Commission the information required under that subsection if the
issuer believes that it is reasonably likely that the issuer will
become subject to those requirements in the future.
``(f) Exemptions.--The Commission may, by order, exempt an
ancillary asset from the specified periodic disclosure requirements
under subsection (c) if the Commission determines that the public
policy goals of disclosure and consumer protection are not satisfied by
requiring disclosures relating to an ancillary asset.
``(g) Rule of Construction.--If an issuer fails to comply with a
provision of this section, an ancillary asset provided by the issuer
shall not be presumed to be a security under a provision of law
described in subsection (b)(4)(A)(ii), solely because of such failure.
``(h) Rules.--The Commission may adopt rules and guidance to
implement this section, consistent with the statutory intent of this
section.''.
SEC. 302. TERMINATION OF SPECIFIED PERIODIC DISCLOSURE REQUIREMENTS.
Section 41 of the Securities Exchange Act of 1934, as added by
section 301 of this Act, is amended by adding at the end the following:
``(i) Termination of Specified Periodic Disclosure Requirements.--
``(1) In general.--The obligation of an issuer to furnish
the information required under subsection (c) shall terminate
on the date that is 90 days, or such shorter period as the
Commission may determine, after the date on which the issuer
files a certification described in paragraph (2).
``(2) Certification.--
``(A) In general.--A certification filed under
paragraph (1) shall be supported by reasonable
evidence, based on the knowledge of the issuer filing
the certification, after due inquiry, that--
``(i) the average daily aggregate value of
all trading in the applicable ancillary asset
in all spot markets open to the public in the
United States in the 12-month period preceding
the date on which the certification is filed
was not greater than $5,000,000; or
``(ii) during the 12-month period preceding
the date on which the certification is filed,
neither the applicable issuer, nor any entity
controlled by the applicable issuer, engaged in
entrepreneurial or managerial efforts that
primarily determined the value of the ancillary
asset.
``(B) Denial.--
``(i) In general.--Subject to subparagraph
(C)(ii), the Commission may, by majority vote
and after notice and opportunity for hearing,
deny a certification filed under paragraph (1)
if the Commission finds that the certification
is not supported by substantial evidence.
``(ii) Effect.--The denial, under clause
(i), of a certification filed under paragraph
(1)--
``(I) shall terminate the
certification so filed; and
``(II) shall not prevent the
applicable issuer from filing another
certification under paragraph (1), if
the re-filed certification is filed not
earlier than 180 days after the date on
which the original certification is
denied.
``(C) Pending status.--
``(i) In general.--Termination of the
disclosure requirements described in paragraph
(1) applicable to an issuer that has filed a
certification under that paragraph shall be
deferred pending review by the Commission of
the evidence supporting the certification.
``(ii) Effect of delay.--If, as of the date
that is 90 days after receiving a certification
filed under paragraph (1), the Commission has
not requested additional evidence with respect
to the certification from the applicable
issuer, the disclosure obligations that are the
subject of the certification shall
terminate.''.
SEC. 303. GUIDANCE RELATING TO SATISFACTORY CONTROL LOCATION.
Not later than 180 days after the date of the enactment of this
Act, the Securities and Exchange Commission (referred to in this title
as the ``Commission'') shall issue guidance relating to section
240.15c3-3 of title 17, Code of Federal Regulations, or any successor
regulation, providing that the requirement to designate a satisfactory
control location for a digital asset that is, or may represent
ownership of, a security may be satisfied by protecting the digital
asset through commercially reasonable cybersecurity practices to
maintain control of sufficient private key material to transfer control
of the digital asset to another person, or to cause another person to
obtain control of the digital asset, including by means of a smart
contract that generates private key material without the involvement of
a natural person.
SEC. 304. CUSTODY AND CUSTOMER PROTECTION RULES.
(a) In General.--
(1) Modernization of existing rules and adoption of new
rules.--Not later than 18 months after the date of enactment of
this Act, the Commission shall--
(A) complete the multi-year study of the Commission
with respect to the modernization of the rules of the
Commission relating to customer protection (section
240.15c3-3 of title 17, Code of Federal Regulations)
and custody of securities, digital assets, and client
funds (section 275.206(4)-2 of title 17, Code of
Federal Regulations); and
(B) consistent with the results of the study
described in subparagraph (A), adopt final rules
relating to the issues described in paragraph (2).
(2) Contents.--The final rules adopted under paragraph
(1)(B) shall address the following concepts:
(A) Investor protection and education with respect
to digital assets.
(B) Digital assets, distributed ledger technology,
and use of collaborative custody or multi-signature
arrangements, including distribution of private key
material and resulting obligations.
(C) Changes in market structure and asset
characteristics, including disuse of physical
securities and assets and appropriate custodial methods
for electronically native assets.
(D) Reduction of regulatory burden.
(E) Use of technology to facilitate regulatory
compliance and risk management.
(F) Parity of State- and nationally chartered
banks, as defined in section 202(a) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)), with respect
to asset custody in a manner consistent with that Act
(15 U.S.C. 80b-1 et seq.) and other existing law.
(G) Standards under which an issuer of an
unregistered digital asset that is, or may represent
ownership of, a security is not required to utilize a
registered transfer agent.
(H) Specification of the digital assets which
constitute client funds under section 275.206(4)-2 of
title 17, Code of Federal Regulations.
(b) Digital Assets and Securities.--Not later than 270 days after
the date of enactment of this Act, the Commission shall adopt final
guidance permitting, for the purposes of section 240.15c3-3(b) of title
17, Code of Federal Regulations, a broker or a dealer to perform,
within the same legal entity, both trading and custodial activities
relating to fully paid and excess margin digital assets, including
virtual currency and digital assets that are securities or may
represent ownership of securities, in addition to traditional
securities, client funds, and other assets permitted by the Commission
to be within the control of a broker or dealer.
TITLE IV--RESPONSIBLE COMMODITIES INNOVATION
SEC. 401. DEFINITIONS.
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
(1) in paragraph (9), by striking ``and frozen concentrated
orange juice'' and inserting ``frozen concentrated orange
juice, and a digital asset (consistent with section
2(c)(2)(F))'';
(2) by inserting after paragraph (15) the following:
``(15A) Digital asset.--
``(A) In general.--Except as provided in
subparagraph (B), the term `digital asset' has the
meaning given the term in section 9801 of title 31,
United States Code.
``(B) Exclusion.--The term `digital asset' does not
include an asset that provides the holder of the asset
with any of the following rights in a business entity:
``(i) A debt or equity interest in that
entity.
``(ii) Liquidation rights with respect to
that entity.
``(iii) An entitlement to an interest or
dividend payment from that entity.
``(iv) A profit or revenue share in that
entity derived solely from the entrepreneurial
or managerial efforts of others.
``(v) Any other financial interest in that
entity.
``(15B) Digital asset exchange.--The term `digital asset
exchange' means a trading facility that lists for trading at
least 1 digital asset.'';
(3) in paragraph (28)(A)(i)--
(A) in subclause (I)--
(i) in item (aa)--
(I) in subitem (EE), by striking
``or'' at the end; and
(II) by adding at the end the
following:
``(GG) the purchase
or sale of a digital
asset that is traded on
or subject to the rules
of a registered
entity;'';
(ii) in item (bb), by striking ``and'' and
inserting ``or''; and
(iii) by adding at the end the following:
``(cc) acting as a
counterparty to any cash or
spot agreement, contract, or
transaction involving a digital
asset with a person who is not
an eligible contract
participant, unless the
activity is--
``(AA) conducted in
compliance with the
laws of the State in
which the activity
occurs;
``(BB) subject to
regulation by another
Federal authority; or
``(CC) separately
regulated under this
Act; and''; and
(B) in subclause (II), by striking ``items (aa) or
(bb)'' and inserting ``item (aa), (bb), or (cc)'';
(4) by inserting after paragraph (39) the following:
``(39A) Registered digital asset exchange.--The term
`registered digital asset exchange' means a digital asset
exchange registered under section 5i.''; and
(5) in paragraph (40)--
(A) in subparagraph (E), by striking ``and'' at the
end;
(B) by redesignating subparagraph (F) as
subparagraph (G); and
(C) by inserting after subparagraph (E) the
following:
``(F) a registered digital asset exchange; and''.
SEC. 402. REPORTING AND RECORDKEEPING.
Section 4g of the Commodity Exchange Act (7 U.S.C. 6g) is amended--
(1) in subsection (a), by inserting ``digital assets or''
before ``commodities''; and
(2) in subsection (d), in the second sentence, by striking
``commodity futures.'' and inserting ``commodities.''.
SEC. 403. CFTC JURISDICTION OVER DIGITAL ASSET TRANSACTIONS.
(a) Commission Jurisdiction Over Retail Digital Asset
Transactions.--
(1) In general.--Section 2(c)(2) of the Commodity Exchange
Act (7 U.S.C. 2(c)(2)) is amended--
(A) in subparagraph (D)(ii)--
(i) in subclause (III), in the matter
preceding item (aa), by inserting ``of a
commodity, other than a digital asset,'' before
``that'';
(ii) by redesignating subclauses (IV) and
(V) as subclauses (V) and (VI), respectively;
and
(iii) by inserting after subclause (III)
the following:
``(IV) a contract of sale of a
digital asset that--
``(aa) results in actual
delivery within 2 days or such
other period as the Commission
may determine by rule based
upon the typical commercial
practice in cash or spot
markets for the digital asset
involved; or
``(bb) is executed on or
subject to the rules of a
registered digital asset
exchange or with a registered
futures commission merchant;'';
and
(B) by adding at the end the following:
``(F) Commission jurisdiction over digital asset
transactions.--
``(i) In general.--
``(I) Jurisdiction.--Subject to
sections 6d and 12(e) and section 403
of the Commodity Futures Modernization
Act of 2000 (7 U.S.C. 27a), the
Commission shall have exclusive
jurisdiction over any agreement,
contract, or transaction involving a
contract of sale of a digital asset in
interstate commerce, including
ancillary assets (consistent with
section 41(b)(4) of the Securities
Exchange Act of 1934), except that
specified periodic reporting
requirements made by an issuer which
provided the holder of the security
with an ancillary asset under that
section, and the security that
constitutes an investment contract
(within the meaning of section 2(a)(1)
of the Securities Act of 1933 (15
U.S.C. 77b(a)(1))), shall remain within
the jurisdiction of the Securities and
Exchange Commission.
``(II) Fungibility requirement.--
The Commission shall only exercise
jurisdiction over an agreement,
contract, or transaction involving a
contract of sale of a digital asset
that is fungible, which shall not
include digital collectibles and other
unique digital assets.
``(ii) Withholding of rulemaking authority
over certain transactions.--Notwithstanding
clause (i), this subparagraph shall not be
interpreted to permit the Commission to issue
any rule regarding any agreement, contract, or
transaction that is not offered, solicited,
traded, facilitated, executed, cleared,
reported, or otherwise dealt in--
``(I) on or subject to the rules of
a registered entity; or
``(II) by any other entity
registered by the Commission.
``(iii) Limitation.--Clause (i) shall not
apply to custodial activities with respect to a
digital asset of an entity supervised or
regulated by a State or other Federal
regulatory agency.''.
(2) Conforming amendment.--Section 2(a)(1)(A) of the
Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)) is amended, in the
first sentence, by striking ``section 19 of this Act'' and
inserting ``subsection (c)(2)(F) or section 19''.
(b) Segregation of Digital Assets.--Section 4d of the Commodity
Exchange Act (7 U.S.C. 6d) is amended by adding at the end the
following:
``(i) Segregation of Digital Assets.--
``(1) Holding of customer assets.--
``(A) In general.--Each futures commission merchant
shall hold customer money, assets, and property in a
manner to minimize the customer's risk of loss of, or
unreasonable delay in the access to, the money, assets,
and property.
``(B) Custodian.--A futures commission merchant
shall hold the property of a customer of the futures
commission merchant with a licensed, chartered, or
registered entity subject to regulation by 1 of the
following agencies:
``(i) The Commission.
``(ii) The Securities and Exchange
Commission.
``(iii) An appropriate Federal banking
agency (as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813)).
``(iv) A State bank supervisor (as defined
in that section).
``(v) An appropriate foreign governmental
authority in the home country of the custodian.
``(2) Segregation of funds.--
``(A) Definition of digital asset customer.--In
this paragraph, the term `digital asset customer' means
a customer involved in a cash or spot, leveraged,
margined, or financed digital asset transaction in
which the futures commission merchant is acting as the
counterparty.
``(B) Requirements.--
``(i) In general.--A futures commission
merchant shall treat and deal with all money,
assets, and property of any digital asset
customer received as belonging to the customer.
``(ii) Commingling prohibited.--Money,
assets, and property of a digital asset
customer described in clause (i)--
``(I) shall be separately accounted
for; and
``(II) shall not be--
``(aa) commingled with the
funds of the futures commission
merchant; or
``(bb) used 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.
``(C) Exceptions.--
``(i) Use of funds.--
``(I) In general.--Notwithstanding
subparagraph (B), money, assets, and
property of a digital asset customer
may, for convenience, be commingled and
deposited in the same account or
accounts with an entity described in
paragraph (1)(B).
``(II) Withdrawal.--Notwithstanding
subparagraph (B), the share of the
money, assets, and property described
in subclause (I) as in the normal
course of business is necessary to
margin, guarantee, secure, transfer,
adjust, or settle a digital asset
transaction with a registered entity
may be withdrawn and applied to those
purposes, including the payment of
commissions, brokerage, interest,
taxes, storage, and other charges,
lawfully accruing in connection with
the digital asset transaction.
``(ii) Commission action.--Notwithstanding
subparagraph (B), in accordance with such terms
and conditions as the Commission may prescribe
by rule or order, any money, assets, or
property of a digital asset customer may be
commingled and deposited in customer accounts
with any other money, assets, or property
received by the futures commission merchant and
required by the Commission to be separately
accounted for and treated and dealt with as
belonging to the digital asset customer.
``(D) Permitted investments.--Money of a digital
asset customer may be invested--
``(i) in--
``(I) obligations of the United
States;
``(II) general obligations of any
State or of any political subdivision
of a State;
``(III) obligations fully
guaranteed as to principal and interest
by the United States; or
``(IV) any other investment that
the Commission may by rule prescribe;
and
``(ii) in accordance with such rules and
subject to such conditions as the Commission
may prescribe.
``(E) Prohibition.--It shall be unlawful for any
person, including any derivatives clearing organization
or depository institution, that has received any money,
assets, or property for deposit in a separate account
or accounts as required by subparagraph (B) to hold,
dispose of, or use any of the money, assets, or
property that belongs to the depositing futures
commission merchant or any person other than the
digital asset customer of the futures commission
merchant.
``(3) Customer right to opt out.--
``(A) In general.--A customer shall have the right
to waive any requirement under this subsection by
affirmatively electing, in writing to the futures
commission merchant, to waive the requirement.
``(B) Limitations.--The Commission may, by rule,
establish notice and disclosure requirements,
segregation requirements, investment limitations, and
other rules relating to the waiving of any requirement
under this subsection that are reasonably necessary to
protect customers, including eligible contract
participants, non-eligible contract participants, and
any other class of customers.''.
(c) Limitation on Futures Commission Merchants Acting as a
Counterparty in Digital Asset Transactions.--Section 4d of the
Commodity Exchange Act (7 U.S.C. 6d) (as amended by subsection (b)) is
amended by adding at the end the following:
``(j) Limitation on Futures Commission Merchants Acting as a
Counterparty in Digital Asset Transactions.--A registered futures
commission merchant shall not act as a counterparty in any agreement,
contract, or transaction involving a digital asset that has not been
listed for trading on a registered digital asset exchange.''.
(d) Common Provisions Applicable to Registered Entities.--Section
5c of the Commodity Exchange Act (7 U.S.C. 7a-2) is amended--
(1) in subsection (a)(1), by striking ``5(d) and 5b(c)(2)''
and inserting ``5(d), 5b(c)(2), and 5i(c)'';
(2) in subsection (b), by inserting ``registered digital
asset exchange,'' before ``derivatives'' each place it appears;
and
(3) in subsection (c)--
(A) in paragraph (2), by inserting ``or
participants'' before ``(in a'';
(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 assets.--
``(i) In general.--In the case of listing
for trading a digital asset that has not
previously been listed for trading on another
registered entity--
``(I) paragraphs (2) and (3) shall
apply as if the listing were a rule;
and
``(II) paragraph (2) shall be
applied by substituting `20 business
days' for `10 business days'.
``(ii) Transitional extension.--During the
1-year period beginning on the date of the
registration of the first digital asset
exchange, the Commission shall have an
additional 20 business days to review any
certification under clause (i).
``(iii) Consideration of comments.--In
conducting a review under clause (i), the
Commission shall consider any comments provided
by the Securities and Exchange Commission with
respect to the legal classification of a
digital asset.''.
SEC. 404. REGISTRATION OF DIGITAL ASSET EXCHANGES.
(a) In General.--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 ASSET EXCHANGES.
``(a) Definition of Customer.--In this section, the term `customer'
means any person that maintains an account for the trading of digital
assets directly with a registered digital asset exchange (other than a
person that is owned or controlled, directly or indirectly, by the
registered digital asset exchange) on behalf of the person or any other
person.
``(b) Registration.--
``(1) In general.--Any trading facility that offers or
seeks to offer a market in digital assets may register with the
Commission as a digital asset exchange by submitting 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 (d) and (f).
``(2) Deemed registration.--A registered designated
contract market or registered swap execution facility that
fulfills the requirements of this section may elect to be
considered a registered digital asset exchange, in such form
and manner as the Commission shall prescribe.
``(3) Additional registration.--A registered digital asset
exchange shall be registered with the Secretary of the Treasury
as a money services business.
``(c) Trading.--
``(1) In general.--A registered digital asset exchange may
make available for trading any digital asset that is not
readily susceptible to manipulation, subject to this
subsection.
``(2) Rules governing margined or leveraged trading.--The
Commission may make, promulgate, and enforce such additional
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
determines to be necessary.
``(3) Prohibition on trading derivatives products.--
Registration as a digital asset 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.
``(d) Core Principles for Digital Asset Exchanges.--
``(1) Compliance with core principles.--
``(A) In general.--To be registered, and maintain
registration, as a digital asset exchange, the
registered digital asset exchange shall comply with--
``(i) the core principles described in this
subsection; and
``(ii) any requirement that the Commission
may impose by rule pursuant to section 8a(5).
``(B) Reasonable discretion of digital asset
exchange.--Unless otherwise determined by the
Commission by rule, a registered digital asset exchange
described in subparagraph (A) shall have reasonable
discretion in establishing the manner in which the
registered digital asset exchange complies with the
core principles described in this subsection.
``(2) Compliance with rules.--A registered digital asset
exchange shall--
``(A) establish and enforce compliance with 1 or
more rules of the registered digital asset exchange,
including--
``(i) the terms and conditions of the
trades traded or processed on or through the
registered digital asset exchange; and
``(ii) any limitation on access to the
registered digital asset exchange;
``(B) establish and enforce compliance with
trading, trade processing, and participation rules that
will deter abuses and have the capacity to detect,
investigate, and enforce violations of 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 registered digital asset exchange, including rules
specifying trading procedures to be used in entering
and executing orders traded or posted on the registered
digital asset exchange.
``(3) Digital assets not readily susceptible to
manipulation.--
``(A) In general.--A registered digital asset
exchange shall permit trading only in assets that are
not readily susceptible to manipulation.
``(B) Listing restrictions.--A registered digital
asset exchange shall not permit trading in a digital
asset if it is reasonably likely that--
``(i) the transaction history of the
digital asset can be fraudulently altered by
any person or group of persons acting
collectively; or
``(ii) the functionality or operation of
the digital asset can be materially altered by
any person or group of persons under common
control.
``(C) Considerations.--In assessing a digital asset
under this paragraph, a registered digital asset
exchange shall consider--
``(i) the purpose and use of the digital
asset;
``(ii) the creation or release process of
the digital asset;
``(iii) the consensus mechanism of the
digital asset;
``(iv) the governance structure of the
digital asset;
``(v) the participation and distribution of
the digital asset;
``(vi) the current and proposed
functionality of the digital asset;
``(vii) the legal classification of the
digital asset; and
``(viii) any other factor required by the
Commission.
``(4) Treatment of customer assets.--
``(A) Required standards and procedures.--A
registered digital asset 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.--A registered digital
asset exchange shall hold customer money,
assets, and property in a manner to minimize
the customer's risk of loss of, or unreasonable
delay in the access to, the money, assets, and
property.
``(ii) Segregation of funds.--
``(I) In general.--A registered
digital asset 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)--
``(aa) shall be separately
accounted for; and
``(bb) shall not be--
``(AA) commingled
with the funds of the
registered digital
asset exchange; or
``(BB) used 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.
``(iii) Exceptions.--
``(I) Use of funds.--
``(aa) In general.--
Notwithstanding clause (ii),
money, assets, and property of
customers of a registered
digital asset exchange may, for
convenience, be commingled and
deposited with an entity
described in section
4d(i)(1)(B).
``(bb) Withdrawal.--
Notwithstanding clause (ii),
the share of the money, assets,
and property described in item
(aa) as in the normal course of
business is necessary to
margin, guarantee, secure,
transfer, adjust, or settle a
digital asset transaction with
a registered entity may be
withdrawn and applied to those
purposes, including the payment
of commissions, brokerage,
interest, taxes, storage, and
other charges, lawfully
accruing in connection with the
digital asset transaction.
``(II) Commission action.--
Notwithstanding clause (ii), in
accordance with such terms and
conditions as the Commission may
prescribe by rule or order, any money,
assets, or property of the customers of
a registered digital asset exchange may
be commingled and deposited in customer
accounts with any other money, assets,
or property received by the registered
digital asset exchange and required by
the Commission to be separately
accounted for and treated and dealt
with as belonging to the customer of
the registered digital asset exchange.
``(C) Permitted investments.--Money described in
subparagraph (B)(ii)(I) may be invested--
``(i) in--
``(I) obligations of the United
States;
``(II) general obligations of any
State or of any political subdivision
of a State;
``(III) obligations fully
guaranteed as to principal and interest
by the United States; or
``(IV) any other investment that
the Commission may by rule prescribe;
and
``(ii) in accordance with such rules and
subject to such conditions as the Commission
may prescribe.
``(D) Misuse of customer property.--It shall be
unlawful--
``(i) for any registered digital asset
exchange that has received any customer money,
assets, or property for custody to dispose of,
or use any of the money, assets, or property as
belonging to the registered digital asset
exchange; or
``(ii) for any other person, including any
other registered digital asset exchange or
custodian that has received any customer money,
assets, or property for deposit, to hold,
dispose of, or use any of the money, assets, or
property as belonging to--
``(I) the registered digital asset
exchange that deposited the money,
assets, or property; or
``(II) any person other than the
customers of the registered digital
asset exchange.
``(E) Customer right to opt out.--
``(i) In general.--A customer shall have
the right to waive any requirement under
subparagraph (B) by affirmatively electing, in
writing to the registered digital asset
exchange, to waive the requirement.
``(ii) Limitations.--The Commission may, by
rule, establish notice and disclosure
requirements, segregation requirements,
investment limitations, and other rules
relating to the waiving of any requirement
under this paragraph that is 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.--A registered digital asset
exchange shall provide a competitive, open, and
efficient market and mechanism for executing
transactions that protects the price discovery process
of trading on the registered digital asset exchange.
``(B) Protection of markets and market
participants.--A registered digital asset exchange
shall establish and enforce compliance with 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 registered digital asset
exchange.
``(C) Procedures and monitoring.--A registered
digital asset exchange shall--
``(i) establish and enforce compliance with
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
registered digital asset exchange; and
``(II) procedures for trade
processing of digital assets on or
through the facilities of the
registered digital asset exchange; and
``(ii) monitor trading in digital assets to
prevent manipulation, price distortion, and
disruptions of the delivery or cash settlement
process through surveillance, and compliance,
including methods for conducting real-time
monitoring of trading and comprehensive and
accurate trade reconstructions.
``(6) Ability to obtain information.--A registered digital
asset exchange shall--
``(A) establish and enforce rules that will allow
the registered digital asset exchange to obtain any
necessary information to perform any of the functions
described in this section;
``(B) provide the information to the Commission on
request; and
``(C) have the capacity to carry out such
international information-sharing agreements as the
Commission may require.
``(7) Emergency authority.--A registered digital asset
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 asset
or to suspend or curtail trading in a digital asset.
``(8) Reporting requirements.--
``(A) In general.--A registered digital asset
exchange shall provide to the Commission information
that is determined by the Commission to be necessary to
perform any responsibility of the Commission under this
Act.
``(B) Timely publication of trading information.--
``(i) In general.--
``(I) Publication.--A registered
digital asset exchange shall make
public timely information on price,
trading volume, and other trading data
on digital assets to the extent
prescribed by the Commission.
``(II) Accessibility.--A registered
digital asset exchange may make trading
data freely accessible to the public
under rules established by the
Commission.
``(ii) Capacity of digital asset
exchange.--A registered digital asset exchange
shall be required to have the capacity to
electronically capture and transmit trade
information with respect to transactions
executed on the registered digital asset
exchange.
``(9) Recordkeeping and reporting.--
``(A) In general.--A registered digital asset
exchange shall--
``(i) maintain records of all activities
relating to the business of the registered
digital asset exchange, 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 records relating to
ancillary assets 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) a self-regulatory organization;
``(ii) the Securities and Exchange
Commission;
``(iii) an appropriate Federal banking
agency (as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813));
``(iv) a State bank supervisor (as defined
in that section);
``(v) a State securities or commodities
regulator;
``(vi) the Financial Stability Oversight
Council;
``(vii) the Department of Justice; and
``(viii) 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 asset transactions that is
provided.
``(D) Providing information.--Each registered
digital asset exchange shall provide to the Commission
(including any designee of the Commission) information
under subparagraph (A) in such form and at such
frequency as is required by the Commission.
``(10) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, a registered
digital asset exchange shall not--
``(A) adopt any rules or take any actions that
result in any unreasonable restraint of trade; or
``(B) impose any material anticompetitive burden on
trading.
``(11) Conflicts of interest.--A registered digital asset
exchange shall--
``(A) establish and enforce rules to minimize
conflicts of interest in the decision-making process of
the registered digital asset exchange; and
``(B) establish a process for resolving conflicts
of interest described in subparagraph (A).
``(12) Financial resources.--
``(A) In general.--A registered digital asset
exchange shall have adequate financial, operational,
and managerial resources, as determined by the
Commission, to discharge each responsibility of the
registered digital asset exchange.
``(B) Minimum amount of financial resources.--A
registered digital asset exchange shall possess
financial resources that, at a minimum, exceed the
total amount that would enable the registered digital
asset exchange to conduct an orderly wind-down of the
activities of the registered digital asset exchange.
``(C) Additional financial resources for leverage
trading.--The Commission may require such additional
financial resources as are necessary to enable a
registered digital asset exchange that offers margined,
leveraged, or financed transactions to fulfill the
customer obligations of the registered digital asset
exchange.
``(13) Governance fitness standards.--
``(A) Governance arrangements.--A registered
digital asset exchange shall establish governance
arrangements that are transparent to fulfill public
interest requirements.
``(B) Fitness standards.--A registered digital
asset 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
registered digital asset exchange;
``(iii) any individual or entity with
direct access to any custodian affiliated with
the registered digital asset exchange;
``(iv) any entity offering affiliated
services for the registered digital asset
exchange; and
``(v) any party affiliated with any
individual or entity described in clauses (i)
through (iv).
``(14) System safeguards.--A registered digital asset
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
registered digital asset exchange; and
``(C) periodically conduct tests to verify that the
backup resources of the registered digital asset
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.
``(e) Appointment of Trustee.--
``(1) In general.--If a proceeding under section 5e results
in the suspension or revocation of the registration of a
digital asset exchange, or if a digital asset exchange
withdraws from registration, the Commission, after providing
notice to the digital asset exchange, may apply to the district
court of the United States for the judicial district in which
the digital asset exchange is located for the appointment of a
trustee.
``(2) Assumption of jurisdiction.--If the Commission
applies to a court for appointment of a trustee under paragraph
(1)--
``(A) the court may take exclusive jurisdiction
over--
``(i) the digital asset exchange; and
``(ii) the records and assets of the
digital asset exchange, wherever those records
and assets are 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
asset exchange in an orderly manner for the protection
of customers, subject to such terms and conditions as
the court may prescribe.
``(f) Custodian.--A registered digital asset exchange shall deposit
with an entity described in section 4d(i)(1)(B) each digital asset that
is--
``(1) the property of a customer of the registered digital
asset exchange;
``(2) required to be held by the registered digital asset
exchange under subsection (c)(2) or (d)(12); or
``(3) otherwise required by the Commission to be so held to
reasonably protect customers or promote the public interest.
``(g) Exemptions.--
``(1) In general.--To promote responsible economic or
financial innovation and fair competition, or protect
customers, the Commission may exempt, either unconditionally or
on stated terms or conditions or for stated periods, and
retroactively, prospectively, or both, a registered digital
asset exchange from the requirements of this section, if the
Commission determines that--
``(A) the exemption--
``(i) will be consistent with the public
interest and the purposes of this Act; and
``(ii) will not have a material adverse
effect on the ability of the Commission or the
registered digital asset exchange to discharge
duties under this Act; or
``(B) the registered digital asset exchange is
subject to comparable, comprehensive regulation by the
appropriate government authorities in the home country
of the registered digital asset exchange.
``(2) Process.--The Commission may grant an exemption under
paragraph (1)--
``(A) on the initiative of the Commission; or
``(B) after receiving an application for the
exemption by the registered digital asset exchange.
``(h) Jurisdiction.--Notwithstanding any other provision of law,
the Commission shall have exclusive jurisdiction over the regulation
and all other activities of a registered digital asset exchange.
``(i) Implementation.--The Commission may prescribe rules to
implement this section.''.
(b) Certain Digital Asset Exchange Functions Not Sufficient To
Trigger Requirement To Register as Futures Commission Merchant.--
Section 4f(c) of the Commodity Exchange Act (7 U.S.C. 6f(c)) is amended
by adding at the end the following:
``(12) Clarification of Scope of Registration Requirement.--A
registered digital asset exchange shall not be required to register as
a futures commission merchant for any activity for which the registered
digital asset exchange is regulated under section 5i.''.
SEC. 405. VIOLATIONS.
Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended--
(1) in subsection (a)(2), by striking ``subsection 4c'' and
inserting ``section 4c''; and
(2) in subsection (e)--
(A) in paragraph (1), by inserting ``contracts for
the sale of digital assets,'' after ``options
thereon,''; and
(B) in paragraph (2), by inserting ``or contracts
for the sale of digital assets'' after ``options
thereon''.
SEC. 406. MARKET REPORTS.
Section 16(a) of the Commodity Exchange Act (7 U.S.C. 20(a)) is
amended--
(1) in the first sentence, by striking ``which are the
subject of futures contracts,'' and inserting ``under the
jurisdiction of the Commission,''; and
(2) in the second sentence, by striking ``futures
markets.'' and inserting ``markets under the jurisdiction of
the Commission.''.
SEC. 407. BANKRUPTCY TREATMENT OF DIGITAL ASSETS.
(a) In General.--Section 20(a) of the Commodity Exchange Act (7
U.S.C. 24(a)) is amended in paragraphs (1) and (2) by inserting
``digital assets,'' after ``securities,'' each place it appears.
(b) Commodity Broker Definition.--Section 101(6) of title 11,
United States Code, is amended by inserting ``registered digital asset
exchange, as defined in section 1a of the Commodity Exchange Act,''
before ``foreign''.
(c) Commodities Contracts.--Section 556 of title 11, United States
Code, is amended by inserting ``a registered digital asset exchange, as
defined in section 1a of the Commodity Exchange Act,'' before ``a
contract''.
(d) Contractual Rights.--Section 561 of title 11, United States
Code, is amended by inserting ``registered digital asset exchange, as
defined in section 1a of the Commodity Exchange Act,'' after
``designated under the Commodity Exchange Act'' each place it appears.
(e) Definitions.--Section 761 of title 11, United States Code, is
amended--
(1) in paragraph (4)--
(A) in subparagraph (A), by inserting ``digital
asset or a'' before ``commodity'';
(B) in subparagraph (I), by striking ``or'' at the
end;
(C) in subparagraph (J), by adding ``or'' at the
end; and
(D) by adding at the end the following:
``(K) a contract for the sale of a digital asset by
a registered digital asset exchange;''; and
(2) in paragraph (10)--
(A) in the matter preceding subparagraph (A)--
(i) by inserting ``a digital asset,'' after
``a security,''; and
(ii) by inserting ``digital asset,'' after
``cash, security,'';
(B) in subparagraph (A)--
(i) in clause (vi), by inserting ``a
digital asset,'' after ``a security,''; and
(ii) in clause (vii)--
(I) by inserting ``or a digital
asset'' before ``held as property'';
(II) by inserting ``or digital
asset'' after ``such security''; and
(III) by inserting ``or digital
asset'' after ``based on a security'';
and
(C) in subparagraph (B)--
(i) by striking ``not including property''
and inserting ``not including--
``(i) property'';
(ii) in clause (i), as so designated, by
adding ``and'' at the end; and
(iii) by adding at the end the following:
``(ii) money, assets, or property with
respect to which any requirement under
subsection (i) of section 4d of the Commodity
Exchange Act (7 U.S.C. 6d) is waived pursuant
to paragraph (3) of that subsection, or any
requirement under subparagraph (B) of paragraph
(4) of section 5i(d) of that Act is waived
pursuant to subparagraph (E) of that
paragraph;''.
(f) Voidable Transfers.--Section 764(b)(1) of title 11, United
States Code, is amended by inserting ``, digital assets'' before ``, or
other property''.
(g) Treatment of Customer Property.--Section 766 of title 11,
United States Code, is amended--
(1) in subsection (b)(1), by striking ``physical commodity
underlying'' and inserting ``commodity underlying'';
(2) in subsection (c), by inserting ``digital asset,''
before ``or commodity contract'' each place the term appears;
(3) in subsection (d), by inserting ``digital asset,''
before ``or commodity contract'' each place the term appears;
(4) in subsection (f)--
(A) in striking ``and other property'' and
inserting ``digital assets, and other property''; and
(B) by striking ``or property'' and inserting ``,
digital assets, or property'';
(5) in subsection (g), by striking ``security or property''
and inserting ``security, digital asset, or property''; and
(6) in subsection (h)(2), by inserting ``digital assets,''
after ``customer securities,''.
SEC. 408. IDENTIFIED BANKING PRODUCTS.
Section 206(a) of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note)
is amended--
(1) in paragraph (5)(B)(ii), by striking ``or'' at the end;
(2) in paragraph (6), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(7) a payment stablecoin issued by a depository
institution under section 722A.''.
SEC. 409. FINANCIAL INSTITUTIONS DEFINITION.
Section 5312(c)(1) of title 31, United States Code, is amended by
adding at the end the following:
``(B) A registered digital asset exchange, as
defined in section 1a of the Commodity Exchange Act.''.
SEC. 410. OFFSETTING THE COSTS OF DIGITAL ASSET REGULATION.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
adding at the end the following:
``SEC. 24. OFFSETTING THE COSTS OF DIGITAL ASSET REGULATION.
``(a) Recovery of Certain Costs of Annual Appropriation.--
``(1) In general.--Effective beginning October 1, 2023, the
Commission may, by rule, collect fees--
``(A) to fund expenses relating to regulation of
digital asset cash and spot markets; and
``(B) that are designed to recover the costs to the
Federal Government of the annual appropriation to the
Commission by Congress.
``(2) Registered entities.--Fees under paragraph (1) shall
only be imposed--
``(A) on registered entities engaged in cash or
spot digital asset activities; and
``(B) in relation to the regulation of those
activities under this Act.
``(3) Fee rates.--Fees under paragraph (1) shall--
``(A) be strictly related to the cost to the
Commission of the regulation of digital asset cash and
spot markets;
``(B) be reduced for newly registered entities with
less than $100,000,000 in daily trading volume; and
``(C)(i) minimize negative impacts on market
liquidity; and
``(ii) maintain the efficiency, competitiveness,
and financial integrity of digital asset markets.
``(4) Collection of fees.--The Commission shall collect
fees under this subsection in such manner and within such time
as may be specified by the Commission by rule.
``(b) Fee Rate Orders.--
``(1) In general.--Not later than 60 days after the date on
which a law providing a regular appropriation to the Commission
for a fiscal year is enacted, the Commission shall adopt an
order setting rates for fees to be collected under subsection
(a) for that fiscal year.
``(2) Publication.--The Commission shall publish in the
Federal Register the order adopted under paragraph (1),
including--
``(A) projections on which the fees are based; and
``(B) an explanation of the method used for
calculating applicable fee rates.
``(c) Deposit of Fees.--
``(1) Offsetting collections.--Fees collected under
subsection (a) for any fiscal year--
``(A) shall be deposited and credited as offsetting
collections to the account providing appropriations to
the Commission; and
``(B) shall not be collected or available for
obligation for any fiscal year except to the extent
provided in advance in appropriation Acts.
``(2) General revenues prohibited.--No fees collected under
subsection (a) shall be deposited and credited as general
revenue of the Treasury.
``(d) Lapse of Appropriations.--If a regular appropriation to the
Commission has not been enacted on the first day of a fiscal year, the
Commission shall continue to collect fees under this section at the
rates in effect on September 30 of the preceding fiscal year.
``(e) Limitations.--
``(1) Leveraged, margined, or financed transactions.--
Nothing in this section authorizes the imposition of fees on a
registered entity relating to leveraged, margined, or financed
transactions under this Act, including those activities
relating to digital assets.
``(2) Other appropriations.--Notwithstanding any other
provision of law, the Commission may use appropriations
otherwise made available by law to fund expenses relating to
the regulation of digital asset cash and spot markets.
``(f) Ceiling on Fees.--Unless otherwise provided by law, fees
collected under this section shall not exceed $30,000,000.
``(g) Authorization Required.--The authority under this section to
impose and collect fees shall only be in effect during a period that a
legislative authorization of the Commission is in effect, as otherwise
provided by law.''.
TITLE V--RESPONSIBLE CONSUMER PROTECTION
SEC. 501. RESPONSIBLE CONSUMER PROTECTION.
Chapter 98 of title 31, United States Code, as added by section
101(a) of this Act, is amended by adding at the end the following:
``Sec. 9802. Consumer protection standards for digital assets
``(a) In General.--A person or protocol that provides digital asset
services shall ensure that the scope of permissible transactions that
may be undertaken with customer digital assets is disclosed clearly in
a customer agreement.
``(b) Notice.--A person who provides digital asset services shall
provide clear notice to each customer, and require acknowledgment, of
the following:
``(1) Prior to the implementation of any updates, material
source code version changes relating to digital assets, except
in emergencies, which may include security vulnerabilities.
``(2) Whether customer digital assets are segregated from
other customer assets and the manner of segregation.
``(3) How the assets of the customer would be treated in a
bankruptcy or insolvency scenario and the risks of loss.
``(4) The time period and manner in which the person is
obligated to return the digital asset of the customer upon the
request of the customer.
``(5) Applicable fees.
``(6) The dispute resolution process of the person.
``(c) Subsidiary Proceeds.--
``(1) Definitions.--In this subsection:
``(A) Subsidiary proceeds.--The term `subsidiary
proceeds' includes forks, airdrops, staking, and other
gains that accrue to a digital asset through market
transactions, use as a financial asset, or being held
in custody or safekeeping by a person who provides
digital asset services.
``(B) Terms of service.--The term `agreement'
includes the standard terms of service of the person
who provides digital asset services.
``(2) Accrual to customer.--Except as otherwise specified
by an agreement with a customer, all ancillary or subsidiary
proceeds relating to digital asset services provided to a
customer shall accrue to the benefit of the customer in
accordance with paragraph (3).
``(3) Election.--A person who provides digital asset
services may elect not to collect certain subsidiary proceeds
if the election is disclosed in an agreement with the customer.
``(4) Withdrawal.--A customer may withdraw digital assets
in a method that permits the collection of the subsidiary
proceeds.
``(5) Agreement.--A person who provides digital asset
services shall enter into an agreement with a customer, if
desired by the customer, regarding the manner in which to
invest subsidiary proceeds or other gains attributable to the
digital assets of the customer.
``(d) Lending Arrangements.--A person who provides digital asset
services shall ensure any lending arrangements relating to digital
assets are--
``(1) clearly disclosed to customers before any lending
services take place;
``(2) subject to the affirmative consent of the customer;
``(3) fully enforceable as a matter of commercial law;
``(4) accompanied by full disclosures of applicable terms
and risks, yield, and the manner in which the yield is
calculated;
``(5) accompanied by appropriate disclosures relating to
collateral requirements and policies, including--
``(A) haircuts and overcollateralization
requirements;
``(B) collateral the person accepts when calling
for additional collateral from a customer, including
collateral substitution;
``(C) whether customer collateral is commingled
with the collateral of other customers or of the
person; and
``(D) how customer collateral is invested, and
whether the yield belongs to the customer or to the
person;
``(6) accompanied by disclosures of mark-to-market and
monitoring arrangements, including--
``(A) the frequency of mark-to-market monitoring
and how frequently the person will call for additional
collateral from a customer;
``(B) the time period in which the customer must
supply additional collateral to the person after a
collateral call; and
``(C) whether the person permits failures to
deliver such collateral, and in the event of a failure
to deliver the period of time in which the customer
must cure the failure to deliver before the customer's
position is closed; and
``(7) compliant with all applicable Federal and State laws.
``(e) Rehypothecation.--
``(1) Definition.--In this subsection, the term
`rehypothecation' means the pledging of an asset as collateral
for a financial transaction by a person after the pledging of
the asset as collateral by a customer of that person.
``(2) Rehypothecation.--Before rehypothecating a digital
asset, a person who provides digital asset services to a
customer shall clearly disclose policies on rehypothecation to
customers, including a clear definition of rehypothecation that
is accessible to consumers. The person who provides digital
asset services to a customer shall obtain affirmative consent
and consider the following factors to appropriately mitigate
risk relating to rehypothecation:
``(A) The liquidity and volatility of a digital
asset.
``(B) Past failures to deliver a particular digital
asset.
``(C) Concentration risk.
``(D) Whether an issuer or lender of last resort
relating to a digital asset exists, including for
virtual currency with a finite supply.
``(E) The capital, leverage and market position of
the person.
``(F) The legal obligations of the person to
customers and other persons in the market who provide
digital asset services.''.
SEC. 502. SOURCE CODE VERSION OF DIGITAL ASSETS.
Chapter 98 of title 31, United States Code, as amended by section
501 of this Act, is amended by adding at the end the following:
``Sec. 9803. Source code version of digital assets
``(a) In General.--A customer and a person who provides digital
asset services shall, at the initiation of a contractual relationship,
agree in writing regarding the source code version the person will use
for each digital asset and the treatment of each asset under the law,
including securities and commodities laws and the Uniform Commercial
Code applicable to the transaction.
``(b) Determination.--A person who provides digital asset
services--
``(1) may periodically determine whether to implement a
source code version that uses validation rules different than
those of the source code version specified in a customer
agreement, including in circumstances where it is not possible
to predict in advance whether utilization of the different
source code version will be in the best interests of the
customer;
``(2) shall consider the nature of proposed changes to
source code versions with potential effects resulting from
third-party actors that may create different source code
versions resulting in new networks that could create economic
value for customers;
``(3) shall not be required to support digital assets and
source code versions that the person has not entered into an
agreement with customers to support; and
``(4) shall not capriciously redefine a digital asset or
the corresponding source code or alter customer agreements with
respect to this subsection.
``(c) Standards.--A person who provides digital asset services--
``(1) shall adopt and maintain standards for changes to
digital asset source code versions that use differing
validation rules than those of the source code version
specified in the customer agreement, which shall include
customer notice and approval, as appropriate based on the
circumstances; and
``(2) may specify differing standards based on source code
changes which occur as the result of emergencies, including
security vulnerabilities.''.
SEC. 503. SETTLEMENT FINALITY.
Chapter 98 of title 31, United States Code, as amended by section
502 of this Act, is amended by adding at the end the following:
``Sec. 9804. Settlement finality
``To promote legal certainty and customer protection, a person who
provides digital asset services and a customer shall agree on the terms
of settlement finality for all transactions, including the following:
``(1) The conditions under which a digital asset may be
deemed fully transferred, provided that these legal conditions
may diverge from operational conditions under which digital
assets are considered transferred, based on the distributed and
probabilistic nature of digital assets.
``(2) The exact moment of transfer of a digital asset.
``(3) The discharge of any obligations upon transfer of a
digital asset.
``(4) Conformity to applicable provisions of the Uniform
Commercial Code.''.
SEC. 504. NOTICE TO CUSTOMERS; ENFORCEMENT.
Chapter 98 of title 31, United States Code, as amended by section
503 of this Act, is amended by adding at the end the following:
``Sec. 9805. Notice to customers; enforcement
``(a) In General.--In providing disclosures and carrying out other
duties under this chapter, a person who provides digital asset services
in or affecting interstate commerce shall have a duty to provide higher
standards of customer notice and acknowledgment if there is likely to
be a material impact on the economic value of the digital asset of a
customer.
``(b) Enforcement of Standards.--The standards under this chapter
shall be enforced in an appropriate manner, commensurate with other
customer protection standards--
``(1) in the case of a digital asset intermediary, by the
Federal or State licensing, registration, or chartering
authority of the intermediary; and
``(2) in the case of a depository institution or other
financial institution, by the appropriate State or Federal
banking supervisor.''.
SEC. 505. RIGHT TO INDIVIDUAL MANAGEMENT OF DIGITAL ASSETS.
Chapter 98 of title 31, United States Code, as amended by section
504 of this Act, is amended by adding at the end the following:
``Sec. 9806. Right to individual management of digital assets
``(a) In General.--Except as otherwise required by law, no person
shall be required to use an intermediary for the safekeeping of digital
assets legally owned, and possessed or controlled, by that person.
``(b) Rule of Construction.--This section shall not be construed
to--
``(1) permit a person to engage in market activity for
which authorization is required under Federal or State law; or
``(2) restrict a person from freely entering into an
agreement for digital asset services with a third party.''.
SEC. 506. TECHNICAL AND CONFORMING AMENDMENTS.
The table of sections of chapter 98, as added by section 101(a) of
this Act, is amended by adding at the end the following:
``9802. Consumer protection standards for digital assets.
``9803. Source code version of digital assets.
``9804. Settlement finality.
``9805. Notice to customers; enforcement.
``9806. Right to individual management of digital assets.''.
TITLE VI--RESPONSIBLE PAYMENTS INNOVATION
SEC. 601. ISSUANCE OF PAYMENT STABLECOINS.
Subtitle C of title VII of the Gramm-Leach-Bliley Act (Public Law
106-102; 113 Stat. 1470) is amended by adding at the end the following:
``SEC. 722A. ISSUANCE OF PAYMENT STABLECOINS.
``(a) In General.--A depository institution may issue, redeem, and
conduct all incidental activities relating to payment stablecoins in
accordance with this section.
``(b) Required Payment Stablecoin Assets.--A depository institution
shall maintain high-quality liquid assets under this section equal to
not less than 100 percent of the face amount of the liabilities of the
institution on payment stablecoins issued by the institution. In the
case of an insured depository institution described in subsection
(m)(1)(A) that engages in on-balance sheet lending activities, assets
under this subsection shall equal not less than 100 percent of the face
amount of the liabilities of the institution on payment stablecoins
issued by the institution, with the assets held in balances at a
Federal Reserve bank (which may include a segregated balance account),
or, in the case of foreign withdrawable reserves, at a foreign central
bank, in a special, custodial, or trust account, other off-balance
sheet account, or in another equivalent manner that ensures the
segregation of the assets in the event of receivership. An insured
depository institution may segregate the issuance and management of
payment stablecoins into a separate depository institution affiliate
under the same holding company structure. Eligible high-quality liquid
assets under this section shall be comprised of the following:
``(1) United States coins and currency and any other
instrument that is legal tender, as defined in section 5103 of
title 31, United States Code.
``(2) Demand deposits at a depository institution, except
that deposits in an insured depository institution shall not
exceed the limit of deposit or share insurance available for
that account, which may include pass through insurance, or
shall be maintained in a special, custodial, or trust account
or other off-balance sheet account held by the insured
depository institution.
``(3) Balances held at a Federal Reserve bank, which may be
held in a master account or segregated balance account.
``(4) Foreign withdrawable reserves, as defined in section
249.3 of title 12, Code of Federal Regulations, consistent with
any foreign unit of account in which the payment stablecoin is
denominated or pegged.
``(5) A security that is issued by, or unconditionally
guaranteed as to the timely payment of principal and interest
by, the Department of the Treasury, with an original maturity
of 1 year or less.
``(6) A reserve repurchase agreement relating to a security
described in paragraph (5).
``(7) Any other high-quality, liquid asset determined to be
consistent with safe and sound banking practices, as determined
by the appropriate Federal banking agency or State bank
supervisor.
``(c) Disclosures.--Not later than 10 business days after the end
of each month, a depository institution shall disclose, in a publicly
accessible manner, a summary description of the assets backing the
payment stablecoin, the value of the assets, and the number of
outstanding payment stablecoins, as of the last day of the month. Such
explanation shall be filed with the appropriate Federal banking agency
or State bank supervisor under penalty of perjury by the chief
financial officer of the institution. The depository institution shall
also report on the summary description any instances in which the
institution failed to comply with any requirement of subsection (b). As
applicable, the appropriate Federal banking agency or State bank
supervisor shall, as part of a regular examination of the depository
institution, at the frequency otherwise required by law, verify the
composition of the assets and the accuracy of the summary descriptions
made under this subsection and reports under subsection (d).
``(d) Call Report.--As applicable, the appropriate Federal banking
agency or State bank supervisor shall require a depository institution
that issues a payment stablecoin to report, in detail, on the
composition of the assets in each periodic report of condition, or in
an alternative format approved by the Federal Financial Institutions
Examination Council, at the frequency otherwise required by law.
``(e) Permission.--A depository institution shall, as applicable,
obtain permission from the appropriate Federal banking agency or State
bank supervisor, with an application submitted not less than 6 months
before intended issuance of the payment stablecoin, but which may be
submitted as part of a charter application. As part of an application
under this section, a depository institution shall develop a tailored
recovery and resolution plan, consistent with the standards adopted
under subsection (k)(1)(F), that would permit the orderly resumption of
a safe and sound operation or the orderly wind-down of operations in
the event of distress, including the redemption of all outstanding
payment stablecoins. The application shall also contain a draft
customer agreement, flow of funds explanation, a robust information
technology plan and operational design of the payment stablecoin. As
applicable, the appropriate Federal banking agency or State bank
supervisor shall render a decision on the application within 4 months
of the date of filing, and shall approve the application unless--
``(1) the payment stablecoin activities are not likely to
be able to operate in a safe and sound manner;
``(2) the depository institution does not have the required
resources and expertise to manage the operation of the payment
stablecoin, commensurate with the size and scale of projected
operations; or
``(3) the depository institution does not have required
policies and procedures relating to material areas of the
operation of the payment stablecoin activities.
``(f) Redemption of Payment Stablecoins.--Upon the demand of a
customer, a depository institution shall redeem an outstanding payment
stablecoin at par in the coins, currency, or other instruments that are
legal tender, as defined in section 5103 of title 31, United States
Code, or the similar laws of the jurisdiction of the unit of account in
which the payment stablecoin is denominated or to which the value of
the payment stablecoin is pegged. A depository institution may redeem a
payment stablecoin issued by another depository institution at par,
upon demand. The Board of Governors of the Federal Reserve System,
through the Federal Reserve banks, shall provide for the clearing and
settlement of payment stablecoin liabilities among depository
institutions under this section and shall ensure competitive equality
in all clearing, settlement and related services. A depository
institution shall also assess its ability to fulfill large redemptions
without placing downward pressure on the market value of the payment
stablecoin.
``(g) Collateral Availability in the Capital Markets.--The
appropriate Federal banking agencies, in consultation with State bank
supervisors, the Securities and Exchange Commission, and Commodity
Futures Trading Commission, shall monitor use of the high-quality
liquid assets authorized under subsection (b) and the impact on
collateral availability and the efficient functioning of the capital
markets.
``(h) Receivership Priority.--In the event of the receivership of a
depository institution that has issued a payment stablecoin under this
section, a person that has a valid claim on a payment stablecoin issued
by that institution shall have priority over all other claims on the
institution with respect to any required payment stablecoin assets,
including claims with respect to insured deposits, other than
administrative costs incurred by the appropriate Federal banking agency
or State bank supervisor, as applicable, relating to the receivership
of the institution, if applicable. Consistent with subsection (f), a
depository institution that redeems a payment stablecoin issued by a
depository institution in receivership shall be considered to have a
valid claim, with corresponding priority under this subsection, on a
payment stablecoin issued by the institution in receivership.
``(i) Incidental Activities.--A depository institution may conduct
all incidental activities relating to the issuance and redemption of
payment stablecoins, which shall include the following:
``(1) Management of required payment stablecoin assets in
accordance with subsection (b).
``(2) Making a market in payment stablecoins.
``(3) Custodial services.
``(4) Settlement and clearing.
``(5) Post-trade services.
``(6) All other activities consistent with a safe and sound
operation, as determined by the appropriate Federal banking
agency or State bank supervisor.
``(j) Applicability of Gramm-Leach-Bliley Data Privacy
Provisions.--Title V of the Gramm-Leach-Bliley Act (12 U.S.C. 6801 et
seq.) shall apply to the payment stablecoin activities of a depository
institution under this section.
``(k) Rules.--
``(1) In general.--The appropriate Federal banking
agencies, in consultation with State bank supervisors, shall
adopt rules to implement this section, including--
``(A) capital treatment for depository institutions
described in subsection (m)(1) in accordance with
paragraph (2);
``(B) liquidity, leverage, and interest rate risk;
``(C) third-party service provider activities--
``(i) including custodial wallet providers;
and
``(ii) not including licensing or capital
requirements for third-party service providers;
``(D) management practices with respect to required
payment stablecoin assets;
``(E) appropriate operational, compliance, and
information technology risk management;
``(F) tailored recovery and resolution standards
relating to payment stablecoins; and
``(G) any other material topic.
``(2) Significant differences.--In accordance with section
5169(c)(3)(A) of the Revised Statutes, in determining capital
and leverage requirements applicable to a depository
institution that has no material assets other than required
payment stablecoin assets under this section--
``(A) the depository institution shall not be
subject to section 171 of the Financial Stability Act
of 2010 (12 U.S.C. 5371); and
``(B) the appropriate Federal banking agencies
shall take into account the significant differences
between the risks of the assets of the institution and
those of depository institutions with assets that
consist primarily of commercial or consumer loans.
``(l) Non-Depository Institution Payment Stablecoin Issuers.--
Nothing in this section shall be construed to prohibit an entity
operating under a State or Federal charter or license that is not a
depository institution from issuing and redeeming a payment stablecoin
and conducting all activities related to the management of such payment
stablecoin consistent with a safe and sound operation, as determined by
the appropriate regulator of the entity. The entity shall--
``(1) be subject to the requirements of subsections (b) and
(c); and
``(2) redeem an outstanding payment stablecoin at par in
the coins, currency, or other instruments that are legal
tender, as defined in section 5103, or the similar laws of the
jurisdiction of the unit of account in which the payment
stablecoin is denominated or to which the value of the payment
stablecoin is pegged.
``(m) Definitions.--In this section:
``(1) Depository institution.--The term `depository
institution' has the meaning given the term in section 19(b)(1)
of the Federal Reserve Act (12 U.S.C. 461(b)(1)) and includes--
``(A) an insured depository institution; or
``(B) a depository institution operating under
subsection (c) of section 5169 of the Revised Statutes
(12 U.S.C. 27), or a substantially similar State law,
which is exclusively engaged in issuing payment
stablecoins, providing safekeeping, trust or custodial
services, or activities incidental to the foregoing.
``(2) Payment stablecoin.--The term `payment stablecoin'
has the meaning given the term in section 9801 of title 31,
United States Code.
``(3) Segregated balance account.--The term `segregated
balance account' includes an account of a depository
institution with a Federal Reserve bank or a foreign central
bank to which only required payment stablecoin assets are
credited.''.
SEC. 602. SANCTIONS COMPLIANCE RESPONSIBILITIES OF PAYMENT STABLECOIN
ISSUERS.
Not later than 120 days after the date of the enactment of this
Act, the Secretary of the Treasury shall adopt final guidance
clarifying the sanctions compliance responsibilities and liability of
an issuer of a payment stablecoin with respect to downstream
transactions relating to the stablecoin that take place after the
stablecoin is first provided to a customer of the issuer.
SEC. 603. USE OF THE OFFICIAL DIGITAL CURRENCY OF THE PEOPLE'S REPUBLIC
OF CHINA ON GOVERNMENT DEVICES.
(a) Definitions.--In this section--
(1) the term ``digital yuan'' means the official central
bank digital currency of the People's Republic of China;
(2) the term ``executive agency'' has the meaning given
that term in section 133 of title 41, United States Code; and
(3) the term ``information technology'' has the meaning
given that term in section 11101 of title 40, United States
Code.
(b) Use of Digital Yuan.--Not later than 60 days after the date of
enactment of this Act, the Director of the Office of Management and
Budget, in consultation with the Administrator of General Services, the
Director of the Cybersecurity and Infrastructure Security Agency, the
Director of National Intelligence, and the Secretary of Defense, and
consistent with the information security requirements under subchapter
II of chapter 35 of title 44, United States Code, shall develop
standards and guidelines for executive agencies which require adequate
security measures for use of the digital yuan on Government information
technology devices.
SEC. 604. CERTIFICATE OF AUTHORITY TO COMMENCE BANKING.
Section 5169 of the Revised Statutes (12 U.S.C. 27) is amended--
(1) in subsection (a), in the third sentence, by striking
``to those of a trust company and activities related thereto.''
and inserting the following: ``to--
``(1) those of a trust company and fiduciary activities
related thereto; or
``(2) those of a depository institution required to
maintain assets valued at not less than 100 percent of the
deposits of the institution, for the purposes of issuing a
payment stablecoin (as defined in section 9801 of title 31,
United States Code) and activities related thereto consistent
with subsection (c) of this section and without the requirement
to maintain deposit insurance under the Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.).''; and
(2) by adding at the end the following:
``(c)(1) Notwithstanding any other provision of law, a National
Bank Association described in subsection (a) may not engage in maturity
transformation or facilitate consumer lending through third parties.
``(2) Restrictions on affiliate transactions applicable for insured
depository institutions shall apply to such depository institutions.
``(3) The Comptroller of the Currency, in close consultation with
the Board of Governors of the Federal Reserve System and State bank
supervisors, shall develop the following:
``(A) A simplified capital framework based on the
following:
``(i) Payment system risk.
``(ii) The greater of--
``(I) all projected costs of receivership;
or
``(II) 3 years of projected operating
expenses.
``(B) Appropriate standards for the depository institution
to develop a community contribution plan, which may include
consumer education, financial literacy, charitable donations,
volunteerism, job training and internships or similar
involvement.
``(C) A tailored recovery and resolution plan that would
permit the orderly resumption of a safe and sound operation or
the orderly wind-down of operations relating to a payment
stablecoin in the event of distress.
``(D) Tailored holding company supervision, as specified by
section 15 of the Bank Holding Company Act of 1956.
``(4) In designing the simplified capital framework
required by paragraph (3)(A), the Comptroller of the Currency--
``(A) shall not subject depository institutions to
the standards of section 171 of the Financial Stability
Act of 2010 (12 U.S.C. 5371); and
``(B) shall take into account the significant
differences between the risks of the assets of the
institution and those of depository institutions with
assets that consist primarily of commercial or consumer
loans.
``(d) The Comptroller of the Currency may promulgate rules to carry
out this section.''.
SEC. 605. HOLDING COMPANY SUPERVISION OF COVERED DEPOSITORY
INSTITUTIONS.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is
amended--
(1) in section 2(c) (12 U.S.C. 1841(c)), by striking
paragraph (2) and by inserting the following:
``(2) Exceptions.--The term `bank' does not include a
covered depository institution subject to tailored holding
company supervision under section 15.''; and
(2) by adding at the end the following:
``SEC. 15. TAILORED HOLDING COMPANY SUPERVISION FOR COVERED DEPOSITORY
INSTITUTIONS.
``(a) Definitions.--In this section:
``(1) Appropriate banking supervisor.--The term
`appropriate banking supervisor' means the Comptroller of the
Currency, a State bank supervisor, in the case of a State
member bank, the Board, or in the case of an insured bank, the
Federal Deposit Insurance Corporation, as applicable.
``(2) Controlling interest.--The term `controlling
interest' means a circumstance when a person, directly or
indirectly, or acting through or in concert with 1 or more
persons--
``(A) owns, controls, or has the power to vote 25
percent or more of any class of voting securities of a
covered depository institution;
``(B) controls in any manner the election of a
majority of the directors of the covered depository
institution; or
``(C) has the power to exercise a controlling
influence over the management or policies of the
covered depository institution.
``(3) Covered depository institution.--The term `covered
depository institution' means a depository institution
operating under subsection (c) of section 5169 of the Revised
Statutes (12 U.S.C. 27), or a substantially similar State law,
other than a bank, as defined in section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841), or an insured depository
institution, as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813), which is exclusively engaged in
issuing payment stablecoins, providing safekeeping, trust or
custodial services, or activities incidental to the foregoing.
``(b) Controlling Interest.--A person with a controlling interest
in a covered depository institution shall--
``(1) submit annual audited financial statements and other
information as otherwise reasonably required by the appropriate
banking supervisor; and
``(2) provide a description of all affiliated or parent
entities and their relationships with the institution,
including annual updates.
``(c) Tax Allocation Agreement.--The appropriate banking supervisor
may require a legal entity with a controlling interest in a covered
depository institution to execute a tax allocation agreement with the
institution that--
``(1) expressly states that an agency relationship exists
between the person and the institution with respect to tax
assets generated by the institution, and that the assets are
held in trust by the person for the benefit of the institution
and will be promptly remitted to the institution; and
``(2) may provide that the amount and timing of any
payments or refunds to the institution by the person should be
no less favorable than if the institution were a separate
taxpayer.
``(d) Prohibition on Controlling Interests.--A person that is a
commercial firm, as defined in section 602 of the Bank and Savings
Association Holding Company and Depository Institution Regulatory
Improvements Act of 2010 (12 U.S.C. 1815 note), may not obtain a
controlling interest in a covered depository institution.
``(e) Public Interest.--If the appropriate banking supervisor finds
that it is in the public interest and has reasonable cause to believe
it is necessary to protect the customers of a covered depository
institution, the supervisor may--
``(1) conduct an examination of a legal entity with a
controlling interest in a covered depository institution or
otherwise require information from the person; and
``(2) require a person with a controlling interest in a
covered depository institution to divest or sever their
relationship with the institution, if necessary to maintain
safety and soundness.''.
SEC. 606. IMPLEMENTATION RULES TO PRESERVE ADEQUATE COMPETITION IN
PAYMENT STABLECOINS.
(a) In General.--The application of a non-depository trust company
or the holder of a State license that only persons engaged in digital
asset activities may obtain, which was chartered or issued under the
laws of a State or the National Bank Act before the date of enactment
of this Act, to receive a charter as a depository institution and to
operate under subsection (c) of section 5169 of the Revised Statutes
(12 U.S.C. 27), as added by section 604 of this Act, shall be decided
upon by the Comptroller of the Currency before an application for a
charter to operate under that section from another entity that is filed
on or after the date of enactment of this Act.
(b) Application.--The application of a covered depository
institution, as defined in section 15(a) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1853(a)), chartered before the date of enactment
of this Act to become a State member bank in the Federal Reserve System
or for access to Federal Reserve services under section 11A of the
Federal Reserve Act (12 U.S.C. 248a) shall be decided upon by the Board
of Governors of the Federal Reserve System, or a Federal Reserve bank,
as applicable, before any application to become a State member bank or
for Federal Reserve services from any other entity which seeks to
operate as a covered depository institution and which is filed on or
after the date of enactment of this Act.
(c) Decision.--The applications described in subsections (a) and
(b) of this section shall be decided upon by the appropriate Federal
banking agency (as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813)) or Federal Reserve bank, as applicable,
before an insured depository institution in operation before the
enactment date of this Act may issue a payment stablecoin in accordance
with section 722A of the Gramm-Leach-Bliley Act, as added by section
601 of this Act.
SEC. 607. FINANCIAL CRIMES ENFORCEMENT NETWORK INNOVATION LABORATORY.
Section 310 of title 31, United States Code, is amended by adding
at the end the following:
``(m) Innovation Laboratory.--
``(1) In general.--There is established within the
Financial Crimes Enforcement Network an Innovation Laboratory
to promote regulatory dialogue, data sharing between the
Financial Crimes Enforcement Network and financial companies,
and an assessment of potential changes in law, rules, or
policies to facilitate the appropriate supervision of financial
technology and the laws under the jurisdiction of the agency.
``(2) Chief innovation officer.--The innovation officer
appointed under section 6208 of the Anti-Money Laundering Act
of 2020 (31 U.S.C. 5311 note) by the Director of the Financial
Crimes Enforcement Network shall manage the Innovation
Laboratory.
``(3) Duties.--The Innovation Laboratory, as appropriate,
shall study changes in financial technology and make
recommendations to Congress, the Secretary, and the Director
for appropriate changes in laws, rules, or policies that can
more effectively facilitate the supervision of financial
technology with respect to the laws under the jurisdiction of
the Financial Crimes Enforcement Network, including digital
assets, distributed ledger technology and decentralized
finance.
``(4) Pilot projects.--The Innovation Laboratory, as
appropriate, shall conduct pilot projects with financial
companies to more effectively facilitate the supervision of
financial technology, consistent with applicable law.''.
TITLE VII--RESPONSIBLE BANKING INNOVATION
SEC. 701. STUDY ON USE OF DISTRIBUTED LEDGER TECHNOLOGY FOR REDUCTION
OF RISK IN DEPOSITORY INSTITUTIONS.
Not later than 180 days after the date of enactment of this Act,
the Board of Governors of the Federal Reserve System shall complete a
study and 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 regarding the manner in which
distributed ledger technology may reduce risk for depository
institutions, as defined in section 19(b)(1) of the Federal Reserve Act
(12 U.S.C. 461(b)(1)), including settlement risk, operational risk and
capital requirements.
SEC. 702. ELIGIBILITY FOR FEDERAL RESERVE SERVICES TO DEPOSITORY
INSTITUTIONS.
(a) Findings.--Congress finds the following:
(1) Final settlement of transactions in central bank money
reduces risk in the financial system, including through the
reduction of counterparty exposure.
(2) Digital assets settle with finality in seconds or
minutes, whereas traditional financial transactions may take
days to settle.
(3) This mismatch in the settlement window of digital
assets and traditional financial assets creates risk in the
economy that may be reduced through the ability of depository
institutions to simultaneously conduct digital asset
transactions and settle, with finality, the United States
dollar component of these transactions.
(4) The Federal Reserve Act specifies that a depository
institution, as defined in section 19(b)(1) of that Act (12
U.S.C. 461(b)(1)), upon receiving a charter from the Office of
the Comptroller of the Currency, National Credit Union
Administration or State bank supervisor, is required to be made
available services from Federal Reserve banks under section 11A
of the Federal Reserve Act (12 U.S.C. 248a), including currency
and coin services, wire transfer services, automated
clearinghouse services and settlement services.
(5) Numerous Federal courts have found that the provision
of services to depository institutions under section 11A of the
Federal Reserve Act (12 U.S.C. 248a) is a ministerial duty
imposed by Congress with respect to all depository
institutions.
(6) The Board of Governors of the Federal Reserve System
has long interpreted the Federal Reserve Act to mean that the
Federal Reserve banks must provide services to all depository
institutions, noting that it has a duty ``to ensure the
provision of payment services to all depository institutions on
an equitable basis, and to do so in an atmosphere of
competitive fairness''.
(7) The Federal Reserve banks have, on occasion, provided
services to non-depository, non-insured institutions without
appropriate statutory authority.
(8) Certain novel legal positions that conflict with or
frustrate these precedents are not in the best traditions of
the Federal Reserve Act, our dual banking system, and the
imperatives of Congress.
(9) The statutory independence of the Board of Governors
and the Federal Reserve banks under the Constitution of the
United States is properly rooted in absolute fidelity to the
laws enacted by Congress.
(10) It is appropriate for Congress to reaffirm its
existing statutory intent to ensure that all depository
institutions may access services under the Federal Reserve Act
``on an equitable basis, and to do so in an atmosphere of
competitive fairness''.
(b) Pricing of Services.--Section 11A of the Federal Reserve Act
(12 U.S.C. 248a) is amended by adding at the end the following:
``(f) A Federal Reserve bank shall provide a segregated balance
account to a depository institution upon the request of any institution
that receives services under this section.''.
(c) Deposits; Exchange and Collection; Member and Nonmember Banks
or Other Depository Institutions; Charges.--Section 13 of the Federal
Reserve Act (12 U.S.C. 342) is amended to read as follows:
``Any Federal Reserve bank shall receive from any of its member
banks or other depository institutions, and from the United States,
deposits of current funds in lawful money, national-bank notes, Federal
reserve notes, or checks, and drafts, payable upon presentation or
other items, and also, for collection, maturing notes and bills; or,
solely for purposes of exchange or of collection, shall receive from
other Federal Reserve banks deposits of current funds in lawful money,
national-bank notes, or checks upon other Federal Reserve banks, and
checks and drafts, payable upon presentation within its district or
other items, and maturing notes and bills payable within its district;
or, solely for the purposes of exchange or of collection, shall receive
from any nonmember bank or trust company or other depository
institution deposits of current funds in lawful money, national-bank
notes, Federal reserve notes, checks and drafts payable upon
presentation or other items, or maturing notes and bills: Provided,
Such nonmember bank or trust company or other depository institutions
maintains with the Federal Reserve bank of its district a balance in
such amount as the Board determines taking into account items in
transit, services provided by the Federal Reserve bank, and other
factors as the Board may deem appropriate: Provided further, That
nothing in this or any other section of this Act shall be construed as
prohibiting a member or nonmember bank or other depository institution
from making reasonable charges, to be determined and regulated by the
Board of Governors, but in no case to exceed 10 cents per $100 or
fraction thereof, based on the total of checks and drafts presented at
any one time, for collection or payment of checks and drafts and
remission therefor by exchange or otherwise; but no such charges shall
be made against the Federal Reserve banks.''.
SEC. 703. ROUTING TRANSIT NUMBER ISSUANCE.
Not later than 2 years after the date of enactment of this Act, the
Board of Governors of the Federal Reserve System shall assume
responsibility for issuing routing transit numbers to depository
institutions for all purposes relating to the clearing of transactions
and the services required to be made available to all depository
institutions under section 11A of the Federal Reserve Act (12 U.S.C.
248a).
SEC. 704. CLARIFYING APPLICATION REVIEW TIMES WITH RESPECT TO THE
FEDERAL BANKING AGENCIES.
Section 343 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4807) is amended by striking
subsection (a) and inserting the following:
``(a) Final Action.--
``(1) Definition.--In this subsection, the term `completed
application'--
``(A) means the information requested by the
Federal banking agency at the outset of an application
through application forms or similar means; and
``(B) does not include supplemental information
requested by the agency after filing of an application.
``(2) Action.--Each Federal banking agency, including
Federal Reserve banks, shall take final action on any
application to the agency before the end of the 1-year period
beginning on the date on which a completed application is
received by the agency.
``(b) Report.--Each Federal banking agency, including the Federal
Reserve banks, shall annually report to Congress a list of the
applications that have been pending for 9 months or longer since the
date of the initial application filed by an applicant. Such list--
``(1) shall disclose the reason why the application has not
yet been approved or denied by the Federal banking agency; and
``(2) shall not contain confidential supervisory
information.''.
SEC. 705. EXAMINATION STANDARDS FOR DIGITAL ASSET ACTIVITIES.
(a) In General.--Not later than 18 months after the date of
enactment of this Act, the Federal Financial Institutions Examination
Council, in consultation with the Financial Crimes Enforcement Network,
shall publish final guidance and examiner handbooks for depository
institutions, as defined in section 19(b)(1) of the Federal Reserve Act
(12 U.S.C. 461(b)(1)), on the following topics related to digital
assets:
(1) Anti-money laundering, customer identification,
beneficial ownership, and sanctions compliance, including with
respect to payment stablecoin activities and subsidiary value
(as defined in section 9802(c) of title 31, United States
Code).
(2) Custody.
(3) Fiduciary and capital markets activities.
(4) Information technology standards.
(5) Payment system risk.
(6) Consumer protection.
(b) Final Guidance.--Not later than 18 months after the date of
enactment of this Act, Securities and Exchange Commission and Commodity
Futures Trading Commission, in consultation with the Financial Crimes
Enforcement Network, shall publish final guidance and examiner
handbooks relating to digital asset intermediaries regarding the topics
described in paragraphs (1) and (4) of subsection (a).
SEC. 706. ASSET CUSTODY FOR DEPOSITORY INSTITUTIONS AND CERTAIN OTHER
ENTITIES.
(a) Findings.--Congress finds the following:
(1) The laws surrounding custody of financial assets is
largely customary, uncodified, and poorly understood.
(2) Lack of uniformity amongst various jurisdictions' laws
relating to custody has largely not been addressed by
regulators, can contribute to risk, and is producing
uncertainty for innovators.
(3) Codifying basic principles around custody of financial
assets will reduce systemic risk, clearly define the rights and
duties of both custodian and customer, and contribute to a more
uniform and effective banking system.
(b) Definition.--In this section, the term ``custody'' means the
safekeeping, servicing and management of customer financial assets,
including currency, securities and commodities, on an off-balance sheet
basis.
(c) Custody.--
(1) In general.--Except as provided in paragraph (2),
custody of financial assets is accomplished by a bailment and
established by a written customer agreement. Custody shall not
be a fiduciary or trust activity unless the custodian is
providing substantial discretionary services with respect to an
account, including through investment advice or investment
discretion, and the custodian owes a customer a higher standard
of care or duty with respect to the customer of that account.
(2) Exception.--A custodian and customer may establish a
legal relationship other than a bailment pursuant to a written
customer agreement.
(d) Proper Documentation.--A custodial account shall be properly
documented in a customer agreement, with a clearly defined legal
relationship between the custodian and customer. Custodial assets shall
be properly identified and segregated from the assets of the custodian,
with proper documentation of asset segregation.
(e) Not Assets or Liabilities.--Assets properly held in a custodial
account under this section are not assets or liabilities of the
custodian and shall be maintained on an off-balance sheet basis,
including for the purpose of accounting treatment for the custodian and
the customers of the custodian, notwithstanding the form in which the
assets are maintained.
(f) Applicability.--This section shall apply to depository
institutions, as defined in section 19(b)(1) of the Federal Reserve Act
(12 U.S.C. 461(b)(1)), and non-depository trust companies chartered
under section 5169 of the Revised Statutes (12 U.S.C. 27).
SEC. 707. REPUTATION RISK; REQUIREMENTS FOR ACCOUNT TERMINATION
REQUESTS AND ORDERS.
(a) Reputation Risk.--An appropriate Federal banking agency may not
formally or informally request or order a depository institution to
terminate a specific customer account or group of customer accounts
unless the agency has a valid reason for such request or order,
consistent with subsections (b) and (c).
(b) No Restriction.--An appropriate Federal banking agency shall
not restrict or discourage a depository institution from entering into
or maintaining a banking relationship with a specific customer or group
of customers based on reputation risk, including through the
examinations and ratings of the depository institution.
(c) Treatment of National Security Threats.--If an appropriate
Federal banking agency believes a specific customer or group of
customers is, or acting as a conduit for, an entity which--
(1) poses a threat to national security;
(2) is involved in terrorist financing;
(3) is an agency of the Government of Iran, North Korea,
Syria, or any country listed from time to time on the State
Sponsors of Terrorism list;
(4) is located in, or is subject to the jurisdiction of,
any country specified in paragraph (3); or
(5) does business with any entity described in paragraph
(3) or (4), unless the appropriate Federal banking agency
determines that the customer or group of customers has used due
diligence to avoid doing business with that entity, such belief
shall satisfy the requirement under subsection (a).
(d) Notice Requirement.--
(1) In general.--If an appropriate Federal banking agency
formally requests or orders a depository institution to
terminate a specific customer account or a group of customer
accounts, the agency shall--
(A) provide such request or order to the
institution in writing; and
(B) accompany such request or order with a written
justification for why such termination is needed,
including any specific laws or rules the agency
believes are being violated by the customer or group of
customers.
(2) Justification requirement.--Consistent with subsection
(b), the justification described in paragraph (1)(B) may not be
based on reputation risk to the depository institution.
(e) Customer Notice.--
(1) Notice required.--Except as provided under paragraph
(2) or as otherwise prohibited from being disclosed by law, if
an appropriate Federal banking agency orders a depository
institution to terminate a specific customer account or a group
of customer accounts, the depository institution shall inform
the specific customer or group of customers of the
justification for the customer's account termination described
under subsection (b).
(2) Notice prohibited.--
(A) Notice prohibited in cases of national
security.--If an appropriate Federal banking agency
requests or orders a depository institution to
terminate a specific customer account or a group of
customer accounts based on a belief that the customer
or customers pose a threat to national security, or are
otherwise described under subsection (a)(2), neither
the depository institution nor the appropriate Federal
banking agency may inform the customer or customers of
the justification for the customer's account
termination.
(B) Notice prohibited in other cases.--If an
appropriate Federal banking agency determines that the
notice required under paragraph (1) may interfere with
an authorized criminal investigation, neither the
depository institution nor the appropriate Federal
banking agency may inform the specific customer or
group of customers of the justification for the
customer's account termination.
(f) Reporting Requirement.--Each appropriate Federal banking agency
shall issue an annual report to Congress stating--
(1) the aggregate number of specific customer accounts that
the agency requested or ordered a depository institution to
terminate during the previous year; and
(2) the legal authority on which the agency relied in
making such requests and orders and the frequency on which the
agency relied on each such authority.
(g) Definitions.--In this section:
(1) Appropriate federal banking agency.--The term
``appropriate Federal banking agency'' means--
(A) the appropriate Federal banking agency, as
defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813); and
(B) the National Credit Union Administration, in
the case of an insured credit union.
(2) Depository institution.--The term ``depository
institution'' has the meaning given the term in section
19(b)(1) of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)).
SEC. 708. CONFORMING AMENDMENTS.
(a) Federal Deposit Insurance Act.--Section 12 of the Federal
Deposit Insurance Act (12 U.S.C. 1822) is amended by adding at the end
the following:
``(g) Appointment of Receiver.--
``(1) Definition.--In this subsection, the term `covered
depository institution' has the meaning given the term in
section 15(a) of the Bank Holding Company Act of 1956.
``(2) Appointment.--The Corporation may be appointed as
receiver of a covered depository institution, as defined in
section 15(a) of the Bank Holding Company Act of 1956.
``(3) Premiums.--A covered depository institution may not
be charged deposit insurance premiums for the purpose of this
subsection, but the Corporation may use the capital of the
covered depository institution to fund the costs of the
receivership.
``(4) Rules.--The Corporation may promulgate rules to carry
out this subsection, which shall--
``(A) be substantially consistent with the rules
for receivership of an insured depository institution;
and
``(B) account for the limited activities, capital,
and the required tailored recovery and resolution plan
of the covered depository institution.''.
(b) Federal Reserve Act.--The Federal Reserve Act (12 U.S.C. 221 et
seq.) is amended--
(1) in section 19(b)(1)(A) (12 U.S.C. 461(b)(1)(A))--
(A) in clause (vi), by striking ``and'' at the end;
(B) in clause (vii), by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following:
``(viii) a covered depository institution,
as defined in section 15(a) of the Bank Holding
Company Act of 1956.''; and
(2) in the first undesignated paragraph of section 9 (12
U.S.C. 321), in the first sentence, by inserting ``, covered
depository institutions, as defined in section 15(a) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1853(a)),'' after
``Plan banks''.
TITLE VIII--RESPONSIBLE INTERAGENCY COORDINATION
SEC. 801. TIMELINE FOR INTERPRETIVE GUIDANCE ISSUED BY FEDERAL
FINANCIAL AGENCIES.
(a) In General.--Title 31, United States Code, is amended by adding
after chapter 98, as added by section 101(a) of this Act, the
following:
``CHAPTER 99--RESPONSIBLE INTERAGENCY COORDINATION
``Sec.
``9901. Timeline for interpretive guidance issues by Federal financial
agencies.
``9902. Interstate sandbox activities.
``Sec. 9901. Timeline for interpretive guidance issues by Federal
financial agencies
``(a) In General.--In this section:
``(1) Federal financial regulator.--The term `Federal
financial regulator' means--
``(A) Board of Governors of the Federal Reserve
System and the Federal Reserve banks;
``(B) Commodity Futures Trading Commission;
``(C) Department of the Treasury;
``(D) Federal Deposit Insurance Corporation;
``(E) Federal Housing Finance Agency;
``(F) National Credit Union Administration;
``(G) Office of the Comptroller of the Currency;
``(H) Consumer Financial Protection Bureau; and
``(I) Securities and Exchange Commission.
``(2) Requesting person.--The term `requesting person'--
``(A) means any entity that is required to be
chartered, licensed, supervised or registered by that
agency; and
``(B) includes State agencies and self-regulatory
organizations.
``(b) Response.--Not later than 180 days after filing a written
request for individualized interpretive guidance with respect to the
application of a statute, rule or policy under the jurisdiction of a
Federal financial regulator, the agency shall provide a final, complete
and written response to the requesting person. This subsection shall
not apply to requests for guidance that the Federal financial regulator
determine lack substance.
``(c) Other Matters.--With respect to matters delegated or
otherwise under the jurisdiction of self-regulatory organizations,
including national securities exchanges, boards of trade, and similar
entities, the self-regulatory organization shall be subject to the same
requirements as a Federal financial regulator under this section.''.
SEC. 802. INTERSTATE SANDBOX ACTIVITIES.
(a) In General.--Chapter 99 of title 31, United States Code, as
added by section 701 of this Act, is amended by adding at the end the
following:
``Sec. 9902. Interstate sandbox activities
``(a) Definitions.--In this section:
``(1) Federal financial regulator.--The term `Federal
financial regulator' means the Federal agency described in
section 9901(a)(1) that would typically exercise jurisdiction
over the product or service made available in the State
financial regulatory sandbox, or the Department of the
Treasury, in the case of a matter only within the jurisdiction
of a State.
``(2) Financial company.--The term `financial company'
means a business entity primarily engaged in activities that
are financial in nature, as described in section 4(k)(4) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)(4)).
``(3) Host state.--The term `host State' means a State in
which a financial company is not operating in the State
financial regulatory sandbox of that State.
``(4) Innovative.--The term `innovative' means new or
emerging technology, or new uses of existing technology, that--
``(A) provides a financial product, service,
business model, or delivery mechanism to the public;
and
``(B) has no substantially comparable, widely
available analogue in common use in the United States.
``(5) State financial regulator.--The term `State financial
regulator' includes State agencies that regulate, supervise, or
license banks, trust companies, credit unions, consumer credit,
consumer protection, money transmission, securities,
commodities, and similar areas.
``(6) State financial regulatory sandbox.--The term `State
financial regulator sandbox' means a program created under
State law that allows a financial company to make an innovative
financial product or service available to customers within that
State during a defined period in order to permit regulatory
dialogue, data sharing amongst regulators and financial
companies, and to promote an assessment of potential changes in
law, rule, or policy to facilitate the appropriate supervision
of financial technology.
``(b) Business Conducted.--Upon joint approval under subsection
(d), a financial company in good standing in a State financial
regulatory sandbox and operating for not less than 6 months in that
sandbox program, may do business across State lines under the standards
of this section. If approved, the State financial regulator and the
Federal financial regulator may agree upon reasonable adjustments to
the number of customers that may be served, increased bonding or
collateral requirements, and similar conditions which may be
appropriate for conducting business nationally.
``(c) State Sandbox Requirements.--A State financial regulatory
sandbox shall contain the following components for financial companies
to be eligible to do business across State lines under this section:
``(1) A limited sandbox period of not more than 24 months.
``(2) Consumer protection requirements, which may include
disclosures, bonding, insurance requirements, and financial
literacy programs for specified consumers.
``(3) Authority to conduct examinations of the financial
company.
``(4) A background investigation of the financial company
and its officers, directors, members, managers and key
employees, prior to commencing business.
``(d) Decision.--Upon submission of an application by a financial
company to conduct business across State lines under subsection (b),
the State financial regulator and Federal financial regulator shall
jointly issue a decision within 120 days with respect to that
application, irrespective of any supplemental information with respect
to the application that may be requested after initial filing. The
Federal financial regulator shall have the authority to conduct a joint
examination of any financial company doing business under this section.
``(e) Factors.--The State financial regulator and Federal financial
regulator shall consider the following factors in rendering a decision
on the application:
``(1) Whether the product or service offered may be offered
in a safe and sound manner across State lines.
``(2) Whether the management and capital of the financial
company is commensurate with the scale of the company.
``(3) Risk management plans of the financial company.
``(4) Conduct of the financial company to date in the State
regulatory sandbox, and any past regulatory actions, including
actions against officers, directors, members, managers and key
employees.
``(5) Plans for consumer education and financial literacy,
including partnerships with local educational institutions and
community colleges to provide financial literacy classes or
resources.
``(6) Other factors determined by the State and Federal
financial regulators to be material.
``(f) Election.--A host State may elect not to permit financial
companies operating under this section to do business in their State
through issuance of an executive order by the Governor of that State.
``(g) Innovative.--A product or service made available under this
section through a State financial regulatory sandbox shall be
innovative.
``(h) Rules of Construction.--This section shall not be construed
to extend to permit--
``(1) a financial company to engage in any activities for
which a charter, license, registration or for which permission
would be required under Federal or State law but for the
innovative financial product or service being offered by the
company, except to the extent the financial company would be
required to obtain a charter, license or other authorization
required in a host State;
``(2) failure to comply with any applicable portion of
State law required by the State financial regulatory sandbox,
or failure to comply with any applicable portion of Federal
law, unless authorized on a limited basis by the Federal
financial regulator to achieve the purposes of this section and
the State financial regulatory sandbox; or
``(3) lending activities in excess of the maximum statutory
rate of interest permissible in a State.''.
(b) Technical and Conforming Amendment.--The table of contents for
subtitle VI of title 31, United States Code, as amended by section
101(b) of this Act, is amended by adding at the end the following:
``99. Responsible interagency coordination.................. 9901''.
SEC. 803. STATE MONEY TRANSMISSION COORDINATION RELATING TO DIGITAL
ASSETS.
(a) In General.--In order to increase uniformity, reduce regulatory
burden, and enhance consumer protection, the States, through the
Conference of State Bank Supervisors and the Money Transmission
Regulators Association, shall, not later than 2 years after the date of
enactment of this Act, ensure uniform treatment of digital assets for
the purposes of State money transmission laws on the following matters:
(1) Whether digital assets are subject to money
transmission licensing requirements, as appropriate, which
shall include the exchange of digital assets for legal tender.
(2) Treatment of payment stablecoins.
(3) Non-applicability to persons or software that engage in
validation of transactions, non-custodial wallet providers, or
software or hardware development.
(4) Tangible net worth and permissible investment
requirements.
(5) Disclosures, reporting, and recordkeeping.
(6) Common examination and examiner training standards,
including common customer identification, anti-money
laundering, and sanctions best practices developed in
consultation with the Financial Crimes Enforcement Network and
the Office of Foreign Assets Control.
(b) Regulations.--If the Director of the Bureau of Consumer
Financial Protection determines that a State does not have the
requirements of subsection (a) in effect by law (including regulations)
that are substantively consistent with the requirements of the several
States on the date that is 2 years after the date of enactment of this
section, the Director shall adopt rules applicable to that State that
achieve the purposes of subsection (a) and that are consistent with the
standards adopted in the States that have the requirements of
subsection (a) in effect. The Director may extend the deadline under
this section for not more than 1 year if a State has shown a good faith
effort towards implementation. The Director may promulgate regulations
to monitor State compliance with this subsection.
SEC. 804. INFORMATION SHARING AMONG FEDERAL AND STATE FINANCIAL
REGULATORS.
Subtitle C of title VII of the Gramm-Leach-Bliley Act (Public Law
106-102; 113 Stat. 1470), as amended by section 601 of this Act, is
amended by adding at the end the following:
``SEC. 722B. INFORMATION SHARING AMONG FEDERAL AND STATE FINANCIAL
REGULATORS.
``(a) Confidentiality.--Notwithstanding any other provision of law,
any requirement under Federal or State law regarding the privacy or
confidentiality of any information or materials exchanged among
financial regulators and any privilege arising under Federal or State
law (including the rules of any Federal or State court) with respect to
such information or material, shall continue to apply to such
information or material after the information or material has been
disclosed to any State or Federal financial regulator.
``(b) Non-Applicability of Certain Requirements.--Information or
material that is subject to privilege or confidentiality under
subsection (a) shall not be subject to--
``(1) disclosure under any Federal or State law governing
the disclosure to the public of information held by an officer
or an agency of the Federal Government or the respective State;
or
``(2) subpoena or discovery, or admission into evidence, in
any private civil action or administrative process, unless with
respect to any privilege held by the Nationwide Mortgage
Licensing System and Registry or the Director with respect to
such information or material, the person to whom such
information or material pertains waives that privilege, in
whole or in part, based on the discretion of such person.
``(c) Coordination With Other Law.--Any State or Federal law,
including any State open records law, relating to the disclosure of
confidential supervisory information or any information or material
described in subsection (a) that is inconsistent with subsection (a)
shall be superseded by the requirements of such provision to the extent
the State or Federal law provides less confidentiality or a weaker
privilege.
``(d) Conference of State Bank Supervisors.--The Conference of
State Bank Supervisors shall be considered the agent of the State
financial regulators for the purposes of sharing information under this
provision.
``(e) Definition.--In this section, the term `financial regulator'
means--
``(1) the Board of Governors of the Federal Reserve System
and the Federal Reserve banks;
``(2) the Commodity Futures Trading Commission;
``(3) the Department of the Treasury, including the
Financial Crimes Enforcement Network and the Office of Foreign
Assets Control;
``(4) the Federal Deposit Insurance Corporation;
``(5) the Federal Housing Finance Agency;
``(6) the National Credit Union Administration;
``(7) the Office of the Comptroller of the Currency;
``(8) the Bureau of Consumer Financial Protection;
``(9) the Securities and Exchange Commission; and
``(10) State agencies that regulate, supervise, or license
banks, trust companies, credit unions, consumer credit,
consumer protection, money transmission, securities,
commodities, and similar areas.''.
SEC. 805. ANALYSIS OF DECENTRALIZED FINANCE MARKETS AND TECHNOLOGIES.
Not later than 1 year after the date of enactment of this Act, the
Secretary of the Treasury, in consultation with the Commodity Futures
Trading Commission, Securities and Exchange Commission, and private
sector developers and participants in decentralized protocols, digital
assets, and digital asset exchanges, shall--
(1) analyze the market position of decentralized finance
technologies with respect to digital assets; and
(2) submit to the Committee on Banking, Housing, and Urban
Affairs and the Committee on Agriculture, Nutrition, and
Forestry of the Senate and the Committee on Financial Services
and the Committee on Agriculture of the House of
Representatives a report on--
(A) current development and use of decentralized
finance protocols in the United States and other
countries;
(B) opportunities, benefits, and challenges
relating to decentralized finance protocols and self-
custody of digital assets;
(C) a comparison of operational friction, fees,
liquidity and trading opportunities in decentralized
finance protocols, digital asset markets, and
traditional markets;
(D) transparency, prevention of manipulation, and
customer protection;
(E) cybersecurity and resiliency; and
(F) ensuring the accuracy of information regarding
the underlying smart contracts of a decentralized
finance protocol and the transactions facilitated by
such contracts, as the information appears on a website
or other similar means relating to the protocol.
SEC. 806. ANALYSIS OF ENERGY CONSUMPTION IN DIGITAL ASSET MARKETS.
(a) In General.--Each year, the Federal Energy Regulatory
Commission, in consultation with the Commodity Futures Trading
Commission and Securities and Exchange Commission, shall analyze the
following topics with respect to digital asset markets:
(1) Energy consumption for mining and staking of digital
asset transactions.
(2) The effect of energy consumption described in paragraph
(1) on national, regional, and local energy prices.
(3) The effects of mining and staking of digital asset
transactions on baseload power levels.
(4) The use of renewable energy sources, including use of
nonrenewable sources that would otherwise be wasted, and a
comparison of digital asset market energy consumption with the
financial services industry and economy as a whole.
(5) The sources and reliability of the data used under this
subsection.
(6) A process for regulated entities to make information
publicly available regarding energy consumption, including
sources of energy and amount, and, if appropriate,
recommendations to Congress to establish such a process.
(b) Report.--Not later than December 31 of each year, the Federal
Energy Regulatory Commission shall submit to the Committee on Energy
and Natural Resources and the Committee on Environment and Public Works
of the Senate and the Committee on Energy and Commerce and the
Committee on Natural Resources of the House of Representatives a report
containing the analysis required by subsection (a).
SEC. 807. ANALYSIS OF SELF-REGULATION AND REGISTERED DIGITAL ASSET
ASSOCIATIONS.
(a) In General.--Not later than 180 days after the date of
enactment of this Act, the Commodity Futures Trading Commission and
Securities and Exchange Commission, in consultation with digital asset
intermediaries, as defined in section 9801 of title 31, United States
Code, as added by section 101 of this Act, and standard-setting
associations representing the digital asset industry, shall conduct a
study and submit to the Committee on Banking, Housing, and Urban
Affairs and the Committee on Agriculture, Nutrition, and Forestry of
the Senate and the Committee on Financial Services and the Committee on
Agriculture of the House of Representatives a report setting forth
principles for self-regulation for digital asset markets and a proposal
for the establishment of registered digital asset associations for
digital asset markets based on delegated authority from the Commodity
Futures Trading Commission and Securities and Exchange Commission to
facilitate innovative, efficient, and orderly markets for digital
assets in accordance with this Act, and the amendments made by this
Act, including--
(1) standard setting, corporate transparency requirements,
and rulemaking relating to digital asset market conduct;
(2) regular consultation between the Commodity Futures
Trading Commission and Securities and Exchange Commission with
respect to rules governing digital asset market conduct and the
governance of registered digital asset associations;
(3) appropriate investigatory and disciplinary powers of
registered digital asset associations and registered digital
asset exchanges, respectively;
(4) the authority of digital asset intermediaries to
conduct activities relating to traditional assets;
(5) consumer education and financial literacy;
(6) professional accreditation and education;
(7) market surveillance and oversight, including use of
technology to facilitate shared trade practices and market
surveillance;
(8) risk-based examination authority;
(9) dispute resolution and arbitration;
(10) membership of registered digital asset association
members in other self-regulatory organizations and mutual
recognition and acceptance of rules and examination reports
amongst self-regulatory organizations;
(11) voluntary and compulsory membership structures;
(12) the initial determination of the legal classification
of a digital asset by a registered digital asset association,
subject to oversight by the Commodity Futures Trading
Commission and Securities and Exchange Commission; and
(13) the funding of registered digital asset associations
based on fees.
(b) Interim Rule.--Not later than August 1, 2022, the Commodity
Futures Trading Commission and Securities and Exchange Commission shall
jointly adopt an interim final rule specifying the scope of the study
under subsection (a), including topics of discussion and questions for
digital asset intermediaries and associations representing the digital
asset industry, and setting forth not fewer than 3 public meetings for
staff of the Commodity Futures Trading Commission and the Securities
and Exchange Commission to receive public comment. The interim final
rule shall establish a comment period of not less than 120 days prior
to publication of the report under subsection (a) and contain draft
legislative text for the creation of registered digital asset
associations by Congress.
SEC. 808. CYBERSECURITY STANDARDS FOR DIGITAL ASSET INTERMEDIARIES.
(a) Definition.--In this section, the term ``digital asset
intermediary'' has the meaning given the term in section 9801 of title
31, United States Code, as added by section 101 of this Act.
(b) Requirement.--Not later than 18 months after the date of
enactment of this Act, the Commodity Futures Trading Commission and the
Securities and Exchange Commission, in consultation with the Secretary
of the Treasury and the Director of the National Institute of Standards
and Technology, shall develop comprehensive, principles-based guidance
relating to cybersecurity for digital asset intermediaries that account
for, with respect to such a digital asset intermediary--
(1) the internal governance, and organizational culture, of
the cybersecurity program of the digital asset intermediary;
(2) security operations of the digital asset intermediary,
including threat identification, incident response, and
mitigation;
(3) risk identification and measurement by the digital
asset intermediary;
(4) the mitigation of risk by the digital asset
intermediary, including policies of the digital asset
intermediary, controls implemented by the digital asset
intermediary, change management with respect to the digital
asset intermediary, and the supply chain integrity of the
digital asset intermediary;
(5) assurance provided by, and testing conducted by, the
digital asset intermediary, including penetration testing and
independent audits so conducted; and
(6) the potential for digital asset intermediaries to be
used to facilitate illicit activities, including sanctions
avoidance.
SEC. 809. ADVISORY COMMITTEE ON FINANCIAL INNOVATION.
(a) Establishment.--There is established the Advisory Committee on
Financial Innovation (in this section referred to as the
``Committee'').
(b) Membership.--
(1) Composition.--The Committee shall be composed of 10
members, as follows:
(A) 2 members appointed by the President from the
financial technology industry.
(B) 4 members appointed by the President with
specializations in consumer protection, consumer
education, financial literacy, or financial inclusion.
(C) A commissioner from the Securities and Exchange
Commission, as designated by the Chair of the
Commission.
(D) A commissioner from the Commodity Futures
Trading Commission, as designated by the Chair of the
Commission.
(E) A member of the Board of Governors of the
Federal Reserve System, as designated by the Chair of
the Board.
(F) A State financial regulator, as jointly
designated by the National Association of State
Securities Administrators and the Conference of State
Bank Supervisors.
(2) Political affiliation.--Not more than 4 of the members
of the Committee shall be from the same political party.
(3) Appointment date.--The appointments of the members of
the Committee shall be made not later than 60 days after the
date of enactment of this Act.
(4) Period of appointment; vacancies.--
(A) In general.--A member of the Committee shall be
appointed for a term of 4 years.
(B) Vacancies.--A vacancy in the Committee--
(i) shall not affect the powers of the
Committee; and
(ii) shall be filled in the same manner as
the original appointment.
(5) Meetings.--
(A) Initial meeting.--Not later than 60 days after
the date on which all members of the Committee have
been appointed, the Committee shall hold its first
meeting.
(B) Frequency.--The Committee shall meet at the
call of the Chair.
(C) Quorum.--A majority of the members of the
Committee shall constitute a quorum, but a lesser
number of members may hold hearings.
(6) Chairperson.--The members described in subparagraphs
(C) and (D) of paragraph (1) shall alternate, on a yearly
basis, as Chairperson of the Committee, with the member
described in such subparagraph (D) serving as the Chair for the
1-year period following establishment of the Committee.
(c) Duties.--
(1) Matters studied.--The matters studied by the Committee
shall include--
(A) digital assets;
(B) consumer education and financial literacy;
(C) market structure in the securities and
commodities markets;
(D) banking, payments and settlement;
(E) consumer credit;
(F) financial inclusion, including reducing the
cost of financial services for all people of the United
States and promoting access to those services;
(G) efficiency in the financial system;
(H) reduction of systemic risk;
(I) competition in financial services; and
(J) the State-Federal partnership in financial
services regulation.
(2) Report.--On an annual basis, or as otherwise determined
necessary by the Chair of the Committee, the Committee shall
report to the President and to Congress on, and provide
recommendations for legislation, regulation, and supervision
relating to innovation in, the matters studied under paragraph
(1).
(d) Powers.--
(1) Hearings.--The Committee shall hold not less than 2
hearings per calendar year to hear from interested parties and
to discuss the work of the Committee.
(2) Information from federal agencies.--
(A) In general.--The Committee may secure directly
from a Federal department or agency such information as
the Committee considers necessary to carry out this
section.
(B) Furnishing information.--On request of the
Chair of the Committee, the head of the department or
agency shall furnish the information to the Committee.
(3) Postal services.--The Committee may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
(e) Compensation.--
(1) In general.--All members of the Committee shall serve
without compensation in addition to that received for their
services as officers or employees of the United States, and all
other members of the Committee shall serve without
compensation.
(2) Travel expenses.--Each member of the Committee may be
allowed travel expenses, including per diem in lieu of
subsistence, in accordance with sections 5702 and 5703 of title
5, United States Code, while away from their homes or regular
places of business in performance of services for the Council.
(f) Staff.--
(1) In general.--The Chair of the Committee may, without
regard to the civil service laws (including regulations),
appoint and terminate an executive director and such other
additional personnel as may be necessary to enable the
Committee to perform its duties, except that the employment of
an executive director shall be subject to confirmation by the
Committee.
(2) Compensation.--The Chair of the Committee may fix the
compensation of the executive director and other personnel
without regard to chapter 51 and subchapter III of chapter 53
of title 5, United States Code, relating to classification of
positions and General Schedule pay rates, except that the rate
of pay for the executive director and other personnel may not
exceed the rate payable for level V of the Executive Schedule
under section 5316 of that title.
(g) Detail of Government Employees.--A Federal Government employee
may be detailed to the Committee without reimbursement, and such detail
shall be without interruption or loss of civil service status or
privilege.
(h) Procurement of Temporary and Intermittent Services.--The Chair
of the Committee may procure temporary and intermittent services under
section 3109(b) of title 5, United States Code, at rates for
individuals that do not exceed the daily equivalent of the annual rate
of basic pay prescribed for level V of the Executive Schedule under
section 5316 of that title.
(i) Termination.--Section 14 of the Federal Advisory Committee Act
(5 U.S.C. App.) shall not apply to the Committee.
(j) Authorization of Appropriations.--There is authorized to be
appropriated to the Committee to carry out this section $2,000,000 for
fiscal year 2023, to remain available through fiscal year 2024.
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