[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4766 Introduced in House (IH)]

<DOC>






118th CONGRESS
  1st Session
                                H. R. 4766

  To provide for the regulation of payment stablecoins, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 20, 2023

 Mr. McHenry introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
  To provide for the regulation of payment stablecoins, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clarity for Payment Stablecoins Act 
of 2023''.

SEC. 2. DEFINITIONS.

    In this Act:
            (1) Bank secrecy act.--The term ``Bank Secrecy Act'' 
        means--
                    (A) section 21 of the Federal Deposit Insurance Act 
                (12 U.S.C. 1829b);
                    (B) chapter 2 of title I of Public Law 91-508 (12 
                U.S.C. 1951 et seq.); and
                    (C) subchapter II of chapter 53 of title 31, United 
                States Code.
            (2) Board.--The term ``Board'' means the Board of Governors 
        of the Federal Reserve System.
            (3) Comptroller.--The term ``Comptroller'' means the 
        Comptroller of the Currency.
            (4) Corporation.--The term ``Corporation'' means the 
        Federal Deposit Insurance Corporation.
            (5) Digital asset.--The term ``digital asset'' means any 
        digital representation of value which is recorded on a 
        cryptographically-secured distributed ledger.
            (6) Distributed ledger.--The term ``distributed ledger'' 
        means technology where data is shared across a network that 
        creates a public digital ledger of verified transactions or 
        information among network participants and the data is linked 
        using cryptography to maintain the integrity of the public 
        ledger and execute other functions.
            (7) Federal qualified nonbank stablecoin issuer.--The term 
        ``Federal qualified nonbank stablecoin issuer'' means a nonbank 
        entity approved by the primary Federal payment stablecoin 
        regulator, pursuant to section 5, to issue payment stablecoins.
            (8) Institution-affiliated party.--With respect to a 
        permitted payment stablecoin issuer, the term ``institution-
        affiliated party'' means any director, officer, employee, or 
        person in control of, or agent for, the permitted payment 
        stablecoin issuer.
            (9) Insured depository institution.--The term ``insured 
        depository institution'' means--
                    (A) an insured depository institution, as defined 
                in section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813); and
                    (B) an insured credit union, as defined in section 
                101 of the Federal Credit Union Act (12 U.S.C. 1752).
            (10) Monetary value.--The term ``monetary value'' means a 
        national currency or deposit (as defined under Section 3 of the 
        Federal Deposit Insurance Act) denominated in a national 
        currency.
            (11) National currency.--The term ``national currency'' 
        means a Federal Reserve note, (as the term is used in the first 
        undesignated paragraph of section 16 of the Federal Reserve Act 
        (12 U.S.C. 411)), money issued by a central bank, and money 
        issued by an intergovernmental organization pursuant to an 
        agreement by one or more governments.
            (12) Nonbank entity.--The term ``nonbank entity'' means a 
        person that is not an insured depository institution or 
        subsidiary of an insured depository institution.
            (13) Payment stablecoin.--The term ``payment stablecoin''--
                    (A) means a digital asset--
                            (i) that is or is designed to be used as a 
                        means of payment or settlement; and
                            (ii) the issuer of which--
                                    (I) is obligated to convert, 
                                redeem, or repurchase for a fixed 
                                amount of monetary value; and
                                    (II) represents will maintain or 
                                creates the reasonable expectation that 
                                it will maintain a stable value 
                                relative to the value of a fixed amount 
                                of monetary value; and
                    (B) that is not--
                            (i) a national currency; or
                            (ii) a security issued by an investment 
                        company registered under section 8(a) of the 
                        Investment Company Act of 1940 (15 U.S.C. 80a-
                        8(a)).
            (14) Permitted payment stablecoin issuer.--The term 
        ``permitted payment stablecoin issuer'' means--
                    (A) a subsidiary of an insured depository 
                institution that has been approved to issue payment 
                stablecoins under section 5;
                    (B) a Federal qualified nonbank payment stablecoin 
                issuer that has been approved to issue payment 
                stablecoins under section 5; or
                    (C) a State qualified payment stablecoin issuer.
            (15) Person.--The term ``person'' means an individual, 
        partnership, company, corporation, association (incorporated or 
        unincorporated), trust, estate, cooperative organization, or 
        other entity.
            (16) Primary federal payment stablecoin regulator.--
                    (A) In general.--The term ``primary Federal payment 
                stablecoin regulator'' means--
                            (i) with respect to an insured depository 
                        institution (other than an insured credit 
                        union) or a subsidiary of an insured depository 
                        institution (other than an insured credit 
                        union), the appropriate Federal banking agency 
                        of such insured depository institution (as 
                        defined under section 3 of the Federal Deposit 
                        Insurance Act (12 U.S.C. 1813));
                            (ii) with respect to an insured credit 
                        union or a subsidiary of an insured credit 
                        union, the National Credit Union 
                        Administration;
                            (iii) with respect to a Federal qualified 
                        nonbank payment stablecoin issuer that is not a 
                        national bank, the Board; and
                            (iv) with respect to any entity chartered 
                        by the Comptroller, the Comptroller.
                    (B) Primary federal payment stablecoin 
                regulators.--The term ``primary Federal payment 
                stablecoin regulators'' means the Comptroller, the 
                Board, the Corporation, and the National Credit Union 
                Administration.
            (17) Registered public accounting firm.--The term 
        ``registered public accounting firm'' has the meaning given 
        that term under section 2 of the Sarbanes-Oxley Act of 2002 (15 
        U.S.C. 7201).
            (18) State.--The term ``State'' means each of the several 
        States, the District of Columbia, and each territory of the 
        United States.
            (19) State qualified payment stablecoin issuer.--The term 
        ``State qualified payment stablecoin issuer'' means an entity 
        that--
                    (A) is legally established and approved to issue 
                payment stablecoins by a State payment stablecoin 
                regulator; and
                    (B) issues a payment stablecoin in compliance with 
                the requirements under section 4.
            (20) State payment stablecoin regulator.--The term ``State 
        payment stablecoin regulator'' means a State agency that has 
        primary regulatory and supervisory authority in such State over 
        entities that issue payment stablecoins.
            (21) Subsidiary of an insured credit union.--With respect 
        to an insured credit union, the term ``subsidiary of an insured 
        credit union'' means--
                    (A) an organization providing services to the 
                insured credit union that are associated with the 
                routine operations of credit unions, as described under 
                section 107(7)(I) of the Federal Credit Union Act (12 
                U.S.C. 1757(7)(I)); and
                    (B) a credit union service organization, as such 
                term is used under part 712 of title 12, Code of 
                Federal Regulations, with respect to which the insured 
                credit union has an ownership interest or to which the 
                insured credit union has extended a loan.

SEC. 3. LIMITATION ON WHO MAY ISSUE A PAYMENT STABLECOIN.

    It shall be unlawful for any person other than a permitted payment 
stablecoin issuer to issue a payment stablecoin for use by any person 
in the United States.

SEC. 4. REQUIREMENTS FOR ISSUING PAYMENT STABLECOINS.

    (a) Standards for the Issuance of Payment Stablecoins.--
            (1) In general.--Permitted payment stablecoin issuers 
        shall--
                    (A) maintain reserves backing the issuer's payment 
                stablecoins outstanding on an at least one to one 
                basis, with reserves comprising--
                            (i) United States coins and currency 
                        (including Federal reserve notes);
                            (ii) funds held as insured demand deposits 
                        or insured shares at insured depository 
                        institutions, subject to limitations 
                        established by the Corporation and the National 
                        Credit Union Administration, respectively, to 
                        address safety and soundness risks of such 
                        insured depository institutions;
                            (iii) Treasury bills with a maturity of 90 
                        days or less;
                            (iv) repurchase agreements with a maturity 
                        of 7 days or less that are backed by Treasury 
                        bills with a maturity of 90 days or less;
                            (v) central bank reserve deposits; or
                            (vi) such other assets as--
                                    (I) the primary Federal payment 
                                stablecoin regulator determines 
                                appropriate; or
                                    (II) in the case of a State 
                                qualified payment stablecoin issuer, 
                                the State payment stablecoin regulator 
                                determines appropriate.
                    (B) publicly disclose the issuer's redemption 
                policy;
                    (C) establish procedures for timely redemption of 
                outstanding payment stablecoins; and
                    (D) publish the monthly composition of the issuer's 
                reserves on the website of the issuer, containing--
                            (i) the total number of outstanding payment 
                        stablecoins issued by the issuer; and
                            (ii) the amount and composition of the 
                        reserves described under subparagraph (A).
            (2) Prohibition on rehypothecation.--Reserves described 
        under paragraph (1)(A) may not be pledged, rehypothecated, or 
        reused, except for the purpose of creating liquidity to meet 
        reasonable expectations of requests to redeem payment 
        stablecoins, such that reserves in the form of Treasury bills 
        may be pledged as collateral for repurchase agreements with a 
        maturity of 90 days or less, provided that either--
                    (A) the repurchase agreements are cleared by a 
                central clearing counterparty that is approved by the 
                primary Federal payment stablecoin regulator; or
                    (B) the permitted payment stablecoin issuer 
                receives the prior approval of the primary Federal 
                payment stablecoin regulator.
            (3) Monthly certification; examination of reports by 
        registered public accounting firm.--
                    (A) In general.--A permitted payment stablecoin 
                issuer shall, each month, have the information 
                disclosed in the previous month-end report required 
                under paragraph (1)(D) examined by a registered public 
                accounting firm.
                    (B) Certification.--Each month, the Chief Executive 
                Officer and Chief Financial Officer of a permitted 
                payment stablecoin issuer shall submit an certification 
                as to the accuracy of the monthly report to--
                            (i) the primary Federal payment stablecoin 
                        regulator; or
                            (ii) in the case of a State qualified 
                        payment stablecoin issuer, to the State payment 
                        stablecoin regulator.
                    (C) Criminal penalty.--Any person who submits a 
                certification required under subparagraph (B) knowing 
                that such certification is false shall be subject to 
                the criminal penalties set forth under section 1350(c) 
                of title 18, United States Code.
            (4) Capital, liquidity, and risk management requirements.--
        The primary Federal payment stablecoin regulators shall, 
        jointly, issue--
                    (A) capital requirements applicable to permitted 
                payment stablecoin issuers, which may not exceed what 
                is sufficient to ensure the permitted payment 
                stablecoin issuer's ongoing operations;
                    (B) liquidity requirements applicable to permitted 
                payment stablecoin issuers, which may not exceed what 
                is sufficient to ensure the financial integrity of the 
                permitted payment stablecoin issuer and the ability of 
                the issuer to meet the financial obligations of the 
                issuer, including redemptions; and
                    (C) risk management requirements applicable to 
                permitted payment stablecoin issuers, tailored to the 
                business model and risk profile of the permitted 
                payment stablecoin issuer.
            (5) Treatment under the bank secrecy act.--A permitted 
        payment stablecoin issuer shall be treated as a financial 
        institution for purposes of the Bank Secrecy Act.
            (6) Limitation on activities.--A permitted payment 
        stablecoin issuer may only issue payment stablecoins, redeem 
        payment stablecoins, manage related reserves (including 
        purchasing and holding reserve assets), provide custodial or 
        safekeeping services for payment stablecoins or private keys of 
        payment stablecoins, and undertake other functions that 
        directly support the work of issuing and redeeming payment 
        stablecoins.
    (b) Rulemaking.--
            (1) In general.--The primary Federal payment stablecoin 
        regulators may issue such orders and regulations as may be 
        necessary to administer and carry out the requirements of this 
        section, including to establish conditions, and to prevent 
        evasions thereof.
            (2) Joint issuance of regulation.--All regulations issued 
        to carry out this section shall be issued jointly by the 
        primary Federal payment stablecoin regulators.
            (3) Rulemaking deadline.--Not later than the end of the 
        180-day period beginning on the date of enactment of this Act, 
        the Federal payment stablecoin regulators shall issue 
        regulations to carry out this section.

SEC. 5. APPROVAL OF SUBSIDIARIES OF INSURED DEPOSITORY INSTITUTIONS AND 
              FEDERAL QUALIFIED NONBANK PAYMENT STABLECOIN ISSUERS.

    (a) In General.--
            (1) Application.--
                    (A) In general.--Any insured depository institution 
                that seeks to issue payment stablecoins through a 
                subsidiary and any nonbank entity (other than a State 
                qualified payment stablecoin issuer) that seeks to 
                issue payment stablecoins shall file an application 
                with the primary Federal payment stablecoin regulator.
                    (B) Timing.--With respect to an application filed 
                under this paragraph, the primary Federal payment 
                stablecoin regulator shall inform the applicant whether 
                the applicant has submitted a complete application 
                within 45 days of receiving the application.
                    (C) Completion of application.--With respect to an 
                application filed under this paragraph, once the 
                primary Federal payment stablecoin regulator has 
                informed the applicant that the application is 
                complete, such application shall be deemed to be 
                complete unless the primary Federal payment stablecoin 
                regulator determines that a significant change in 
                circumstances requires otherwise.
            (2) Evaluation of applications.--A complete application 
        received under paragraph (1) shall be evaluated by the primary 
        Federal payment stablecoin regulator using the factors 
        described in paragraph (3).
            (3) Factors to be considered.--The factors described in 
        this paragraph are the following:
                    (A) The ability of the applicant (or, in the case 
                of an applicant that is an insured depository 
                institution, the subsidiary of the applicant), based on 
                the financial condition and resources, to meet the 
                requirements set forth in section 4.
                    (B) The general character and fitness of the 
                management of the applicant.
                    (C) The risks presented by the applicant and 
                benefits provided to consumers.
            (4) Timing for decision; grounds for denial.--
                    (A) Timing.--The primary Federal payment stablecoin 
                regulator shall render a decision on an application no 
                later than 120 days after informing the applicant that 
                the application is complete.
                    (B) Denial of application.--
                            (i) Grounds for denial.--The primary 
                        Federal payment stablecoin regulator may only 
                        deny a complete application received under 
                        paragraph (1) if the regulator determines that 
                        the activities of the applicant would be unsafe 
                        or unsound based on the factors described in 
                        paragraph (3).
                            (ii) Explanation required.--If the primary 
                        Federal payment stablecoin regulator denies a 
                        complete application received under paragraph 
                        (1), the regulator shall provide the applicant 
                        with written notice explaining such denial, 
                        including all findings made by the regulator 
                        with respect to all identified material 
                        shortcomings regarding the application, 
                        including recommendations on how the applicant 
                        could address the identified material 
                        shortcomings.
                            (iii) Opportunity for hearing; final 
                        determination.--
                                    (I) In general.--Not later than 30 
                                days after the date of receipt of any 
                                notice of the denial of an application 
                                under this subsection, the applicant 
                                may request, in writing, an opportunity 
                                for a written or oral hearing before 
                                the primary Federal payment stablecoin 
                                regulator to appeal the denial.
                                    (II) Timing.--Upon receipt of a 
                                timely request, the primary Federal 
                                payment stablecoin regulator shall 
                                notice a time (not later than 30 days 
                                after the date of receipt of the 
                                request) and place at which the 
                                applicant may appear, personally or 
                                through counsel, to submit written 
                                materials or provide oral testimony and 
                                oral argument).
                                    (III) Final determination.--Not 
                                later than 60 days after the date of a 
                                hearing under this clause, the primary 
                                Federal payment stablecoin regulator 
                                shall notify the applicant of the final 
                                determination of the primary Federal 
                                payment stablecoin regulator, which 
                                shall contain a statement of the basis 
                                for that determination, with specific 
                                findings.
                                    (IV) Notice if no hearing.--If an 
                                applicant does not make a timely 
                                request for a hearing under this 
                                clause, the primary Federal payment 
                                stablecoin regulator shall notify the 
                                applicant, not later than 10 days after 
                                the date by which the applicant may 
                                request a hearing under this clause, in 
                                writing, that the denial of the 
                                application is a final determination of 
                                the regulator.
                    (C) Failure to render a decision.--If the primary 
                Federal payment stablecoin regulator fails to render a 
                decision on a complete application within the time 
                period specified in subparagraph (A), the application 
                shall be deemed approved.
                    (D) Right to reapply.--The denial of an application 
                under this subsection shall not prohibit the applicant 
                from filing a subsequent application.
            (5) Report on pending applications.--Each primary Federal 
        payment stablecoin regulator shall annually report to Congress 
        on the applications that have been pending for 6 months or 
        longer since the date of the initial application filed under 
        paragraph (1) where the applicant has been informed that the 
        application remains incomplete, including providing 
        documentation on the status of the application and why the 
        application has not yet been approved.
            (6) Rulemaking.--The primary Federal regulatory agencies 
        shall, jointly, issue rules necessary for the regulation of the 
        issuance of payment stablecoins, but may not impose 
        requirements inconsistent with the requirements specified under 
        section 4.
    (b) Effective Date.--
            (1) In general.--This section shall take effect on the 
        earlier of--
                    (A) 18 months after the date of enactment of this 
                Act; or
                    (B) the date that is 120 days after the date on 
                which the primary Federal payment stablecoin regulators 
                issue final regulations implementing this section.
            (2) Authority to issue regulations and process 
        applications.--The primary Federal payment stablecoin 
        regulators may, before the effective date described under 
        paragraph (1)--
                    (A) issue regulations to carry out this section; 
                and
                    (B) pursuant to regulations described under 
                subparagraph (A), accept and process applications 
                described under this section.
            (3) Notice to congress.--Each of the primary Federal 
        payment stablecoin regulators shall notify Congress once 
        beginning to process applications described under this section.
            (4) Safe harbor for pending applications.--The primary 
        Federal payment stablecoin regulator may waive the application 
        of the requirements of this section for a period not to exceed 
        12 months beginning on the effective date described under 
        paragraph (1), with respect to--
                    (A) a subsidiary of an insured depository 
                institution, if the insured depository institution has 
                an application pending for the subsidiary to become a 
                permitted payment stablecoin issuer on the effective 
                date described under paragraph (1); or
                    (B) a nonbank entity with an application pending to 
                become a Federal qualified nonbank stablecoin issuer on 
                the effective date described under paragraph (1).

SEC. 6. SUPERVISION AND ENFORCEMENT WITH RESPECT TO SUBSIDIARIES OF 
              INSURED DEPOSITORY INSTITUTIONS AND FEDERAL QUALIFIED 
              NONBANK STABLECOIN ISSUERS.

    (a) Supervision.--
            (1) Subsidiary of an insured depository institution.--
                    (A) In general.--Each permitted payment stablecoin 
                issuer that is a subsidiary of an insured depository 
                institution shall be subject to supervision by the 
                primary Federal payment stablecoin regulator in the 
                same manner as such insured depository institution.
                    (B) Gramm-Leach-Bliley act.--For purposes of title 
                V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 et 
                seq.) each permitted payment stablecoin issuer that is 
                a subsidiary of an insured depository institution shall 
                be deemed a financial institution.
            (2) Federal qualified nonbank payment stablecoin issuer.--
                    (A) Submission of reports.--Each Federal qualified 
                nonbank payment stablecoin issuer shall, upon request, 
                submit reports to the primary Federal payment 
                stablecoin regulator as to--
                            (i) the Federal qualified nonbank payment 
                        stablecoin issuer's financial condition, 
                        systems for monitoring and controlling 
                        financial and operating risks; and
                            (ii) compliance by the Federal qualified 
                        nonbank payment stablecoin issuer (and any 
                        subsidiary thereof) with this Act.
                    (B) Examinations.--The primary Federal payment 
                stablecoin regulator may make examinations of a Federal 
                qualified nonbank payment stablecoin issuer and each 
                subsidiary of a Federal qualified nonbank stablecoin 
                issuer in order to inform the regulator of--
                            (i) the nature of the operations and 
                        financial condition of the Federal qualified 
                        nonbank stablecoin issuer;
                            (ii) the financial, operational, and other 
                        risks within the Federal qualified nonbank 
                        stablecoin issuer that may pose a threat to--
                                    (I) the safety and soundness of the 
                                Federal qualified nonbank stablecoin 
                                issuer; or
                                    (II) the stability of the financial 
                                system of the United States; and
                            (iii) the systems of the Federal qualified 
                        nonbank payment stablecoin issuer for 
                        monitoring and controlling the risks described 
                        in clause (ii).
                    (C) Requirement to use existing reports.--In 
                supervising and examining a Federal qualified nonbank 
                payment stablecoin issuer, the primary Federal payment 
                stablecoin regulator shall, to the fullest extent 
                possible, use existing reports and other supervisory 
                information.
                    (D) Avoidance of duplication.--The primary Federal 
                payment stablecoin regulator shall, to the fullest 
                extent possible, avoid duplication of examination 
                activities, reporting requirements, and requests for 
                information in carrying out this Act with respect to a 
                Federal qualified nonbank payment stablecoin issuer.
                    (E) Gramm-Leach-Bliley act.--For purposes of title 
                V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 et 
                seq.) each Federal qualified nonbank stablecoin issuer 
                shall be deemed a financial institution.
    (b) Enforcement.--
            (1) Suspension or revocation of registration.--The primary 
        Federal payment stablecoin regulator may prohibit a permitted 
        payment stablecoin issuer from issuing payment stablecoins, if 
        the primary Federal payment stablecoin regulator determines 
        that such permitted payment stablecoin issuer, or an 
        institution-affiliated party of the permitted payment 
        stablecoin issuer, is--
                    (A) violating or has violated this Act or any 
                regulation or order issued under this Act; or
                    (B) violating or has violated any condition imposed 
                in writing by the primary Federal payment stablecoin 
                regulator in connection with a written agreement 
                entered into between the permitted payment stablecoin 
                issuer and the primary Federal payment stablecoin 
                regulator or a condition imposed in connection with any 
                application or other request.
            (2) Cease-and-desist proceedings.--If the primary Federal 
        payment stablecoin regulator has reasonable cause to believe 
        that a permitted payment stablecoin issuer or any institution-
        affiliated party of a permitted payment stablecoin issuer is 
        violating, has violated, or is attempting to violate this Act, 
        any regulation or order issued under this Act, or any written 
        agreement entered into with the primary Federal payment 
        stablecoin regulator or condition imposed in writing by the 
        primary Federal payment stablecoin regulator in connection with 
        any application or other request, the primary Federal payment 
        stablecoin regulator may, by provisions that are mandatory or 
        otherwise, order the permitted payment stablecoin issuer or 
        institution-affiliated party of the permitted payment 
        stablecoin issuer to--
                    (A) cease and desist from such violation or 
                practice;
                    (B) take affirmative action to correct the 
                conditions resulting from any such violation or 
                practice; or
                    (C) take such other action as the primary Federal 
                payment stablecoin regulator determines to be 
                appropriate.
            (3) Removal and prohibition authority.--The primary Federal 
        payment stablecoin regulator may remove an institution-
        affiliated party of a permitted payment stablecoin issuer from 
        their position or office or prohibit further participation in 
        the affairs of the permitted payment stablecoin issuer or all 
        permitted payment stablecoin issuers by such institution-
        affiliated party, if the primary Federal payment stablecoin 
        regulator determines that--
                    (A) the institution-affiliated party has, directly 
                or indirectly, committed a violation or attempted 
                violation of this Act or any regulation or order issued 
                under this Act; or
                    (B) the institution-affiliated party has committed 
                a violation of any provision of subchapter II of 
                chapter 53 of title 31, United States Code.
            (4) Procedures.--
                    (A) In general.--If the primary Federal payment 
                stablecoin regulator identifies a violation or 
                attempted violation of this Act or makes a 
                determination under paragraph (1), (2), or (3), the 
                primary Federal payment stablecoin regulator shall 
                comply with the procedures set forth in subsections (b) 
                and (e) of sections 8 of the Federal Deposit Insurance 
                Act (12 U.S.C. 1818).
                    (B) Judicial review.--A person aggrieved by a final 
                action under this subsection may obtain judicial review 
                of such action exclusively as provided in section 8(h) 
                of the Federal Deposit Insurance Act (12 U.S.C. 
                1818(h)).
                    (C) Injunction.--The primary Federal payment 
                stablecoin regulator may, in the discretion of the 
                regulator, follow the procedures provided in section 
                8(i)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
                1818(i)(1)) for judicial enforcement of any effective 
                and outstanding notice or order issued under this 
                subsection.
                    (D) Temporary cease-and-desist proceedings.--If the 
                primary Federal payment stablecoin regulator determines 
                that a violation or attempted violation of this Act or 
                an action with respect to which a determination was 
                made under paragraph (1), (2), or (3), or the 
                continuation thereof, is likely to cause insolvency or 
                significant dissipation of assets or earnings of a 
                permitted payment stablecoin issuer, or is likely to 
                weaken the condition of the permitted payment 
                stablecoin issuer or otherwise prejudice the interests 
                of the customers of the permitted payment stablecoin 
                issuer prior to the completion the proceedings 
                conducted under this paragraph, the primary Federal 
                payment stablecoin regulator may follow the procedures 
                provided in section 8(c) of the Federal Deposit 
                Insurance Act (12 U.S.C. 1818(c)) to issue a temporary 
                cease-and-desist order.
            (5) Civil money penalties.--
                    (A) Failure to be approved.--Any person who issues 
                a payment stablecoin and who is not a permitted payment 
                stablecoin issuer, and any institution-affiliated party 
                of such a person who knowingly participates is issuing 
                such a payment stablecoin, shall be liable for a civil 
                penalty of not more than $100,000 for each day during 
                which such payment stablecoins are issued.
                    (B) First tier.--Except as provided in subparagraph 
                (A), a permitted payment stablecoin issuer or 
                institution-affiliated party of such permitted payment 
                stablecoin issuer that violates this Act or any 
                regulation or order issued under this Act, or that 
                violates any condition imposed in writing by the 
                primary Federal payment stablecoin regulator in 
                connection with a written agreement entered into 
                between the permitted payment stablecoin issuer and the 
                primary Federal payment stablecoin regulator or a 
                condition imposed in connection with any application or 
                other request, shall be liable for a civil penalty of 
                up to $100,000 for each day during which the violation 
                continues.
                    (C) Second tier.--Except as provided in 
                subparagraph (A), and in addition to the penalties 
                described under subparagraph (B), a permitted payment 
                stablecoin issuer or institution-affiliated party of 
                such permitted payment stablecoin issuer who knowingly 
                participates in a violation of any provision of this 
                Act, or any regulation or order issued thereunder, is 
                liable for a civil penalty of up to an additional 
                $100,000 for each day during which the violation 
                continues.
                    (D) Procedure.--Any penalty imposed under this 
                paragraph may be assessed and collected by the primary 
                Federal payment stablecoin regulator pursuant to the 
                procedures set forth in section 8(i)(2) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1818(i)(2)).
                    (E) Notice and orders after separation from 
                service.--The resignation, termination of employment or 
                participation, or separation of an institution-
                affiliated party (including a separation caused by the 
                closing of a permitted payment stablecoin issuer) shall 
                not affect the jurisdiction and authority of the 
                primary Federal payment stablecoin regulator to issue 
                any notice or order and proceed under this subsection 
                against any such party, if such notice or order is 
                served before the end of the six-year period beginning 
                on the date such party ceased to be an institution-
                affiliated party with respect to such permitted payment 
                stablecoin issuer.
            (6) Non-applicability to a state qualified payment 
        stablecoin issuer.--This subsection shall not apply to a State 
        qualified payment stablecoin issuer.

SEC. 7. STATE QUALIFIED PAYMENT STABLECOIN ISSUERS.

    (a) In General.--A State payment stablecoin regulator shall have 
supervisory, examination, and enforcement authority over a State 
qualified payment stablecoin issuer of such State.
    (b) Authority To Enter Into Agreements With the Board.--A State 
payment stablecoin regulator may enter into a memorandum of 
understanding with the Board, by mutual agreement, under which the 
Board may carry out the supervision, examination, and enforcement 
authority with respect to the State qualified payment stablecoin 
issuers of such State.
    (c) Sharing of Information.--A State payment stablecoin regulator 
and the Board shall share information on an ongoing basis with respect 
to a State qualified payment stablecoin issuer of such State, including 
a copy of the initial application and any accompanying documents.
    (d) Rulemaking.--The Board shall issue orders and rules under 
section 4 applicable to State qualified payment stablecoin issuers to 
the same extent as the primary Federal payment stablecoin regulators 
issue orders and rules under section 4 applicable to permitted payment 
stablecoin issuers that are not a State qualified payment stablecoin 
issuers.
    (e) Board Enforcement Authority in Exigent Circumstances.--
            (1) In general.--In exigent circumstances, the Board may, 
        after no less than 48 hours prior written notice to the 
        applicable State payment stablecoin regulator, take an 
        enforcement action against a State qualified payment stablecoin 
        issuer or an institution-affiliated party of such issuer for 
        violations of this Act.
            (2) Rulemaking.--Not later than the end of the 180-day 
        period beginning on the date of enactment of this Act, the 
        Board shall issue rules to set forth those exigent 
        circumstances in which the Board may act under this subsection.
    (f) Gramm-Leach-Bliley Act.--For purposes of title V of the Gramm-
Leach-Bliley Act (15 U.S.C. 6801 et seq.) a State qualified payment 
stablecoin issuer is deemed a financial institution.
    (g) Effect on State Law.--The provisions of this section do not 
preempt any law of a State and do not supersede any State licensing 
requirement.

SEC. 8. CUSTOMER PROTECTION.

    (a) In General.--A person may only engage in the business of 
providing custodial or safekeeping services for permitted payment 
stablecoins or private keys of permitted payment stablecoins, if the 
person--
            (1) is subject to--
                    (A) supervision or regulation by a primary Federal 
                payment stablecoin regulator or a primary financial 
                regulatory agency described under subparagraph (B) or 
                (C) of section 2(12) of the Dodd-Frank Wall Street 
                Reform and Consumer Protection Act (12 U.S.C. 
                5301(12)); or
                    (B) supervision by a State bank supervisor, as 
                defined under section 3 of the Federal Deposit 
                Insurance Act (12 U.S.C. 1813) or a State credit union 
                supervisor, as defined under section 6003 of the Anti-
                Money Laundering Act of 2020, and such state bank 
                supervisor or state credit union supervisor makes 
                available to the Board such information as the Board 
                determines necessary and relevant to the categories of 
                information under subsection (d); and
            (2) complies with the segregation requirements under 
        subsection (b), unless such person complies with similar 
        requirements as required by a primary Federal payment 
        stablecoin regulator, the Securities and Exchange Commission, 
        or the Commodity Futures Trading Commission.
    (b) Segregation Requirement.--A person described in subsection (a) 
shall--
            (1) treat and deal with the payment stablecoins, private 
        keys, cash, and other property of a person for whom or on whose 
        behalf the person receives, acquires, or holds payment 
        stablecoins, private keys, cash, and other property 
        (hereinafter in this section referred to as the ``customer'') 
        as belonging to such customer; and
            (2) take such steps as are appropriate to protect the 
        payment stablecoins, private keys, cash, and other property of 
        a customer from the claims of creditors of the person.
    (c) Commingling Prohibited.--
            (1) In general.--Payment stablecoins, cash, and other 
        property of a customer shall be separately accounted for by a 
        person described in subsection (a) and shall not be commingled 
        with the funds of the person.
            (2) Exception.--Notwithstanding paragraph (1)--
                    (A) the payment stablecoins, cash, and other 
                property of a customer may, for convenience, be 
                commingled and deposited in an omnibus account holding 
                the payment stablecoins, cash, and other property of 
                more than one customer at an insured depository 
                institution or trust company;
                    (B) such share of the payment stablecoins, cash, 
                and other property of the customer that shall be 
                necessary to transfer, adjust, or settle a transaction 
                or transfer of assets may be withdrawn and applied to 
                such purposes, including the payment of commissions, 
                taxes, storage, and other charges lawfully accruing in 
                connection with the provision of services by a person 
                described in subsection (a); and
                    (C) in accordance with such terms and conditions as 
                the Board may prescribe by rule, regulation, or order, 
                any customer payment stablecoin, cash, and other 
                property described in this subsection may be commingled 
                and deposited in customer accounts with payment 
                stablecoins, cash, and other property received by the 
                person and required by the Board to be separately 
                accounted for, treated, and dealt with as belonging to 
                customers.
    (d) Regulatory Information.--A person described under subsection 
(a) shall submit to the Board information concerning the person's 
business operations and processes to protect customer assets, in such 
form and manner as the Board shall determine.
    (e) Exclusion.--The requirements of this section shall not apply to 
any person solely on the basis that such person engages in the business 
of providing hardware or software to facilitate a customer's own 
custody or safekeeping of the customer's payment stablecoins or private 
keys.
    (f) Clarification.--The Board, the Comptroller, the Corporation, 
the National Credit Union Administration, and the Financial Crimes 
Enforcement Network shall make no rules, regulations, orders, or 
guidance, or take any other administrative action, which would restrict 
the ability of an individual to use digital assets for such 
individual's own purposes or prohibit or otherwise restrict an 
individual to use hardware or software to facilitate such individual's 
own custody or safekeeping of such individual's digital assets.

SEC. 9. INTEROPERABILITY STANDARDS.

    The primary Federal payment stablecoin regulators, in consultation 
with the National Institute of Standards and Technology, other relevant 
standard setting organizations, and State governments, shall assess 
and, if necessary, may, pursuant to section 553 of title 5 and in a 
manner consistent with the National Technology Transfer and Advancement 
Act of 1995 (Public Law 104-113), prescribe standards for payment 
stablecoin issuers to promote compatibility and interoperability.

SEC. 10. MORATORIUM ON ENDOGENOUSLY COLLATERALIZED STABLECOINS.

    (a) Moratorium.--During the 2-year period beginning on the date of 
enactment of this Act, it shall be unlawful to issue, create, or 
originate an endogenously collateralized stablecoin not in existence on 
the date of enactment of this Act.
    (b) Study by Treasury.--
            (1) Study.--The Secretary of the Treasury, in consultation 
        with the Board, the Comptroller, the Corporation, and the 
        Securities and Exchange Commission, shall carry out a study of 
        endogenously collateralized stablecoins.
            (2) Report.--Not later than 365 days after the date of the 
        enactment of this Act, the Secretary shall provide to the 
        Committee on Financial Services of the House of Representatives 
        and the Committee on Banking, Housing, and Urban Affairs of the 
        Senate a report that contains all findings made in carrying out 
        the study under subsection (a), including an analysis of--
                    (A) the categories of non-payment stablecoins, 
                including the benefits and risks of technological 
                design features;
                    (B) the participants in non-payment stablecoin 
                arrangements;
                    (C) utilization and potential utilization of non-
                payment stablecoins;
                    (D) nature of reserve compositions;
                    (E) types of algorithms being employed;
                    (F) governance structure, including aspects of 
                decentralization;
                    (G) nature of public promotion and advertising; and
                    (H) clarity and availability of consumer notices 
                disclosures.
    (c) Endogenously Collateralized Stablecoin Defined.--In this 
section, the term ``endogenously collateralized stablecoin'' means any 
digital asset--
            (1) in which its originator has represented will be 
        converted, redeemed, or repurchased for a fixed amount of 
        monetary value; and
            (2) that relies solely on the value of another digital 
        asset created or maintained by the same originator to maintain 
        the fixed price.

SEC. 11. REPORT ON RULEMAKING STATUS.

    Not later than 6 months after the date of enactment of this Act, 
the primary Federal payment stablecoin regulators shall provide a 
status update on the development of the rulemaking under this Act to 
the Committee on Financial Services of the House of Representatives and 
the Committee on Banking, Housing, and Urban Affairs of the Senate.

SEC. 12. AUTHORITY OF BANKING INSTITUTIONS.

    (a) Rule of Construction.--Nothing in this Act may be construed to 
limit the authority of a depository institution, Federal credit union, 
State credit union, or trust company to engage in activities 
permissible pursuant to applicable State and Federal law, including--
            (1) accepting or receiving deposits and issuing digital 
        assets that represent deposits;
            (2) utilizing a distributed ledger for the books and 
        records of the entity and to affect intrabank transfers; and
            (3) providing custodial services for payment stablecoins, 
        private keys of payment stablecoins, or reserves backing 
        payment stablecoins.
    (b) Treatment of Custody Activities.--The appropriate Federal 
banking agency (as defined under section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813)), the National Credit Union 
Administration (in the case of a credit union), and the Securities and 
Exchange Commission may not require a depository institution, national 
bank, Federal credit union, State credit union, or trust company, or 
any affiliate thereof--
            (1) to include assets held in custody as a liability on any 
        financial statement or balance sheet, including payment 
        stablecoin custody or safekeeping activities;
            (2) to hold additional regulatory capital against assets in 
        custody or safekeeping, except as necessary to mitigate against 
        operational risks inherent with the custody or safekeeping 
        services, as determined by--
                    (A) the appropriate Federal banking agency;
                    (B) the National Credit Union Administration (in 
                the case of a credit union);
                    (C) a State bank supervisor (as defined under 
                section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813)); or
                    (D) a State credit union supervisor (as defined 
                under section 6003 of the Anti-Money Laundering Act of 
                2020);
            (3) to recognize a liability for any obligations related to 
        activities or services performed for digital assets that the 
        entity does not own if that liability would exceed the expense 
        recognized in the income statement as a result of the 
        corresponding obligation.
    (c) Definitions.--In this section:
            (1) Depository institution.--The terms ``depository 
        institution'' has the meaning given that term under section 3 
        of the Federal Deposit Insurance Act.
            (2) Credit union terms.--The terms ``Federal credit union'' 
        and ``State credit union'' have the meaning given those terms, 
        respectively, under section 101 of the Federal Credit Union 
        Act.

SEC. 13. CLARIFYING THAT PAYMENT STABLECOINS ARE NOT SECURITIES OR 
              COMMODITIES.

    (a) Investment Advisers Act of 1940.--Section 202(a)(18) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(18)) is amended by 
adding at the end the following: ``The term `security' does not include 
a payment stablecoin issued by a permitted payment stablecoin issuer, 
as such terms are defined, respectively, in section 2 of the Clarity 
for Payment Stablecoins Act of 2023.''.
    (b) Investment Company Act of 1940.--Section 2(a)(36) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(36)) is amended by 
adding at the end the following: ``The term `security' does not include 
a payment stablecoin issued by a permitted payment stablecoin issuer, 
as such terms are defined, respectively, in section 2 of the Clarity 
for Payment Stablecoins Act of 2023.''.
    (c) Securities Act of 1933.--Section 2(a)(1) of the Securities Act 
of 1933 (15 U.S.C. 77b(a)(1)) is amended by adding at the end the 
following: ``The term `security' does not include a payment stablecoin 
issued by a permitted payment stablecoin issuer, as such terms are 
defined, respectively, in section 2 of the Clarity for Payment 
Stablecoins Act of 2023.''.
    (d) Securities Exchange Act of 1934.--Section 3(a)(10) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)) is amended by 
adding at the end the following: ``The term `security' does not include 
a payment stablecoin issued by a permitted payment stablecoin issuer, 
as such terms are defined, respectively, in section 2 of the Clarity 
for Payment Stablecoins Act of 2023.''.
    (e) Securities Investor Protection Act of 1970.--Section 16(14) of 
the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll(14)) is 
amended by adding at the end the following: ``The term `security' does 
not include a payment stablecoin issued by a permitted payment 
stablecoin issuer, as such terms are defined, respectively, in section 
2 of the Clarity for Payment Stablecoins Act of 2023.''.
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