Congressional Record, Volume 170 Issue 89 (Wednesday, May 22, 2024)

[Congressional Record Volume 170, Number 89 (Wednesday, May 22, 2024)]
[House]
[Pages H3419-H3463]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

FINANCIAL INNOVATION AND TECHNOLOGY FOR THE 21ST CENTURY ACT

general leave

Mr. McHENRY. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
and include extraneous material on the bill (H.R. 4763).
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from North Carolina?
There was no objection.
The SPEAKER pro tempore. Pursuant to House Resolution 1243 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the state of the Union for the consideration of the bill, H.R. 4763.
The Chair appoints the gentleman from Mississippi (Mr. Guest) to
preside over the Committee of the Whole.

{time} 1448

In the Committee of the Whole

Accordingly, the House resolved itself into the Committee of the
Whole House on the state of the Union for the consideration of the bill
(H.R. 4763) to provide for a system of regulation of digital assets by
the Commodity Futures Trading Commission and the Securities and
Exchange Commission, and for other purposes, with Mr. Guest in the
chair.
The Clerk read the title of the bill.
The CHAIR. Pursuant to the rule, the bill is considered read the
first time.
General debate shall be confined to the bill and shall not exceed 1
hour equally divided and controlled by the chair and ranking minority
member of the Committee on Financial Services or their respective
designees.
The gentleman from North Carolina (Mr. McHenry) and the gentlewoman
from California (Ms. Waters) each will control 30 minutes.
The Chair recognizes the gentleman from North Carolina (Mr. McHenry).
Mr. McHENRY. Mr. Chairman, I yield myself such time as I may consume.
Today, Congress will establish a new high-water mark for digital
asset policy. To be clear, this joint effort between the Financial
Services Committee and the Agriculture Committee did not come together
overnight. Far from it. We formed subcommittees, convened working
groups, heard from countless stakeholders, and received input from
Members across the ideological spectrum in the House of
Representatives.
Last July, we passed the bipartisan Financial Innovation and
Technology for the 21st Century Act, FIT21, out of our respective
committees. Each step in this process has created a new high-water
mark.
The next step will be a broad bipartisan vote today to finally
provide the robust consumer protections and clear regulatory framework
established by this bill. FIT21 will cement the United States' global
leadership in technological innovation, invention, and adoption.
Unfortunately, our current regulatory framework is preventing digital
assets innovation from reaching its full potential. The SEC and the
CFTC are currently in a food fight for control of these asset classes.
They have created an impossible situation where the same firms are
subject to competing and contradictory enforcement actions by the two
different agencies, leaving consumers behind, leaving innovators
behind.
FIT21 fixes this by creating a regulatory framework that will provide
clear rules of the road and strong guardrails for Americans engaging
with the digital asset ecosystem.
At its core, FIT21 applies time-tested consumer protections to ensure
that the 20 percent of Americans who engage in the digital asset
ecosystem can do so safely and so more Americans can engage, as well.
Today, we have the opportunity to answer the calls of consumers,
digital asset innovators, and the Biden administration. We can
establish the next

[[Page H3420]]

high-water mark for digital assets here in the United States.
Mr. Chair, I urge my colleagues to support consumer protection,
innovation, and American leadership by voting for FIT21, and I reserve
the balance of my time.
Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.
Mr. Chair, I rise in strong opposition to H.R. 4763, which I am
calling the not fit for purpose act.
This bill would deregulate a substantial portion of the crypto
industry, taking them out of the purview of the Securities and Exchange
Commission, or SEC. It would allow them to operate either under a
lighter touch regulatory regime under the Commodity Futures Trading
Commission or in what I have called a regulatory no-man's-land, with no
primary regulator and virtually no regulations. For crypto that would
remain under the SEC's purview, this bill still provides major
exemptions from critical securities laws.
If this wasn't bad enough, this bill is not just about crypto.
Language was added to the bill after it was marked up by the committees
of jurisdiction that would allow even some traditional securities to
also exist in this regulatory no-man's-land.
Specifically, I am referring to title II of the bill that defines the
term ``investment contract asset.'' Assets that fall under this
definition are explicitly deemed not to be securities and, therefore,
not under the SEC's purview, but the bill doesn't provide an
alternative legal framework for these assets.
This represents an extreme MAGA, libertarian approach where companies
can operate without regulatory scrutiny, and consumers and investors
are on their own in detecting and avoiding fraudulent schemes.
While Republican defenders of this bill have argued that this
definition of investment contract asset is limited to digital assets
under the bill, this is disputed by legal experts and SEC Chair Gary
Gensler himself, who confirmed in a recent statement regarding this
bill that it would have a broader impact on traditional securities.
Interestingly, I didn't hear any arguments from the Republicans at
the Rules Committee hearing disputing that this would, in fact, be a
regulatory no-man's-land, even if they insist it is just for crypto.
Even for crypto that would be transferred over to the CFTC, I have
serious concerns about the loss of protections for consumers and
investors. The CFTC is generally designed to deal with sophisticated
institutional investors and traders. It doesn't have the same kind of
protections that the SEC has for retail investors and consumers.

Under all three avenues provided for crypto under this bill: The
CFTC's lighter touch regulatory regime, SEC's weaker regulatory regime
for restricted digital assets, or the regulatory no-man's-land, these
are just a few examples of protections that would be stripped away: the
right of an investor to sue, gone; protections against conflicts of
interest, gone; the right to critical disclosures that help investors
make informed choices, gone; and enforcement by States against fraud;
and enforcement by the SEC for all of the above protections, including
antifraud.
H.R. 4763 would also upend more than 170 enforcement cases the SEC
has brought related to crypto violations. These actions have been
brought by both Democratic and Republican administrations to protect
investors against crypto bad actors.
The SEC is the Federal agency on the front lines of enforcing our
existing securities laws on crypto firms that have willfully chosen to
ignore the law and defrauded consumers out of billions of dollars with
these get-rich-quick schemes. Giving this industry a free pass to avoid
most all regulations cannot be the answer to the serious concerns that
Members have raised about crypto fraud.
I have seen many efforts by Republicans, acting at the behest of the
industry to pass deregulatory regulation, but this is perhaps the
worst, most harmful proposal I have seen in a long time. This bill
would deregulate crypto and certain traditional securities to the
extent that I and other experts have expressed serious concerns about
this bill causing a potential market crash and recession.
I am also reminded of how, over the warnings of regulators, Congress
moved to deregulate the over-the-counter derivatives. Remember the
derivatives market back in 2000? The resulting financial crisis
triggered the implosion of financial institutions, a wave of
foreclosures, and trillions of dollars in lost wealth.
Mr. Chair, I urge my colleagues not to forget. They should not repeat
history with this bill.
The Biden administration has released a Statement of Administration
Policy opposing this bill. The bill is also opposed by a long list of
investors and consumer advocates, State securities administrators
concerned about State preemption, labor organizations worried about the
retirement funds of their members, environmental groups concerned about
the undisclosed risk of crypto mining, civic organizations worried
about the undue influence of the financial and crypto industry over
Congress' actions, academics, legal experts, and technologists.
Mr. Chair, I urge my colleagues to stand up and to not be afraid of
Big Crypto, to stand up for everyday investors and consumers.
Mr. Chair, I urge my colleagues to vote ``no'' on this bill, and I
reserve the balance of my time.

{time} 1500

Mr. McHENRY. Mr. Chair, I yield 4 minutes to the gentleman from
Pennsylvania (Mr. Thompson), the chair of the Agriculture Committee and
partner in FIT21.
Mr. THOMPSON of Pennsylvania. Mr. Chairman, I rise today in support
of H.R. 4763, the Financial Innovation and Technology for the 21st
Century Act, or FIT21, which establishes a regulatory framework for
digital assets while protecting consumers and fostering innovation
within the United States.
This legislation has been a long time coming. Since 2018, the House
Committee on Agriculture has held numerous hearings, roundtables, and
meetings and introduced multiple pieces of legislation to bring
certainty and clarity to the digital asset markets.
For Congress to establish a comprehensive digital assets market
framework, it was clear the House Committee on Agriculture and the
House Committee on Financial Services needed to work in a collaborative
manner.
Chairman McHenry and I first met nearly 2 years ago to discuss this
ambitious plan, and together, we aimed to develop the best policies
possible.
Over this Congress, members of both committees have engaged in robust
and collaborative debates and educational sessions on current
securities and commodities laws and regulations, as well as gaining a
deeper understanding of the digital asset ecosystem.
Through this process, we learned several key points, including: that
the current process to determine if a digital asset is a security or
not is unclear, unworkable, and impractical; the Commodity Futures
Trading Commission lacks essential regulatory authority over retail-
serving intermediaries in the digital commodity spot market; and the
treatment of customer assets held by intermediaries needs to be
strengthened.
Mr. Chairman, my colleagues on the other side of the aisle have
claimed that this bill will allow a substantial portion of crypto and
some traditional securities to escape nearly all laws and regulations,
operating without any primary regulator. That is far from the truth.
The legislation before us today enhances existing securities and
commodities regulations to create an appropriate framework for digital
assets.
For example, a registered digital commodity exchange would follow
regulations similar to those of the CFTC for derivatives exchanges,
including monitoring trading activity, prohibiting abusive practices,
reporting trading information, managing conflicts of interest, ensuring
governance standards, upholding cybersecurity, and more.
Mr. Chairman, Congress has a historic opportunity to enact
legislation that not only protects consumers but also ensures that the
United States remains at the forefront of technical innovation.
By supporting FIT21, we can foster and create a safer, more
transparent, and more competitive environment for digital assets.
Let us seize this moment to provide clear guidelines and robust
protections,

[[Page H3421]]

fostering a future where innovation can thrive responsibly within our
borders.
Mr. Chairman, I urge all of my colleagues to support this bill.
Mr. Chairman, I understand that the gentlewoman from Washington
State, the chair of the Energy and Commerce Committee, has a few
questions for clarification.
Mrs. RODGERS of Washington. Mr. Chairman, will the gentleman yield?
Mr. THOMPSON of Pennsylvania. Mr. Chairman, I yield to the
gentlewoman for the purpose of a colloquy.
Mrs. RODGERS of Washington. Mr. Chairman, I rise in support of H.R.
4763.
Blockchains are a new foundational technology that will reshape our
daily lives. Through innovative design approaches, blockchains can be
used in all kinds of applications, like tracking products through
supply chains or facilitating the tokenization of financial assets.
Unfortunately, many American innovators are being pushed abroad by
overzealous regulators. According to a report by Electric Capital, the
U.S. share of blockchain developers has declined from 40 percent in
2017 to 29 percent in 2022.
I am excited about this legislation providing clear rules of the
road. This is a clear complement to some of the work that we have been
doing in the Energy and Commerce Committee to ensure American
leadership in blockchain technology.
I will clarify some of the nonfinancial applications and uses that
may be unintentionally captured by the bill.
The CHAIR. The time of the gentleman has expired.
Mr. McHENRY. Mr. Chairman, I yield an additional 1 minute to the
gentlewoman from Washington.
Mrs. RODGERS of Washington. Mr. Chairman, I thank the gentleman for
yielding time.
Based on conversations I have had, it is my understanding that the
intent of this bill is to ensure that the current authority over
certain restricted digital asset transactions remains with the SEC and
that the CFTC would only be authorized to regulate certain
intermediaries in spot digital commodity markets. Is this correct?
Mr. THOMPSON of Pennsylvania. Mr. Chairman, the gentlewoman's
understanding of the legislation is correct.
The intent of FIT21 is to draw jurisdictional lines between the SEC
and the CFTC as it relates to certain spot digital asset transactions.
Mrs. RODGERS of Washington. Can the gentleman clarify the intent when
it comes to exclusive jurisdiction of the CFTC and how this would
impact the current protections for Americans against fraud and market
manipulation?
Mr. THOMPSON of Pennsylvania. FIT21 provides the CFTC with exclusive
jurisdiction over digital commodity spot market transactions that occur
on or through entities registered with CFTC. FIT21 does not provide
CFTC with the authority to directly regulate any transaction between
two people which is not intermediated by an entity registered with the
CFTC.
Separate from FIT21, CFTC has existing authority to police spot
market commodities for fraud and market manipulation, which FIT21 does
not change.
Mrs. RODGERS of Washington. Mr. Chairman, I thank Chairman Thompson,
Chairman McHenry, and Representative Hill for the clarification and for
all of their work.
Ms. WATERS. Mr. Chairman, I yield 3 minutes to the gentleman from
Massachusetts (Mr. Lynch), who is also the ranking member of the
Subcommittee on Digital Assets, Financial Technology and Inclusion.
Mr. LYNCH. Mr. Chairman, I thank the gentlewoman for yielding time.
Mr. Chairman, I have been a Member of Congress for over 20 years, and
I have to say that while this may not be the worst, it is in the top
three in terms of the worst bills that I have seen actually progress to
the floor of the House.
Anybody who is excited about this bill either has not read it or does
not understand it. This bill is a radical rewrite of the securities
laws in this country.
As most people who know our history realize, in 1929, when the
markets crashed, we established the Securities and Exchange Commission
in 1934, shortly after the crash.
What that did was it created an agency that became the cop on the
beat in financial services. They became the protectors of investors.
Since that time in 1934, as courts have interpreted that law that is
protecting investors, we built up a body of case law that now makes the
United States financial markets the most robust, and they have become
the marvel of the world. Everyone comes to the United States for
investment because they know that their investment is protected and
that they will be treated fairly in the courts because we have well-
defined laws.
This bill undoes all of that. This bill is a radical rewriting of the
securities laws since 1934. It redefines what a security is. It allows
financial companies to escape the cop on the beat. Now, they can leave
the jurisdiction of the SEC and go over to the CFTC, which is about six
times as small as the SEC.
What will happen here is you will see a migration of companies going
out from under the SEC jurisdiction over to the CFTC, and this will
cause havoc in our financial markets eventually.
The one amendment I would have liked to see on this bill is that any
company that becomes insolvent because of their involvement with crypto
cannot receive a taxpayer bailout because that is where this bill is
heading. This is going to cause infirmity in the financial institutions
in this country as they get commingled with crypto, and eventually, we
will be forced into a situation where we are going to have to bail some
of these banks out because of their involvement in crypto.
Mr. Chairman, this is a very bad bill, and I urge my colleagues to
vote against it.
Mr. McHENRY. Mr. Chairman, I yield 2 minutes to the gentleman from
Arkansas (Mr. Hill), the chairman of the Subcommittee on Digital
Assets, Financial Technology and Inclusion, who has shepherded this
bill along very well.
Mr. HILL. Mr. Chairman, I thank the gentleman for yielding time.
Mr. Chairman, for those watching at home, it is like the tale of two
cities, where one side is offering a work of fiction and the other side
a work of nonfiction.
I think, over here, those who support this bill are supporting
exactly the opposite of what I have heard on the other side of the
aisle.
Since last January, our two committees, Agriculture and Financial
Services, have collaborated to make sure that we protect consumers and
investors in the digital marketplace by preventing fraud, manipulation,
front-running, and other abusive practices; applying Bank Secrecy Act/
AML requirements and know-your-customer rules; mitigating conflicts of
interest; requiring firms to hold capital and segregate customer funds;
have the right kind of custody policy; have registration for exchanges,
dealers, and brokers that are working in digital assets; imposing
reporting and bookkeeping requirements; and building on the existing
exemption regime for the offer and sale of digital securities to
include robust disclosures to anyone considering a purchase.
With that said, we hear a lot about the lack of legal clarity for the
treatment of digital assets, which was the impetus for this
legislation. What does that even mean?
Mr. Chairman, to this day, the SEC and the CFTC still contradict each
other in court about whether a digital asset like Ethereum should be
treated as a security or a commodity. Both cannot be true.
When two Federal agencies in the same administration cannot agree on
the law, it should be up to Congress, and that is the regulatory
clarity that this FIT21 bill will bring.
In fact, I would argue, Mr. Chairman, that FIT21 is responsive to
President Biden's own executive order and the Financial Stability
Oversight Council report calling on Congress to enact a framework for
digital assets that are not securities. That is what we have done.
I am also proud that this measure is the product of committee work
done through regular order and through good-faith bipartisan efforts.
Mr. Chairman, all Members should support this bill, and I encourage a
full ``yes'' vote from both sides of the aisle.

[[Page H3422]]

Ms. WATERS. Mr. Chairman, I yield 4 minutes to the gentleman from
Illinois (Mr. Casten).
Mr. CASTEN. Mr. Chairman, we have heard several times this
legislation is better than the status quo. There are a whole lot of
reasons that is not true, but I want to focus specifically on this
bill's utter failure to address the use of cryptocurrency by
terrorists, foreign adversaries, and criminals.
By the way, Treasury asked us specifically to address those issues
with a whole bunch of reasonable changes. We introduced amendments.
Every one of those amendments was rejected.
The anti-money laundering provisions that are in this bill simply
duplicate existing requirements. Yet, the bill's supporters have
actually argued, and Treasury has agreed, that the status quo is not
sufficient to address the challenges created by cryptocurrencies.

How do we know that cryptocurrencies are a problem for money
laundering? Because the bad guys love crypto. Let's give some examples.
North Korean hackers have stolen $3 billion in cryptocurrency since
2017. White House national security officials said last year that
crypto theft and cybercrime have funded half of North Korea's nuclear
program.
Russia and Venezuela are both using crypto to evade U.S. sanctions.
Venezuela recently said that because of the bite of sanctions, they
are now moving to accept payments in crypto because that allows them to
get money that we, in Washington, cannot track.
The Treasury Department is reviewing more than $20 billion of
cryptocurrency that was laundered through a Russian-based
cryptocurrency exchange.
The Treasury Department has noted that Hamas, the Palestinian Islamic
Jihad, ISIS, and al-Qaida are all using crypto to finance terrorist
attacks globally.
Crypto is the preferred means of payment for fentanyl trafficking.
Chinese businesses that sell fentanyl chemical ingredients to Mexican
cartels have accepted millions in crypto payments. They have sold
enough ingredients to make more than $54 billion worth of fentanyl
pills. That is enough to kill 8.6 billion people, if you are counting.
Blockchain analytics firm Chainalysis said in January that virtual
currency is the dominant choice for buyers and sellers of child sexual
abuse content.
FinCEN basically said the same thing. It said that perpetrators of
online child sexual exploitation are increasingly using convertible
virtual currency to avoid detection.
I could go on and on. These are not cherry-picked statistics. These
are statistics from U.S. officials and from crypto firms, people who
are entrusted with protecting our national security and who care about
this stuff.
The Treasury Department asked for new rules to address this. Every
single one of those proposals was objected to either in the Financial
Services Committee, the Ag Committee, or in the Rules Committee.

{time} 1515

If that was all this bill did, that would be one thing. In fact, this
bill goes out of its way to make it weaker by basically saying that
anybody who uses unhosted wallets, decentralized, or DeFi services is
exempted from regulation, ignoring recommendations from both the Trump
and Biden administrations.
My Republican colleagues will boast that in this rule there is
specific language that says brokers and dealers are required to comply
with anti-money laundering requirements. They are already required to
do that. This bill does nothing to address that. It is exactly the
same. They are going to brag about saying it is now illegal to speed.
What we should have done is we should have made provisions to ban
anonymous actors, to prevent you from saying: I want to move crypto
from my account to yours, and I am going to move it through an
anonymous party so you can't tell what a bad guy I am. It should have
banned people from using digital asset mixers that allow you to take a
whole bunch of people, combine all their money together, and then give
you something where you can't trace it through.
If you want to understand how crazy this is, I would encourage you to
go to your bank and try to deposit $10,000 in cash at your bank. Your
bank will say: You have to tell me where that money came from. I am
going to take you behind the counter, and we are going to have to take
your picture and get your fingerprints, because I do not like money
laundering, and I am obliged to protect it.
By comparison, if you want to move a million dollars of crypto from
one person's account to another, send it through these mixers or send
it through these anonymizers, you can do it.
The CHAIR. The time of the gentleman has expired.
Ms. WATERS. Mr. Chair, I yield an additional 30 seconds to the
gentleman from Illinois.
Mr. CASTEN. Mr. Chair, we have got all of these mixers that are used.
Why were they not included in there? I don't know.
I know why the crypto industry doesn't want them included in there,
because they are profiting from people who are using these illicit
services.
The largest cryptocurrency exchange that stands to benefit from this
regime helped to finance a legal challenge to the Treasury Department's
case against Tornado Cash, which was the largest asset mixer in the
world.
This is a bad bill. It fails to address known problems. What it does
do, however, is make the United States safer for drug traffickers, for
terrorist funders, for child and drug traffickers, and for those who
buy and sell child pornography. I did not know those groups had such
advocates in Congress, but I am proud to oppose them and encourage all
my colleagues to do the same.
Mr. McHENRY. Mr. Chair, I yield 2 minutes to the gentleman from South
Dakota (Mr. Johnson), my good friend and the chair of the Commodity
Markets, Digital Assets, and Rural Development Subcommittee of the
Agriculture Committee.
Mr. JOHNSON of South Dakota. Mr. Chair, here in Congress, we are
supposed to be in the problem-solving business. My, oh, my, do we have
problems in the digital asset space.
In recent years, we have seen the FTX debacle, a debacle that
happened under the regulatory regime that some Members are apparently
so enamored with, a regime that does not work today. We have seen
chronic and disruptive overreach by the Securities and Exchange
Commission.
We have seen innovation and investment flow overseas. Mr. Chair, they
seek markets that are more predictable. We are the only G7 country that
hasn't figured this out yet.
Clearly, we have problems. I would submit that FIT21 is the solution.
For more than a year, French Hill and I, working with Chairs McHenry
and Thompson and Members on both sides of the aisle, have worked hard
together to craft a solution that increases regulatory predictability,
which increases consumer protection, and that will foster innovation.
I know that success has many fathers and mothers, and so I do thank
Messrs. McHenry, Thompson, Hill, Emmer, and Davidson on the Republican
side, and I do need to especially recognize my colleagues on the
Democratic side of the aisle, particularly Mr. Nickel and Ms. Caraveo,
who have invested countless hours in getting this bill right. They have
been joined by Representatives Himes, Crockett, Torres, Soto,
Gottheimer, and Davis. This success would not be possible without their
good-faith efforts, and I thank them.
Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.
It is no mystery why the crypto industry prefers to be regulated by
the CFTC rather than the SEC. Let's start with the substantial
differences in funding and staff for the CFTC compared to SEC.
In 2023, the CFTC employed roughly 680 full-time employees with an
annual budget of $365 million. Wow. The Securities and Exchange
Commission, the SEC, employed over 4,500 employees and had a budget of
over $2 billion.
Even with the limited funding provided to the CFTC under this bill,
which is capped at $40 million and set to expire after 4 years, the
CFTC's funding would be only one-fifth of the SEC's budget. Mr. Chair,
$40 billion is not sufficient to oversee more than 16,000
cryptocurrencies.

[[Page H3423]]

Let's not forget that the same Republicans who are bringing this bill
to the floor are the same ones who proposed cutting CFTC's budget last
year. Moreover, the CFTC is designed to deal mostly with sophisticated
institutional investors and traders rather than retail investors and
consumers. Therefore, the CFTC does not have the same level of
protections for retail investors and consumers.
Mr. Chair, I would simply say that we should look at this example.
The CFTC has no mandate like the SEC that requires entities to act in
the best interests of the investors or to put their clients' interests
first. This is just another reason why I am very concerned about the
light-touch regulatory regime under the CFTC.

Mr. Chair, I yield 5 minutes to the gentleman from California (Mr.
Sherman), who is also the ranking member of the Subcommittee on Capital
Markets.
Mr. SHERMAN. Mr. Chair, last week we had police week. This week, the
Republicans show us that they support crime in the suites. The effect
of this bill in the short term will be to disempower the most effective
investor protection crime investigation organization in the world, the
SEC.
The long-term objective of the crypto billionaire bros is to create a
new currency, and they have named it well. Cryptocurrency literally
means hidden money. If it ever becomes a currency, it means we will not
be able to enforce our tax laws, except on wage earners, and we will
not be able to enforce our laws against child traffickers, drug
dealers, and those who violate our sanctions.
The crypto bros have a lot of money. They make money by literally
making money. They spread it around all of Washington. They had Sam
Bankman-Fried do it. Now he is in jail, and others have stepped
forward.
They have a PR campaign. The Lakers don't play at ``enforce tax laws
arena.'' They don't play at an arena dedicated to law enforcement. They
play at Crypto.com Arena.
In spite of all that money and power, three-quarters of Democrats
voted ``no'' on this bill when it was before our committee. There are
those who say they want clarity. We have clarity. The SEC has
jurisdiction. What they really want is a patina of regulation, as
little regulation as possible to claim to be regulated.
Now, this bill would be bad enough if we were dealing with the
original statute. I know a lot of my colleagues have had meetings in
their offices, and they were told about this bill weeks ago or months
ago. Some are leaning toward voting for it because they don't know that
they dropped a new title in the bill just a few weeks ago.
What does that new title do? Does it prohibit secret wallets, self-
custody wallets? No. Does it outlaw the mixers whose sole purpose is to
mix up law enforcement? No. What does this new title do? It defines an
investment contract in a new way, designed to make this bill not just
applicable to crypto, but it says our regular stocks and bonds can be
put on blockchain and have no regulation from the SEC. It is a dagger
at the hundred-trillion-dollar capital markets we have that finance our
whole economy. It doesn't just say you are moving from the SEC's tough
regulation to the CFTC's weak regulation. It allows crypto to get no
regulation by defining themselves as an investment contract.
This is a bill that will gut regulation of crypto and may gut
regulation of all our capital markets, but it goes beyond that. Its
ultimate purpose is to move forward with this cryptocurrency project.
Right now, crypto is not a currency. There are very few purchases of
goods with crypto. You can't buy a sandwich, but the very few times, as
Mr. Casten pointed out, that crypto is used as a means of exchange, it
is used by the worst criminals in the world. If crypto does become a
currency, then we will not be able to enforce our other laws.
Now, we have to understand every time a billionaire cheats on his
taxes, a member of the Freedom Caucus earns his wings. The patriotic
anarchists come forward and say we want a strong America and we want to
destroy the power of the American Government. You can't have it both
ways.
This is a bill that in the short term means no regulation of crypto;
not just lighter regulation under the CFTC but no regulation under
their new title. It is a bill that could gut all securities regulation
for the stocks and bonds that power the American economy.
In the longer term, it creates a competitor to the U.S. dollar which
has one advantage right in the name: hidden money. Hide your money from
the IRS, from our sanctions enforcers, from everyone involved in the
U.S. Government.
Finally, crypto declares that it wants to partially displace the U.S.
dollar as a reserve currency.
The Acting CHAIR (Mr. Curtis). The time of the gentleman has expired.
Ms. WATERS. Mr. Chair, I yield an additional 30 seconds to the
gentleman from California.
Mr. SHERMAN. Mr. Chair, you have to understand how important it is.
We, frankly, are not fiscally responsible in this House. We don't
collect nearly as much in taxes as we spend in benefits. We are able to
do that without too much harm because of the role of the U.S. dollar as
a reserve currency. We have fiscal policies that would make Argentina
blush, but we are able to do it. The crypto bros see the incredible
amount of money and power the U.S. Government has by being the world's
reserve currency and they say no. They want to appropriate that for
themselves.
Mr. McHENRY. Mr. Chair, may I inquire how much time I have remaining.
The Acting CHAIR. The gentleman from North Carolina has 19\1/2\
minutes remaining.
The gentlewoman from California has 7\1/2\ minutes remaining.
Mr. McHENRY. Mr. Chair, I yield 1\1/2\ minutes to the gentleman from
North Carolina (Mr. Nickel), my colleague and friend who has been a
great leader on digital assets and pragmatic policy here in the House.
Mr. NICKEL. Mr. Chair, I rise in support of the Financial Innovation
and Technology for the 21st Century Act, or FIT21, which I am proud to
cosponsor.
This legislation is a product of hundreds and hundreds of hours of
bipartisan collaboration, and I was proud to work with Chair McHenry,
Digital Assets Subcommittee Chair Hill, and members of the House
Financial Services Committee to get this bill on the floor.
This is a big deal. We are currently relying on 90-year-old
securities laws written before the internet even existed. Congress has
never voted on a regulatory structure for crypto.
Roughly 20 percent of Americans have invested, traded, or used
crypto. It is not going anywhere. Whether you love crypto or you hate
it, you should support regulation, because the status quo just isn't
working. We can't wait for the next FTX to take action.
It is clear there are regulatory gaps between the SEC and the CFTC.
Right now, the United States is the global leader in financial services
and technology. If we still want to hold this position in 50 years,
then we need to pass FIT21.
Support for U.S. leadership in digital assets shouldn't be a partisan
issue. I urge my colleagues on both sides of the aisle to support this
legislation.
Mr. Chair, I include in the Record a letter of support from the
Chamber of Progress outlining how FIT21 lays out strong rules of the
road, consumer protections, and supports innovation.

[From Chamber of Progress]

HR 4763: Financial Innovation and Technology for the 21st Century Act
(FIT21): Strong Rules, Consumer Protections, and More Oversight Over
Digital Assets

We need strong, clear federal rules and oversight over the
digital assets industry that embrace innovation while
protecting consumers and the integrity of markets.
HR 4763, the Financial Innovation and Technology for the
21st Century Act (FIT21), is the first bill regulating the
digital assets industry that has received bipartisan approval
from both the House Financial Services and House Agriculture
Committees. It is scheduled for a floor vote this week.

House Democrats Supported This Legislation

A cross section of Members spanning the Democratic Caucus
have recognized that this bill provides an effective and
needed regulatory framework for digital assets. The
legislation:
Passed the House Financial Services Committee on July 26
with six Democratic votes: Reps. Himes, Gottheimer, Torres,
Horsford, Nickel, Pettersen.
Passed the House Agriculture Committee by voice vote on
July 27.

What House Dems Are Saying About HR 4763

Rep. Ritchie Torres (D-NY): ``For me, the lack of
protection for retail investors underscores the fierce
urgency around passing a

[[Page H3424]]

market structure bill to protect the average American
consumer.''
Rep. Jim Himes (D-CT): ``I'm a deep skeptic of this
industry, but we deserve better than the status quo.''
Rep, Wiley Nickel (D-NC): ``I firmly believe in the SEC's
mission to protect investors, but for this to be effective,
Congress needs to pass legislation with a clear regulatory
framework.''
Rep. Yadira Caraveo (D-CO): ``This is not a perfect bill.
But I believe that it is a good step in the right
direction.''

Bill Expands the Federal Government's Role in Regulating Digital Assets

Current securities laws and regulations do not account for
the complexities of digital assets. This legislation expands
the authority of the CFTC and SEC, giving them joint
oversight over all digital assets, allowing them to issue
joint rulemakings, and ensuring market safety and investor
protection. HR 4763 also gives the SEC clear authority over
certain digital assets that do not meet requirements to be
regulated by the CFTC. This allows the SEC to allocate their
limited resources to regulating solely those digital assets
that fall within its jurisdiction. Additionally, the CFTC
will receive an increase in funding to adequately fulfill
their oversight responsibilities.
HR 4763 also requires the GAO to conduct studies on the
development of emerging technology in digital assets, like
non-fungible tokens (NFTs), and directs the CFTC and SEC to
study the impact of digital assets on markets and investors
through codified FinTech programs and Joint Advisory
Committees.

Protects Consumers from the Next FTX

Given that roughly 20 percent of Americans have invested,
traded or used cryptocurrency, the digital asset industry
will continue to attract American investors for years to
come. HR 4763 provides much-needed consumer protection by
filling the regulatory gaps between the SEC and CFTC,
creating accountability for digital asset companies through
registration and disclosures, requiring companies to
establish policies to mitigate potential conflicts of
interest, and giving regulators increased power over bad
actors.
Communities of color are investing in digital assets at a
higher rate than most Americans. According to Pew Research
Center polls in 2021 and 2022, some 20 percent of Black,
Hispanic and Asian U.S. adults have bought, traded or used
cryptocurrency, compared with 13 percent of white adults.
These communities are at increased risk of losing their
investments if similar events like FTX, Terra/Luna and others
continue to happen without regulatory safeguards for
Americans.

Protects America's National Security & Ensures American Oversight Over
Crypto

By enhancing oversight of digital assets through the CFTC
and SEC, HR 4763 ensures all digital assets will be subjected
to transparency and compliance metrics that would deter
illicit financing, money laundering and other financial
crimes. The ability for regulators to issue clear rules for
the digital asset industry will prevent threats to our
financial system and keep digital asset companies from
relocating abroad to countries with fewer rules.
There are good national security reasons to keep the
industry under the Federal government's watchful eye. For
example, after Vladimir Putin ordered an invasion of Ukraine,
the U.S. government released economic sanctions against
Russia that included instructions for American digital asset
exchanges to block Russian users from handling currency
through their services.
While U.S.-based digital asset exchanges abided by our
sanctions, international exchanges like Binance refused,
continuing to serve Russian users and creating a potential
loophole for Russian actors to finance war operations through
their markets. Throwing away our jurisdiction over an
emerging global financial industry, no matter its flaws,
would jeopardize America's influence on the world stage.

{time} 1530

Ms. WATERS. Mr. Chair, I yield 4 minutes to the gentleman from
Illinois (Mr. Foster), who is the ranking member of the Subcommittee on
Financial Institutions and Monetary Policy.
Mr. FOSTER. Mr. Chair, I thank Chair Waters for yielding.
Mr. Chair, I rise in opposition to this bill.
I am encouraged by the dialogue and collaboration that has taken
place between the House Financial Services Committee and the House Ag
Committee on this bill. I believe in the potential of distributive
ledger technology. I am, in fact, the co-chair of the Congressional
Blockchain Caucus and perhaps the only Member of Congress who has
actually programmed a blockchain client.
However, I cannot support this bill in its current form. To that end,
my office submitted three constructive clarifying amendments, none of
which were made in order by the Rules Committee.
This legislation contains several fatal flaws.
First, this legislation largely shifts oversight of the digital
assets industry away from the Securities and Exchange Commission which
has a long track record of successfully protecting retail investors
from abuse in the financial markets toward the CFTC which has
traditionally overseen markets with significantly less retail
participation.
Secondly, it would create a safe harbor for wannabe pirates through a
so-called intent to register that shields crypto firms from SEC
investor protection rules before the agencies even have time to write
the rules.
Thirdly, the bill was not crafted through regular order. This version
of the bill contains a new and dangerous title that was never
considered by the Financial Services Committee, title II, which would
create a new class of investment in contract assets which has the
potential to undermine decades of legal precedent governing the
securities laws, and it would create opportunities for regulatory
arbitrage.
Instead, it was airdropped in during closed-door negotiations and
before it was materialized for a final vote today. That is not regular
order.
Finally, this bill also fails to address fundamental challenges of
digital assets related to uncontrolled anonymity of self-hosted digital
wallets that I believe must be addressed for the digital asset industry
to accede to a healthy and sustainable future over the long term.
For example, to be regulated as a commodity under this bill, no
person or group can have owned more than 20 percent of the assets at
any point over the preceding 12 months.
Mr. Chair, how can this possibly be guaranteed when unknown fractions
of ownership are held in anonymous self-hosted wallets?
This bill requires the SEC to issue beneficial ownership disclosure
rules, however, the SEC has little or no means of compelling
individuals or firms in other countries to comply with such a
requirement.
This beneficial ownership test could be skewed by noncompliant
foreign owners, by individuals spreading their holdings across multiple
wallets, or by dead or lost crypto that artificially inflates the
amount of the asset that is currently judged to be in circulation.
The list goes on.
This legislation actually ties the hands of the top financial crimes
watchdog, the FinCEN, by limiting their ability to respond to issues
related to self-custody of digital wallets which they will tell you is
the main issue that they struggle with every day in trying to prevent
financial crimes.
Given the widespread use of digital assets by bad actors, we should
strengthen the authorities of FinCEN and not weaken them.
My colleagues and I, as I said, offered several constructive
amendments to this bill to clarify and address these issues, and the
Rules Committee, controlled by the majority, unfortunately, chose to
exclude every one of them from today's debate.
Given the content of this bill and its failure to address these
issues, I cannot support this bill, and I encourage my colleagues to
vote ``no.''
Mr. McHENRY. Mr. Chairman, I yield 2 minutes to the gentleman from
Minnesota (Mr. Emmer), who is a great leader for digital assets,
cryptocurrency, and innovation.
Mr. EMMER. Mr. Chair, today we have an opportunity to determine
whether the next iteration of the internet will be designed by
Americans or if it will, instead, reflect the values of some other
nation. FIT21 gives us that opportunity and unlocks a larger
conversation beyond innovation.
This bill is about national security. It is about consumer
protection. It is about global competitiveness. It is about shaping
what the future global digital economy looks like and how it functions.
Currently, all online transactions are intermediated, but as we move
deeper into the digital age, digital assets are key to decentralizing
the internet so Americans can transact directly with each other, no
intermediary needed.
Without crypto, we don't have this ability, and I think giving
Americans the choice to do business through an intermediary or directly
with each other is important. Having that choice will fundamentally
alter the digital economy, unlocking new opportunities for Americans
and individuals across the world in ways we haven't even begun to
contemplate.

[[Page H3425]]

However, this Congress can no longer stand by as regulators squander
this opportunity right within our grasp. This administration has
demonstrated they simply are not willing to allow the digital asset
industry to innovate in the United States. For every legal
inconsistency or regulatory hurdle they produce, instead of coherent
and informed guidance, they drive American digital asset users into
less safe jurisdictions.
Mr. Chair, this is why FIT21 is significant. It sets clear and
consistent rules for American innovators. Among the many important
provisions in this bill is my Securities Clarity Act, bipartisan
language tailored specifically to digital assets that provides the
legal flexibility for a digital asset project to transition from
centralization to decentralization.

This transition is critical to the future of the peer-to-peer digital
economy. I thank the chairmen and my friends on the other side of the
aisle for working with me to incorporate this section into the bill
today. Their work on this extensive framework will allow Americans to,
once again, lead the way.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, may I inquire as to the time remaining on
both sides.
The Acting CHAIR (Mr. Van Drew). The gentleman from North Carolina
has 16 minutes remaining. The gentlewoman from California has 4 minutes
remaining.
Mr. McHENRY. Mr. Chairman, I yield 2 minutes to the gentlewoman from
Colorado (Ms. Caraveo), who has been a fantastic leader on the
Agriculture Committee on digital assets.
Ms. CARAVEO. Mr. Chair, I thank Mr. McHenry for yielding.
Mr. Chair, I rise today in support of H.R. 4763, the Financial
Innovation and Technology for the 21st Century Act, because the time
has come for us to establish a comprehensive regulatory system for
digital assets.
About 70 percent of digital assets are currently unregulated. That
leaves a large number of retail investors unprotected in a volatile
market where many people have already lost their life savings.
There is clearly a gap in oversight over our digital asset cash
markets, and I believe the status quo is unacceptable. Despite previous
volatility, a significant number of Americans continue to own and
invest in digital assets in an unprotected manner.
As Congress falls behind other nations in the race to establish a
clear regulatory framework, we run the risk of industry players taking
their services and customers abroad, including to foreign jurisdictions
with insufficient regulations.
Since we began this process over a year ago, I made it a point to
work across the aisle with Chairs Thompson and Johnson to improve this
bill as much as possible. I am happy to report that the bill retains
many of the provisions that I fought for, with one of the most
important pieces being a funding mechanism for the CFTC. Increased
funding will be vital for the CFTC as they take on further oversight
activities and engage in a rulemaking process.
I thank my colleagues, both Democrats and Republicans, who have
helped strengthen the consumer protections in this bill, including
strengthening disclosure requirements, market integrity, and
transparency. Further protections include stricter regulatory
requirements for emerging financial technologies, prohibiting
commingling of customer funds with firm funds, and establishing a
process of temporary oversight before rulemaking is complete.
I am excited about the innovation these technologies have to offer,
which is why I believe they deserve a comprehensive regulatory
environment, but making sure customers and retail investors are
protected as they navigate this space remains a top priority. I believe
we have made significant improvements in that direction.
I am looking forward to continuing to move this bill forward and
taking a first real step toward regulation of a market that more of our
constituents are engaging in every day.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, the gentlewoman from California has indeed
been a great advocate for consumer protection.
Mr. Chair, I yield 1 minute to the gentleman from New Jersey (Mr.
Gottheimer).
Mr. GOTTHEIMER. Mr. Chairman, I rise in support of the bipartisan
Financial Innovation and Technology for the 21st Century Act. This
well-reasoned and thoughtful bipartisan legislation is the result of
rigorous research and bipartisan negotiation by the Financial Services
Committee, which I proudly helped lead with Representatives McHenry and
Hill.
I thank them both and all of my colleagues on both sides of the aisle
who have worked so hard to make sure that consumers in our country are
protected.
Cryptocurrency is here, and it has a tremendous economic potential
for our country. My State, New Jersey, ranks second nationwide in
crypto ownership by proportion, and the key is now in making sure we
protect Americans who own it and ensure our country can realize the
economic and jobs potential it has to offer.
For that to happen, we need rules of the road to guide entrepreneurs
and businesses, to embrace innovators, and to protect consumers.
This bill offers protections that are fit for the 21st century. FIT21
takes commonsense steps to safeguard consumers in their investments and
strengthen market oversight.
The legislation includes key transparency and accountability
measures.
The Acting CHAIR. The time of the gentleman has expired.
Mr. McHENRY. Mr. Chair, I yield an additional 30 seconds to the
gentleman from New Jersey.
Mr. GOTTHEIMER. At the same time, FIT21 eliminates regulatory
redundancies so the SEC and CFTC work together to protect investors and
crack down on nefarious crypto users.
Finally, this legislation spurs American-led innovation, encouraging
entrepreneurs and businesses to invest here instead of going abroad to
other nations with no consumer protections.
Mr. Chair, I encourage my colleagues to vote for this important
innovative and bipartisan legislation. It is fit to become law if we
work together.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from New
York (Mr. Molinaro), who is a leader on the Agriculture Committee.

Mr. MOLINARO. Mr. Chairman, for far too long, the U.S. digital asset
ecosystem has been plagued by regulatory uncertainty. Consumers, yes,
have fallen victim to scams, hacks, market manipulation, and
bankruptcies after intermediaries misused customer funds and were
unable to meet their obligations.
Thanks to the leadership of Chairmen McHenry and Thompson,
Representatives Dusty Johnson and French Hill, we finally have a
framework, thanks to the work of many before us today that will set a
regulatory foundation to protect consumers and innovators alike all the
while ensuring future American leadership in this space.
This bipartisan bill does, in fact, provide consumer protections in a
functional, regulatory framework that will ensure the digital asset
ecosystem is safe for investors.
This bill accomplishes this by delivering the transparency consumers
expect and need to make informed decisions and prevent brokers from
engaging in manipulative practices that harm American investors.
This regulatory certainty will also drive financial inclusion by
promoting technology that can foster economic growth in underserved
communities and expand opportunities for economic participation.
Mr. Chair, I encourage my colleagues to support the bill.
Ms. WATERS. Mr. Chair, I continue to reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1\1/2\ minutes to the gentleman from
Ohio (Mr. Davidson), who is the vice chair of the Individual Assets and
Financial Technology Subcommittee and the OG, as they say, in the
crypto space.
Mr. DAVIDSON. Mr. Chair, I rise in strong support of this long
overdue legislation. It builds on the framework that my colleagues and
I have worked on for at least 6 years beginning with the Token Taxonomy
Act in 2018.

[[Page H3426]]

Its core is a bright-line test to define what digital assets or
securities are regulated by the SEC and which are commodities under the
jurisdiction of the CFTC.
Innovators and investors will no longer risk their freedom and their
fortunes by simply launching a company and raising capital. The law
will be clear, and regulation by selective enforcement must end.
Additionally, and perhaps most notably, this bill also provides
first-ever Federal level protection for self-custody of digital assets.
This protection, which is very intentional, mirrors my Keep Your Coins
Act, and it is a giant step toward restoring the right to privacy and
private property protecting permissionless transactions using digital
assets.
In an account-based financial system where Americans must rely on
intermediaries, self-custody provides the only protection against third
parties controlling the individual's transactions.
Thirdly, self-custody provides the first line of consumer protection
where individuals can eliminate third-party liabilities who hold their
assets.
For too long we have pushed innovation and investment in digital
asset projects overseas as Congress has constantly failed to bring the
clarity that we need. We finally have the chance to end this trend and
solidify ourselves as the leaders in this industry.
Mr. Chair, I urge the Senate to quickly take up this bipartisan
legislation and send it to the President's desk as soon as possible.
Please vote ``yes.''

{time} 1545

Ms. WATERS. Mr. Chair, I include in the Record the following
statements:
The Statement of Administration Policy from the Biden administration
opposing this bill;
The statement from SEC Chair Gensler raising serious concerns about
this bill;
A letter from the Treasury Department to me, dated July 20, 2023,
expressing serious concerns about this bill;
A letter from the North American Securities Administrators
Association opposing this bill; and
A letter from 48 stakeholders opposing this bill.

Statement of Administration Policy

H.R. 4763--Financial Innovation and Technology for the 21st Century
Act--Rep. Thompson, R-PA, and 11 cosponsors

The Administration opposes passage of H.R. 4763, which
would affect the regulatory structure for digital assets in
the United States. The Administration is eager to work with
Congress to ensure a comprehensive and balanced regulatory
framework for digital assets, building on existing
authorities, which will promote the responsible development
of digital assets and payment innovation and help reinforce
United States leadership in the global financial system. H.R.
4763 in its current form lacks sufficient protections for
consumers and investors who engage in certain digital asset
transactions. The Administration looks forward to continued
collaboration with Congress on developing legislation for
digital assets that includes adequate guardrails for
consumers and investors while creating the conditions needed
for innovation, and further time will be needed for such
collaboration.
____

May 22, 2024.

Statement on the Financial Innovation and Technology for the 21st
Century Act

(By Gary Gensler, Chair, Securities and Exchange Commission)

Introduction

For 90 years, the federal securities laws have played a
crucial role in protecting the public. These critical
protections were created in the wake of the Great Depression
after many Americans suffered the consequences of
inadequately regulated capital markets. We saw sky-high
unemployment, bread lines, and shantytowns springing up due
to mass foreclosures.
Back then, the rules didn't exist. That's why President
Roosevelt and Congress created the SEC and the laws it
administers.
At their core is the critical concept of registering
securities that will be offered to the public and registering
the intermediaries that facilitate the exchange of those
securities. For securities, registration means that issuers
provide robust disclosures and are liable if their material
statements are untruthful. For intermediaries, registration
brings with it rulebooks that prevent fraud and manipulation,
safeguards against conflicts of interest, proper disclosures,
segregation of customer assets, oversight by a self-
regulatory organization, and routine inspection by the SEC.
Today, these rules do exist.
Many market participants in the crypto industry, however,
have shown their unwillingness to comply with applicable laws
and regulations for more than a decade, variously arguing
that the laws do not apply to them or that a new set of rules
should be created and retroactively applied to them to excuse
their past conduct. Widespread noncompliance has resulted in
widespread fraud, bankruptcies, failures, and misconduct. As
a result of criminal charges and convictions, some of the
best-known leaders in the crypto industry are now in prison,
awaiting sentencing, or subject to extradition back to the
United States.
The SEC, during both Republican and Democratic
Administrations, has allocated enforcement resources to
holding crypto market participants accountable. Courts have
time and again agreed with the SEC, ruling that the
securities laws apply when crypto assets or crypto-related
investment schemes are offered or sold as investment
contracts.

The Financial Innovation and Technology for the 21st Century Act

The Financial Innovation and Technology for the 21st
Century Act (``FIT21'') would create new regulatory gaps and
undermine decades of precedent regarding the oversight of
investment contracts, putting investors and capital markets
at immeasurable risk.
First, the bill would remove investment contracts that are
recorded on a blockchain from the statutory definition of
securities and the time-tested protections of much of the
federal securities laws.
Further, by removing this set of investment contracts from
the statutory list of securities, the bill implies what
courts have repeatedly ruled--but what crypto market
participants have attempted to deny--that many crypto assets
are being offered and sold as securities under existing law.
Second, the bill allows issuers of crypto investment
contracts to self-certify that their products are a
``decentralized'' system and then be deemed a special class
of ``digital commodities'' and thus not subject to SEC
oversight. Whether something is a ``digital commodity'' would
be subject to self-certification by ``any person'' that files
a certification. The SEC would only have 60 days to review
and challenge the certification that a product is a digital
commodity. Those that the SEC successfully challenges would
be re-classified as restricted digital assets and subject to
the bill's lighter-touch SEC oversight regime that excludes
many core protections. There are more than 16,000 crypto
assets that currently exist. Given limits on staff resources,
and no new resources provided by the bill, it is implausible
that the SEC could review and challenge more than a fraction
of those assets. The result could be that the vast majority
of the market might avoid even limited SEC oversight
envisioned by the bill for crypto asset securities.
Third, the bin's regulatory structure abandons the Supreme
Court's long-standing Howey test that considers the economic
realities of an investment to determine whether it is subject
to the securities laws. Instead, the bill makes that
determination based on labels and the accounting ledger used
to record transactions. It is akin to determining the level
of investor protection based on whether a transaction is
recorded in a notebook or a software database. But it's the
economic realities that should determine whether an asset is
subject to the federal securities laws, not the type of
recordkeeping ledger. The bill's result would be weaker
investor protection than currently exists for those assets
that meet the Howey test.
Fourth, for those crypto investment contracts that would
still fall under the SEC's remit the bill seeks to replace
Roosevelt's investor protection framework with fewer
protections than investors are afforded in every other type
of investment. Doing so increases risk to the American
public.
Fifth, the bill specifically excludes crypto asset trading
systems from the definition of an exchange and thus removes,
for investors on crypto asset trading platforms, the
protections that benefit investors on registered exchanges.
These crypto trading platforms would be able to legally
comingle their functions in a way that fosters conflicts of
interest, may allow trading against their customers, and
reduces custody protections for their customers.
Sixth, the legislation creates an exemption from regulation
under this Act for any entity or organization that falls
under a broadly defined category called ``Decentralized
Finance.'' Any number of firms would qualify for the
exemption, regardless of potential conflicts of interest.
This would include firms that intermediate crypto securities
transactions.
Finally, the bill could be read to functionally eliminate
the current Regulation A and Regulation D offering
restrictions for crypto securities by creating a new exempt
offering framework. Non-accredited investors would be allowed
to purchase crypto assets worth up to 10 percent of their net
worth or annual income before the issuer would be required to
provide any disclosure. That's a lot of risk for ordinary
investors to take on without disclosure.

Risks to the Broader Capital Markets

The self-certification process contemplated by the bill
risks investor protection not just in the crypto space; it
could undermine the broader $100 trillion capital markets by
providing a path for those trying to escape robust
disclosures, prohibitions preventing the loss and theft of
customer funds, enforcement by the SEC, and private rights of
action for investors in the federal courts. It

[[Page H3427]]

could encourage non-compliant entities to try to choose what
regulatory regimes they wish to be subjected to--not based on
economic realities, but potentially based on a label.
What if perpetrators of pump and dump schemes and penny
stock pushers contend that they're outside of the securities
laws by labeling themselves as crypto investment contracts or
self-certifying that they are decentralized systems? The SEC
would only have 60 days to contest their self-certification.

Conclusion

History has shown for 90 years that robust securities
regulation both creates trust in markets and fosters
innovation. There are countless examples of American
companies across many industries that have made world-
changing innovations while also registering their securities.
It is through the securities laws that we get full, fair, and
truthful disclosure that arms investors with the information
they need to make investment decisions and enables regulators
to guard against the types of fraud we've seen in the crypto
field.
The crypto industry's record of failures, frauds, and
bankruptcies is not because we don't have rules or because
the rules are unclear. It's because many players in the
crypto industry don't play by the rules. We should make the
policy choice to protect the investing public over
facilitating business models of noncompliant firms.
____

Department of the Treasury,

Washington, DC, July 20, 2023.
Hon. Maxine Waters,
Ranking Member, Committee on Financial Services, House of
Representatives, Washington, DC.
Dear Representative Waters: Thank you for your June 23,
2023, letter requesting feedback on a legislative proposal to
revise the market structure for digital assets.
As you know, in response to President Biden's March 9,
2022, Executive Order 14067 on Ensuring Responsible
Development of Digital Assets, the U.S. Department of the
Treasury (``Treasury'') prepared reports covering a range of
topics related to digital assets, including current use cases
of digital assets and their effects on consumers, investors,
and businesses. In addition, the Financial Stability
Oversight Council (''FSOC'') published a report on the
potential financial stability risks posed by digital assets.
Events that have occurred since publishing these reports--
including the failures of large crypto firms, runs on
stablecoins, and losses to investors and consumers--have
confirmed and reinforced many of the risks and concerns
identified in the reports.
These events have also reinforced the reports'
recommendations for how to address these risks. First, the
existing market regulatory framework is designed to address
many of the risks posed by digital assets. For example, the
protections and principles of the existing framework--
including governance and risk management standards, and
protections against commingling of customer assets--are
directly responsive to the failures of large crypto
platforms. Accordingly, where existing requirements apply,
they must be enforced rigorously so that the same protections
and principles that apply in markets for other financial
assets apply in markets for digital assets.
At the same time, the FSOC report also identified discrete
gaps in existing regulatory authority and recommended that
Congress expand regulators' authorities to address these
gaps. First, the FSOC recommended that Congress provide
authority over the spot market for non-security digital
assets. Today, these markets are subject to limited direct
federal regulation and, as a result, are not subject to the
same protections that are designed to ensure orderly trading,
prevent conflicts of interest, and protect investors. Second,
the FSOC recommended that Congress ensure that regulators
have visibility into the activities of affiliates and
subsidiaries of federally regulated intermediaries. Today,
digital asset platforms may have affiliates or subsidiaries
operating under different regulatory frameworks, and no
single regulator may have visibility into the risks across
the entire business. Finally, and as we have discussed
previously, FSOC recommended establishing a regulatory
framework for stablecoins.
In developing these recommendations and when considering
legislative proposals, we are guided by our and the FSOC's
prior work on digital assets. More specifically,
Existing authorities should be preserved. As discussed
above, the existing market regulatory framework is designed
to address many of the risks of digital assets. Exceptions
and limitations to the existing framework--whether on a
provisional or ongoing basis--would leave investors without
critical protections and undermine market integrity. For
example, provisional or temporary exemptions should not
exclude core protections that are critical to an effective
market regulatory regime, such as requirements that ensure
orderly trading and to protect against conflicts of interest.
Immunizing issuers and platforms from enforcement of prior
violations prevents redress of harms done to investors and
undermines market integrity. On an ongoing basis, limiting
market regulators ability and discretion to act would
undermine their ability to provide clarity to market
participants.
Same risk, same activity, same regulatory outcome.
Activities that bear the same risks should be subject to the
same regulatory outcome. To that end, when creating new
regulatory categories--e.g., new pathways to access capital
markets, or distinguishing a type of trading platforms--
policymakers must consider carefully how existing products or
services may be affected, either disadvantaged relative to
the new category or migrating to take advantage of more
favorable treatment. Technological differences may be
relevant to regulatory treatment, but only insofar as these
distinctions inform the conduct of the activity and how risks
manifest. The process for accessing capital markets, along
with the conduct of secondary market activity within those
markets, should reflect the underlying risks, not the
technology used. Fraud, misstatements, and other misconduct
in digital asset markets do not suggest that the underlying
technology is associated with a reduction in or change to the
underlying risks for investors. Moreover, regulatory
distinctions based on technology alone are prone to arbitrage
or obsolescence, in part because they do not always
appropriately reflect the underlying risks. Finally,
regulatory arbitrage also may have a wide range of financial
stability and other risks if activities that bear the same
risks are subject to different rules or if firms can operate
in a manner that prevents regulators from assessing the
totality of the organization's risks. Today, the operations
and organizational structures of digital asset trading
platforms may result in having different regulatory regimes
for different affiliates or subsidiaries, such that no single
regulator has a view into operations of the whole. By adding
new regulatory distinctions without appropriately addressing
the underlying risks of the activity or conduct, the proposal
could amplify these risks.
Robust regulation of spot markets. Investors in non-
security digital asset spot markets, which includes many
retail investors, should have the same basic protections as
are present in other trading markets. Accordingly, and
consistent with the principles above, regulatory authority
should cover a range of subjects, including conflicts of
interest, abusive trading practices, margin, trade reporting,
governance, capital, recordkeeping, governance, custody, and
settlement. Regulatory authority should be accompanied by
resources sufficient to ensure that implementation is
effective.
We appreciate your leadership on these issues and share
your concerns that many digital assets present significant
risks to consumers, investors, and businesses, and have the
potential to pose significant risks to the broader financial
system. We also appreciate your engagement with Treasury on
these issues, and we look forward to working with you and
your staff in the future. If you have any further questions,
please do not hesitate to contact the Office of Legislative
Affairs.
Sincerely,
Jonathan Davidson.
North American Securities Administrators Association,
Inc.,
May 21, 2024.
Re Vote NO on H.R. 4763, the Financial Innovation and
Technology Act for the 21st Century Act, As Amended

Hon. Mike Johnson,
Speaker, House of Representatives,
Washington, DC.
Hon. Hakeem Jeffries,
Democratic Leader, House of Representatives,
Washington, DC.
Dear Speaker Johnson and Democratic Leader Jeffries: On
behalf of the North American Securities Administrators
Association, Inc. (``NASAA''), I write to express strong
opposition to H.R. 4763, the Financial Innovation and
Technology for the 21st Century Act, as amended (``H.R.
4763''). In short, H.R. 4763 would create a bespoke, light-
touch regime under federal securities and commodities laws to
benefit market participants that elect to use blockchain and
other distributed ledger technologies (``DLTs'') to raise
capital, manage risk, and trade products. As explained below,
over time, this bill could upend decades of industry,
judicial, legislative, and regulatory work to build capital
markets that are the gold standard. Near-term, the bill would
nullify or otherwise severely complicate the ability of
securities regulators to fulfill their missions.
To begin, H.R. 4763 would supplant long-standing and
critical components of securities laws through the
introduction of new defined terms into our federal market
frameworks for products such as ``digital assets,''
``investment contract assets,'' and ``digital commodities.''
Indeed, the point of entry to access this regime would be the
definition of a ``digital asset.'' The bill would define such
products as any fungible digital representation of value that
(i) can be exclusively possessed and transferred, person to
person, without necessary reliance on an intermediary, (ii)
is recorded on a cryptographically secured public distributed
ledger, and (iii) is not a product enumerated in H.R. 4763,
which in short is a list of selected products treated as
securities and commodities under federal law. With respect to
``digital assets'' that run on a DLT that is certified as
``decentralized,'' meaning no one person or entity had
``unilateral authority'' during the lookback period to
control the operation of or access to the system, H.R. 4763
would treat them as ``digital commodities.'' This designation
would place them and associated intermediaries under the
Commodity Futures Trading Commission (``CFTC''). By contrast,
for those ``digital assets'' that run

[[Page H3428]]

on a DLT that is not ``decentralized'' enough to qualify as a
``digital commodity,'' H.R. 4763 would treat them as
``digital assets,'' ``restricted digital assets'' or
``securities,'' depending on the facts. This designation
would place or keep them and associated intermediaries under
the Securities and Exchange Commission (``SEC''). Alarmingly,
H.R. 4763 would define ``investment contract assets'' by
carrying over the ``digital assets'' definition and then
essentially carving the product out of federal securities
laws, thereby creating a new gap, specifically the investment
contracts assets gap with no federal market regulator in
charge.
Staying on the bill's impact on the SEC's regulation of
``digital assets,'' the legislation would establish a new
minimally transparent market for transactions ``involving the
offer or sale of units of a digital asset'' that meet
specified criteria. In short, H.R. 4763 would create an
exemptive pathway for raising capital under the Securities
Act of 1933 (``1933 Act''). Issuers relying on the exemption
could raise as much as $75 million within a 12-month period
with certain limits on sales to non-accredited investors.
Importantly, while H.R. 4763 would prevent state
governments from requiring issuers to register their digital
asset offerings with the states, the legislation would
preserve the ability of states to investigate and if
appropriate bring enforcement actions for fraud and require
notice filings and associated fees. Anti-fraud authority and
notice filings are important tools that mirror existing state
authority for certain other federal ``covered securities.''
However, they are insufficient regulatory tools when it comes
to authority meant to stop potential harm before it is
inflicted on retail investors. Unfortunately, fraud tied to
the offer and sale of digital asset securities has been and
continues to be a top investor threat.
Further, H.R. 4763 would introduce several new defined
terms under federal securities law for intermediaries
associated with ``digital assets'' such as a new category
called a ``digital asset broker.'' Creating such bespoke new
categories, particularly when they would or could be
redundant of existing categories such as broker-dealer
agents, would add complexity and costs to our federal market
frameworks, with no net-benefit for investors. Indeed, years
after the adoption of SEC Regulation Best Interest and Form
CRS, many investors still struggle to distinguish between
broker-dealer agents and investment adviser representatives.
Injecting new, largely redundant digital asset intermediaries
would only create more confusion and more conflicts for
retail investors.
Undoubtedly, the deregulatory nature of this bill would
prompt so-called traditional market participants to explore
the use of DLTs if only to access a regime that has less
transparency and less robust standards than the present one.
We have seen time-and-again that market behaviors shift to
more opaque areas of the markets, a move observable most
recently in the now widespread use of the SEC Regulation D,
Rule 506(b) exemption in lieu of public offerings. In
addition to further reducing transparency in our markets,
such a shift would create new competition concerns,
particularly for small market participants who generally
cannot afford to use the latest technology.
In sum, we believe this legislation began as a well-
intentioned effort to fill what was described initially as a
potential regulatory gap for so-called virtual currencies.
Fast forward to today, the legislation that has emerged in
the form of H.R. 4763 introduces anti-competitive, overly
complicated, costly, and unwarranted changes to the laws that
have protected investors and promoted robust capital markets
for decades.
Should you have any questions, please do not hesitate to
contact me or Kristen Hutchens, NASAA's Director of Policy
and Government Affairs, and Policy Counsel.
Respectfully,
Joseph Brady,
NASAA Executive Director.
____

May 20, 2024.
Hon. Mike Johnson,
Speaker of the House, House of Representatives,
Washington, DC.
Hon. Hakeem Jeffries,
Minority Leader, House of Representatives,
Washington, DC.
Dear Speaker Johnson and Minority Leader Jeffries, We, the
undersigned organizations and individuals, write to you today
to express our opposition to H.R. 4763, the Financial
Innovation and Technology for the 21st Century Act (The
``FIT'' Act). We urge you and Members of Congress to vote
against this bill when it comes to floor this week. Many
signatories of this letter also wrote to the House Financial
Services and Agriculture Committees last year expressing
their opposition to this bill when it was marked up in
Committee. We see little in the new version of this bill
(despite format and cosmetic changes) to assuage our
concerns.
Consumers have lost trillions due to the 2022-2023 crypto
collapse, in addition to the billions lost directly to
widespread scams, fraud and theft found throughout the
industry. Public opinion has largely soured on these
speculative investments. Venture capital funding, which
pumped crypto hype for years, often for their own firms'
benefit, plummeted during the crash, migrating to the next
shiny object of discussion--AI. Most of the industry's wounds
are self-inflicted, and are a result of either failure to
adhere to the most basic financial management principles,
rampant fraud, or both. Even now, after the prosecutions of
Sam Bankman-Fried, Changpeng Zhao, and other seminal crypto
players, many industry players large and small are still
facing civil and criminal enforcement actions at the state,
national and international level, as well as class-action
lawsuits from defrauded customers. After 15 years, crypto
still struggles to demonstrate viable use cases outside of
speculative investment. While other tech has proven its
usefulness many times over, crypto's big moment is always
just over the horizon. The industry has superficially
recovered this year, in part due to controversial approval of
spot BTC ETPs by the Securities Exchange Commission. Yet, the
scams, hacks, theft, instability, reckless promotional
activities, and regulatory evasion that were present during
the last crypto bull market remain endemic in the industry
today.
In the midst of this new bubble, a concentrated lobbying
effort by the crypto industry, backed primarily by wealthy
venture capital investors seeking short-term returns on risky
investments, has moved lawmakers to advance this proposal
with potentially radical implications that would, in the name
of ``crypto innovation'' and so-called ``regulatory
clarity,'' complicate and weaken consumer and investor
protections for both traditional and crypto investors. It
would also broadly reshape financial regulatory agencies'
jurisdictions and weaken regulatory oversight of financial
products and services writ large. All this could result in
real harm to consumers and investors, whether they invest in
crypto or not.
We have numerous concerns about the bill; we discuss a set
of crucial problems below.
A potential backdoor path to undermine the Howey Test. For
decades, the Howey Test--a legal framework outlined by a
Supreme Court ruling that is used to determine whether
certain transactions qualify as investment contracts, and
thus must adhere to robust investor safeguards--has a been a
vetted and reliable formula used by the courts and regulators
to determine whether certain investment activities, assets
and actors should subject to investor protection standards
under securities law. The crypto industry's efforts to
contest the notion that crypto assets aren't securities under
Howey have had a rocky trajectory--a few wins, many more
losses and settlements in court. As described further below,
much of this bill seeks to circumvent these standards, in
part by creating a fast-track, rubber stamp process to
designate crypto assets as ``commodities,'' thus narrowing
application of securities regulation to those assets and
related actors.
But, leaving nothing to chance, Title II of the FIT Act
also declares that, if enacted, all ``investment contracts
assets''--which are defined in the bill as digital assets--
are not securities, full stop. This would likely not only
undermine application of the Howey Test to crypto assets and
activities writ large (even when evidently appropriate) but
would also invite non-crypto actors to use this new
terminology to evade coverage of the Howey Test for their
investment products and activities as well. Instead of
applying the principles of ``same activities, same risks,
same rules'' which helps create consistent regulatory
standards, this bill seeks to re-write large swathes of
securities law to create special exceptions and lighter
regulations for crypto. And it does so in ways that are
likely to undermine consistent regulation and investor
protection more broadly. That means even investors who never
touch crypto may be harmed by this bill if enacted.
A blueprint for unregistered stock offerings. This bill
creates a blueprint for crypto asset issuers to effectively
issue ``unregistered stock,'' by enacting a static
decentralized system definition that would allow crypto asset
issuers and traders to qualify as decentralized when certain
conditions are met, and therefore be exempt from most
meaningful securities regulatory oversight. This approach
effectively codifies existing crypto business models that are
all too often used to exploit retail investors for the
benefit of a smaller group of initial investors.
A roadmap for traditional financial firms to use
``decentralized networks'' to evade more rigorous oversight.
Not only could the decentralization framework named above
allow crypto firms to largely continue with dangerous
business practices as usual; it could also enable traditional
financial firms to evade more robust regulatory oversight by
claiming their products and platforms meet this
decentralization rubric (e.g. ``slap a blockchain on it''),
and thus are exempt from conventional regulatory requirements
for securities issuers and actors. This would create huge
potential risks for consumers, investors, and markets due to
less rigorous oversight than they would otherwise see with
traditional regulatory approaches.
A rubber-stamp certification scheme for crypto
``commodities.'' The bill's self-certification process for
crypto industry actors makes it very easy for anyone to
declare they fall under CFTC jurisdiction (as crypto
commodity issuers, brokers, etc.) The SEC is given nominal
authority to intervene in these certifications, but the bill
sets a 60-day time limit for such interventions, requires the
agency to do extensive legal analysis, and allows the CFTC to
intervene and applicants to file appeals. This process and
unreasonable timeline stacks the deck against the appropriate
securities regulation of crypto assets that should fall under
the SEC's jurisdiction, and all but guarantees many asset
issuers and traders will flood the system seeking
registration under the CFTC. This

[[Page H3429]]

also flies in the face of arguments that this bill is
intended to address a targeted gap in crypto spot market
regulation, when it's clear the scope of assets and actors
that can and would likely seek registration with the CFTC is
far greater.
A vague mandate for CFTC that lacks clarity or sufficient
investor and consumer protections. The bill grants the CFTC
new regulatory authority over crypto commodities and crypto
commodity traders, but the language regarding consumer and
investor protection provisions in the bill is vague, narrowly
cast, or left up to rulemakings, and not fully commensurate
with investor protection provisions found in the securities
regulatory framework. If and when the agency sought to
further define these elements--especially if they were to do
so in a robust way--they would likely face significant
litigation from crypto and non-crypto entities alike, as the
bill's proposals are not fully supported by or consistent
with its current statutory mandate, which is largely focused
on anti-fraud and market manipulation measures meant to
address activity by large, sophisticated trading firms, not
retail crypto investors buying crypto from their phone on an
app.
The legal wrangling that would likely ensue could take
years, if not decades, to resolve--leaving crypto investors
without adequate regulatory protections in the interim.
Lastly, it's possible the regulatory authority given to the
CFTC under this bill could undermine the authority of
agencies such as the CFPB to regulate and oversee crypto
consumer financial products and services as well. All told,
instead of the so-called ``regulatory clarity'' the crypto
industry claims it needs to be compliant with basic investor
protection safeguards, this bill is more likely to introduce
regulatory chaos for crypto and non-crypto actors alike.
Weaker regulatory requirements for many crypto securities.
The bill's regulatory provisions for those crypto assets that
are deemed `securities' allow for major exemptions for crypto
asset issuers whose sales are under $75 million a year--a
threshold that would exclude thousands of tokens currently on
the market. This exemption would allow crypto securities
issuers to issue what amount to private offerings to the
broader investor public, without adequate regulatory
oversight. Numerous crypto scams and pump and dump schemes
have fleeced crypto consumers with sales volumes of far less.
An expansive temporary safe harbor that tacitly rewards
non-compliance. Finally, this bill, via a ``notice of intent
to file'' provision, creates an expansive safe harbor for
crypto platforms and crypto asset issuers, whereby firms can
offer nominal information about their business regulators and
``provisionally'' register with the SEC or CFTC while these
agencies enact more formal rules. By giving such safe harbor
(which given rulemaking timelines, could potentially last for
years) crypto firms currently out of compliance with existing
financial regulatory laws would be sheltered from current or
future legal action, and would be free to continue with
business as usual. We fear this would give such firms a
patina of legitimacy which could draw unwary consumers back
to crypto, exposing them to more risk and harm.
A lack of action to protect the right to private action for
consumers and investors. The recent collapse or bankruptcy of
multiple crypto firms--Terraform Labs, 3AC, Voyager Digital,
Celsius Network, BlockFI, Genesis Global Capital, Gemini
Trust, FTX, and many others--has illustrated how important it
is to preserve investor rights that provide to access US
courts, help hold bad actors accountable and enable investors
to recover their losses. Yet, this bill fails to create such
protections within this framework, does nothing to preserve
existing investor rights and does not include a savings
clause to retain these rights under state law as well. The
bill also fails to address the widespread use by crypto firms
of forced arbitration clauses and other onerous limitations
on consumers' and investors' rights.
All told, we believe this bill as written introduces a
policy ``cure'' that would be far worse than the disease and
create significant harm within and far beyond the crypto
industry. Regulators already have extensive existing powers
to regulate this industry, the same way other financial
products and services are regulated. Those regulatory gaps
that may exist require a targeted, narrow, and measured
approach, but this bill is sweeping and broad in scope, and
should it become law it would profoundly undermine the SEC's
ability to support orderly markets and protect investors from
harm.
Instead of pursuing this ill-advised proposal, the best
immediate step Congress could take to protect consumers who
choose to participate in crypto markets would be to support
regulators' ongoing efforts to enforce existing regulatory
standards that apply to crypto actors, assets and
activities--the very basic elements of securities, banking
and consumer finance regulation which provide the foundation
for consumer and investor protections in the financial
regulatory realm.
Thank you.
Signed,

organizations

American Federation of State, County and Municipal
Employees (AFSCME); American Association for Justice;
American Economic Liberties Project; AFL-CIO; Americans for
Financial Reform; Center for American Progress; Center for
Economic Integrity: Center for Responsible Lending; Clean
Energy Action; Communication Workers of America; Consumer
Federation of America; Consumer Federation of California;
Consumer Reports; DC Consumer Rights Coalition; Demand
Progress; Democracy for America Advocacy Fund; Economic
Action Maryland; Empower Our Future.
Food and Water Watch; Groundwork Data; ISAIAH (MN);
Institute for Agriculture and Trade Policy; Maine People's
Alliance; National Community Reinvestment Coalition; National
Consumer Law Center, on behalf of its low-income clients; P
Street; Public Citizen; RAISE Texas; Revolving Door Project;
Rise Economy; US PIRG; Take On Wall Street; Texas Appleseed;
THIS! Is What We Did; Virginia Poverty Law Center; Woodstock
Institute; 20/20 Vision; 350Hawaii.

Individuals (titles and institutions provided for identification
purposes only and do not constitute institutional endorsements)

Anat Admati, George G.C. Parker Professor of Finance and
Economics, Graduate School of Business, Stanford University
Hilary J. Allen, Professor of Law, Associate Dean for
Scholarship, American University Washington College of Law
Raul Carrillo, Academic Fellow, Columbia Law School
Brian Flick, Ohio State Chair, National Association of
Consumer Advocates
Richard W. Painter, S. Walter Richey Professor of Corporate
Law, University of Minnesota Law School
Todd Phillips, Assistant Professor of Legal Studies,
Robinson College of Business, Georgia State University
Lee Reiners, Lecturing Fellow, Duke Financial Economics
Center and Duke Law
Jennifer Taub, Professor of Law, Wayne State University Law
School (Fall 2024)
Urska Velikonja, Associate Dean For Academic Affairs,
Professor of Law and Anne Fleming Research Professor,
Georgetown Law School
Arthur E. Wilmarth, Jr., Professor Emeritus of Law, George
Washington University Law School

Ms. WATERS. Mr. Chair, I also include an excerpt from Coinbase's Form
S-1 filing acknowledging the risk that Coinbase could be found to be
illegally acting outside of securities laws, excerpts from the SEC's
complaint against Coinbase alleging that Coinbase was illegally acting
outside of securities laws; and a summary of, and key excerpt from, the
decision in the case of SEC v. Coinbase, finding that Coinbase was
indeed acting illegally by failing to comply with existing laws.

SEC v. Coinbase

Excerpt from Coinbase S-1 Filing on ``Risk Factors''

As indicated in the above complaint, in its Form S-1 filing
with the SEC Coinbase acknowledged the risks that the crypto
assets it makes available on its platform could be deemed
securities, and therefore Coinbase could be found to be
engaging in unregistered brokerage, exchange, and/or
clearing-agency activity:
``A particular crypto asset's status as a ``security'' in
any relevant jurisdiction is subject to a high degree of
uncertainty and if we are unable to properly characterize a
crypto asset, we may be subject to regulatory scrutiny,
investigations, fines, and other penalties, which may
adversely affect our business, operating results, and
financial condition. The SEC and its staff have taken the
position that certain crypto assets fall within the
definition of a ``security'' under the U.S. federal
securities laws. The legal test for determining whether any
given crypto asset is a security is a highly complex, fact-
driven analysis that evolves over time, and the outcome is
difficult to predict. The SEC generally does not provide
advance guidance or confirmation on the status of any
particular crypto asset as a security. Furthermore, the SEC's
views in this area have evolved over time and it is difficult
to predict the direction or timing of any continuing
evolution. It is also possible that a change in the governing
administration or the appointment of new SEC commissioners
could substantially impact the views of the SEC and its staff
. . . With respect to all other crypto assets, there is
currently no certainty under the applicable legal test that
such assets are not securities, notwithstanding the
conclusions we may draw based on our risk-based assessment
regarding the likelihood that a particular crypto asset could
be deemed a ``security'' under applicable laws.
The classification of a crypto asset as a security under
applicable law has wide-ranging implications for the
regulatory obligations that flow from the offer, sale,
trading, and clearing of such assets. Persons that effect
transactions in crypto assets that are securities in the
United States may be subject to registration with the SEC as
a ``broker'' or ``dealer.'' Platforms that bring together
purchasers and sellers to trade crypto assets that are
securities in the United States are generally subject to
registration as national securities exchanges, or must
qualify for an exemption, such as by being operated by a
registered broker-dealer as an alternative trading system, or
ATS, in compliance with rules for ATSs. Persons facilitating
clearing and settlement of securities may be subject to
registration with the SEC as a clearing agency.

[[Page H3430]]

Summary and excerpt from opinion of the judge from the US District
Court for the Southern District of New York, denying Coinbase's Motion
to Dismiss in the case of SEC v. Coinbase

In March 2024, U.S. District Court Judge Katherine Polk
Failla of the Southern District of New York made a
preliminary ruling in the Coinbase case, holding that because
at least some crypto trades on the Coinbase platform met the
longstanding definition of an investment contract, the SEC
can move ahead with claims that Coinbase improperly operated
as a securities exchange, broker and clearing agency. She
also said the SEC adequately alleged that Coinbase sold
unregistered securities through its staking program. In an
84-page opinion, the judge asserted, among other things, that
``the `crypto' nomenclature may be of recent vintage, but the
challenged transactions fall comfortably within the framework
that courts have used to identify securities for nearly
eighty years.''

excerpts from the sec's complaint filed against coinbase in june 2023

``In September 2019, Coinbase released a framework for
analyzing crypto assets that assigned to the crypto asset a
score ranging from 1 to 5, with a score of 1 indicating that
an ``asset has few or no characteristics consistent with
treatment as an investment contract,'' and a score of 5
meaning that an ``asset has many characteristics strongly
consistent with treatment as a security.'' Meanwhile, between
2019 and 2020, Coinbase more than doubled the number of
crypto assets available for trading on its platform, and it
more than doubled that number again in 2021. During this
period, Coinbase made available on its platform crypto assets
with high ``risk'' scores under the CRC framework it had
adopted. In other words, to realize exponential growth of the
Coinbase Platform and boost its own trading profits, Coinbase
made the strategic business decision to add crypto assets to
the Coinbase Platform even where it recognized the crypto
assets had the characteristics of securities.''
Coinbase generates most of its revenue from transaction
fees collected on crypto asset trades made through the
Coinbase Platform, Prime, and Wallet. Fox example, in 2021,
Coinbase generated $6.8 billion in ``transaction revenue,''
out of a total net revenue of $7.4 billion. Likewise, in
2022, Coinbase generated over $2.2 billion in transaction
revenue out of a total net revenue of $3.1 billion.
``Coinbase also worked closely with issuers of crypto
assets who sought to have their crypto assets listed on
Coinbase. Coinbase's ``Listings Team'' engaged in a dialogue
with issuers focused on identifying potential ``roadblocks''
under Howey. For example, on one occasion, Coinbase
identified ``problematic statements'' by an issuer that
described its crypto asset ``with language traditionally
associated with securities,'' ``implying that the asset is an
investment or way to earn profit,'' ``emphasizing the
profitability of a project and/or the historic or potential
appreciation of the value of the assets,'' and ``using terms
referring to the assets that are commonly associated with
securities such as `dividend,' `interest,' `investment' or
`investors.' '' As ``possible mitigation,'' Coinbase
suggested that the issuer ``remove any existing problematic
statements, and refrain from making problematic statements in
the future.'' Coinbase was thus aware of the risk that it
could be making available for trading on the Coinbase
Platform crypto assets that were being offered and sold as
securities. Indeed, Coinbase touted to the investing public
its familiarity with the relevant legal analysis governing
the offer and sale of securities.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from Kansas
(Mr. Mann).
Mr. MANN. Mr. Chair, my home State of Kansas is a leader when it
comes to agriculture innovation. A lesson that I have learned from
Kansans is that we must be ready to respond to new technological
developments as they come to life. Digital asset markets are no
exception.
As these markets have grown, they have lacked congressional guidance
over who has regulatory and enforcement authority over them. Currently,
participants are at the mercy of regulators who continue to assert
jurisdiction and extend their authority through enforcement actions,
all without legislation and direction from Congress.
Mr. Chair, I urge my colleagues to support this bill to establish a
framework consistent with existing financial market requirements while
acknowledging the uniqueness of digital assets. We can and should give
consumers, developers, and institutions a clear set of rules that
provide certainty as they explore this new, innovative technology.
Digital assets and related blockchain technology have the potential
to lead us to the next generation of internet technology. Everyone here
should want America to be a place where this flourishes. That is what
FIT21 does. It allows America to build on this potential. If we do not
act now, we cede American leadership, talent, and innovation.
Mr. Chair, I urge my colleagues to vote ``yes'' on FIT21.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from
Nebraska (Mr. Flood), a great legislator in the innovation space.
Mr. FLOOD. Mr. Chair, I would like to focus on one particular aspect
of this bill. It is exactly responsive to the problems in the digital
assets market that we have seen over the last couple of years.
In the aftermath of the collapse of FTX in 2022, we need to ensure
that there are investor protection rules that prevent anything from
happening like that again in the United States.
Under the regulatory structure created by this bill, FTX would not
have been able to register. FTX would not have been able to comingle
customer funds that hurt so many of their investors.
Some of my friends on the other side of the aisle have spoken about
protecting investors. The great irony is that they are opposing a bill
that would do just that. If you believe in investor protection, if you
believe we need to respond to the disaster of FTX, then we need to pass
a bill that would prevent the next FTX.
The status quo will not work. It did not work in 2022, and it will
not work today.
Mr. Chair, I urge my colleagues to support this bill.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from
Tennessee (Mr. Rose), a great leader on the Agriculture and Financial
Services Committees.
Mr. ROSE. Mr. Chair, I rise in support of H.R. 4763, the Financial
Innovation and Technology for the 21st Century Act, or the FIT21.
As a member of the House Financial Services and Agriculture
Committees, I am proud to support this bill. This product is a joint
effort between both committees. I commend both Chairman McHenry and
Chairman Thompson for working on this bipartisan legislation.
This bill confronts the litigation-heavy approach toward digital
assets of the Securities and Exchange Commission led by rogue regulator
Gary Gensler. Chair Gensler has blown past the SEC's statutory mandate
and instead forced investors and companies to operate in the dark, thus
risking the United States' standing as a world leader in digital
innovation.
The Financial Innovation and Technology for the 21st Century Act will
allow the U.S. to reclaim our place as a world leader in innovation and
provides clear rules of the road for cryptocurrencies.
Mr. Chair, I urge Members to join me in voting ``yes.''
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, may I inquire how much time is remaining.
The Acting CHAIR. The gentleman from North Carolina has 7 minutes
remaining. The gentlewoman from California 4 has minutes remaining.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from
Oklahoma (Mr. Lucas), a leader on the Agriculture Committee, a former
chair of the Agriculture Committee, a great leader on the Financial
Services Committee, and also the chair of the Science Committee, before
I forget.
Mr. LUCAS. Mr. Chair, the United States has no meaningful Federal
regulation of the digital asset markets. The attempts by regulators to
apply existing laws are arbitrary and unclear.
The fact is, the status quo does not work. Without a clear Federal
framework, we fail to provide adequate consumer protections and forfeit
our international competitiveness. This hurts U.S. consumers,
investors, and the entire economy.
This is why this bill is so important. The legislation establishes a
market structure framework that accounts for the unique characteristics
of digital assets, adhering to the core principles of the Commodity
Exchange Act.
U.S. consumers are actively participating in the digital asset
market, and we should ensure they are protected from fraud and scams.
This bill does that.
Mr. Chair, I thank Chairman McHenry and Chairman Thompson for

[[Page H3431]]

all of their work on this legislation, and I urge my colleagues to
support the bill.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from
Michigan (Mr. Huizenga), the chair of the Oversight and Investigations
Subcommittee of the House Financial Services Committee.
Mr. HUIZENGA. Mr. Chair, since the first cryptocurrency network was
created nearly 15 years ago, the rules governing the digital asset
ecosystem have remained unclear.
As I learned while serving as chairman of the Capital Markets
Subcommittee, regulators have been using opaque guidelines and
regulation by enforcement. Meanwhile, Congress has been working on a
bipartisan path forward.
Digital assets have the potential to revolutionize payment systems in
the United States by allowing financial systems to become more
efficient and more accessible to consumers.
By passing a comprehensive market structure framework, responsible
actors will now have greater certainty and consumers will have greater
protection from bad actors.
Mr. Chair, our markets are the envy of the world. We must not cede
any ground. American innovation is a critical element of job creation
and economic opportunity here in the United States. Congress must look
to preserve this competitive advantage and not let it leave our shores.
FIT21 is a historic first step.
Mr. Chair, I urge all of my colleagues to support this legislation.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, does the gentlewoman have any additional
speakers?
Ms. WATERS. Mr. Chair, if the gentleman has no more speakers, I am
prepared to close.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentlewoman from
California (Mrs. Kim).
Mrs. KIM of California. Mr. Chair, millions of Americans from all
backgrounds see digital assets as one of the many options to take
wealth creation into their own hands. Unfortunately, the U.S. is
falling behind compared to other countries, and we have yet to
establish a viable regulatory framework for digital assets.
H.R. 4763 establishes a much-needed digital asset market structure
framework that provides clear rules for digital asset firms while
providing robust consumer protections. Thus, I believe this bill is
very fit for the 21st century.
FIT21 would enable innovation to flourish and the United States to
lead the world in the development of digital assets. The EU, the U.K.,
Hong Kong--and the list goes on--have established or are in the process
of establishing a regulatory framework.
The development of technologies and new financial services tools
should be taking place here, not elsewhere. Mr. Chair, I urge a ``yes''
vote on H.R. 4763.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from
Wisconsin (Mr. Steil), the chair of the House Administration Committee
and a great member of the Financial Services Committee on innovation
policy.
Mr. STEIL. Mr. Chair, I rise in support of the Financial Innovation
and Technology for the 21st Century Act.
Blockchain and digital assets are transforming finance and reshaping,
in particular, the way the internet works, but responsible innovators
are being held back by stubborn Washington bureaucrats. It is pushing
jobs and opportunities overseas.
For the first time in generations, the U.S. is at risk of missing out
on leading the next wave of technology. FIT21 provides clear rules for
digital assets and related businesses. It protects consumers and
strengthens transparency and accountability. It establishes the United
States as a technology leader.
Mr. Chair, I urge my colleagues to support the bill and bring jobs,
opportunities, and innovation in digital assets to the United States.
Ms. WATERS. Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I yield 1 minute to the gentleman from Utah
(Mr. Curtis).
Mr. CURTIS. Mr. Chair, I rise in favor of the Financial Innovation
and Technology for the 21st Century Act, which establishes a much-
needed regulatory framework for digital assets.
Currently, the lack of clear direction from Congress, combined with
broad definitions of securities and commodities, has allowed the SEC to
insert itself into the regulation of cryptocurrency. This has created
uncertainty and hindered innovation.
Meanwhile, other countries like Singapore, UAE, and even China have
capitalized on our unclear regulatory environment. They have developed
their own framework, positioning themselves as hubs for the digital
asset ecosystem.
I believe the United States, and particularly Utah's Silicon Slopes,
which boasts a growing and thriving blockchain industry, should be the
global center for digital assets.
This bill creates an appropriate framework for cryptocurrency
regulation that fosters innovation and ensures U.S. leadership in
blockchain technology while also protecting against bad actors like
FTX.
The Financial Innovation and Technology for the 21st Century Act
realigns the SEC with its appropriate regulatory role and designates
the Commodity Futures Trading Commission as the primary regulator of
cryptocurrency as a commodity. It also clarifies the SEC's role in
regulating digital assets.
Ms. WATERS. Mr. Chair, I yield myself the balance of my time.
Mr. Chair, as we have heard today, the entities that stand to benefit
from this bill are not ordinary investors trying to build wealth but
rather the crypto firms that have chosen not to register with the SEC
or otherwise comply with the securities laws.
They have already made billions of dollars unlawfully issuing or
facilitating the buying and selling of crypto securities, and
Republicans are now proposing to reward these illegal activities by
making these activities legal. This is truly preposterous.

Mr. Lynch, when he spoke, said this was one of the worst pieces of
legislation he has experienced during his entire career. I understood
why when I examined this bill and I saw that the Republicans created
this new definition. This new definition is known as the investment
contract assets.
We have talked about this, but even in the Rules Committee, while
they were talking about how this bill was going to protect consumers,
they did not debate us about this investment contract asset because
they know that it created a void. It created a no-man's-land. This was
created basically so that the crypto companies could be in a space
without regulation, but it goes further than that.

{time} 1600

It also covers traditional securities so they can be in a space
without regulations.
It is not enough to say this is a bad bill. This is not only a bad
bill, this is a bill where the crypto companies decided they didn't
like the SEC, they do not want to be regulated, and they were going to
come to the Congress of the United States. They were going to use their
power, they were going to use their influence to change the rules of
the game, and they were going to now go to where the commodities are
regulated, and they are going to take the securities over there.
I explained to you that the CFTC is a small agency. I explained to
you that they don't have a lot of money. I explained to you how much
smaller they are than the SEC.
The SEC are the experts. They have been developing regulations for
this country for 90 years. The SEC is 90 years old, and it is respected
all over the world. We are the envy of the world because we have an
SEC.
When I talk about this void that has been created, there is no way
that the Members of this Congress can allow that to happen, to allow
this no-man's-land to exist where the same crypto companies are now
refusing to register, who are unlawful, that you are going to exonerate
and then you are going to further give them the opportunity to operate
without regulation.
This is unbelievable. How can this happen in the Congress of the
United States in the House of Representatives where we are supposed to
represent the people?
We have an SEC that is a cop on the block. We have an SEC that is
expert

[[Page H3432]]

in securities. The SEC goes into the courts, and they fight tough
battles. These battles are long. These battles are hard because they
are fought by the crypto companies. They don't give up because at least
they have people who can begin to work on it. We try to give the SEC
more money to do their work, but they are denied additional
appropriations by the other side of the aisle.
The Acting CHAIR (Mr. Fulcher). The time of the gentlewoman has
expired.
Mr. McHENRY. Mr. Chair, may I inquire as to how much time I have
remaining.
The Acting CHAIR. The gentleman from North Carolina has 2 minutes
remaining.
Mr. McHENRY. Mr. Chair, I yield myself the balance of my time.
Let me speak to this. The void is the lack of a definition of what is
a digital asset in Federal law. We have none. This bill establishes it.
We have no consumer protections for crypto today. This bill establishes
it both at the CFTC with a robust oversight of this industry and the
SEC with real clarity. That is what this bill does is provide clarity
for investors and consumers and innovators.
We are falling behind Europe. This bill catches us up so that we do
not lose out on innovation policy to the Europeans, to the folks in the
U.K., to Singapore, to Japan, to Hong Kong that all have regimes
similar to what we are doing in this bill.
This is an important bill. It is bipartisan work. Hundreds of hours
have been put into developing this bill with Members and staff.
I thank the great partnership I have had with French Hill of the
Financial Services Committee and Chairman GT Thompson on the Ag
Committee and Dusty Johnson on the Ag Committee. I also thank the great
staff on the House Financial Services Committee, Allison Behuniak, who
has shepherded this bill to this point and Paul Balzano on the Ag
Committee. They have worked in great partnership and friendship and
worked through major issues. I thank them for this important
legislative product.
We can promote American innovation, consumer protection, and
leadership with a clear regulatory framework for digital assets. The
next generation of internet technology is being written. It should be
written by American innovators here in the United States. We can allow
that innovation to pass us by, or we can seize the opportunity and pass
this bill to provide real clarity for innovation policy here in the
United States.
Regulatory clarity and consumer protection, that is FIT21.
Let's vote ``yes'' on this bill and establish bipartisan support for
crypto in America. Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. All time for general debate has expired.
Pursuant to the rule, the bill shall be considered for amendment
under the 5-minute rule.
In lieu of the amendments in the nature of a substitute recommended
by the Committees on Agriculture and Financial Services, printed in the
bill, an amendment in the nature of a substitute consisting of the text
of Rules Committee Print 118-33, modified by the amendment printed in
part A of House Report 118-516, shall be considered as adopted. The
bill, as amended, shall be considered as the original bill for purpose
of further amendment under the 5-minute rule and shall be considered as
read.
The text of the bill, as amended, is as follows:

H.R. 4763

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 ``Financial
Innovation and Technology for the 21st Century Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title; table of contents.

TITLE I--DEFINITIONS; RULEMAKING; NOTICE OF INTENT TO REGISTER

Sec. 101. Definitions under the Securities Act of 1933.
Sec. 102. Definitions under the Securities Exchange Act of 1934.
Sec. 103. Definitions under the Commodity Exchange Act.
Sec. 104. Definitions under this Act.
Sec. 105. Rulemakings.
Sec. 106. Notice of intent to register for digital commodity exchanges,
brokers, and dealers.
Sec. 107. Notice of intent to register for digital asset brokers,
dealers, and trading systems.
Sec. 108. Commodity Exchange Act savings provisions.
Sec. 109. Administrative requirements.
Sec. 110. International harmonization.
Sec. 111. Implementation.

TITLE II--CLARITY FOR ASSETS OFFERED AS PART OF AN INVESTMENT CONTRACT

Sec. 201. Short title.
Sec. 202. Treatment of investment contract assets.

TITLE III--OFFERS AND SALES OF DIGITAL ASSETS

Sec. 301. Exempted transactions in digital assets.
Sec. 302. Requirements for offers and sales of certain digital assets.
Sec. 303. Enhanced disclosure requirements.
Sec. 304. Certification of certain digital assets.
Sec. 305. Effective date.

TITLE IV--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE
SECURITIES AND EXCHANGE COMMISSION

Sec. 401. Treatment of digital commodities and other digital assets.
Sec. 402. Authority over permitted payment stablecoins and restricted
digital assets.
Sec. 403. Registration of digital asset trading systems.
Sec. 404. Requirements for digital asset trading systems.
Sec. 405. Registration of digital asset brokers and digital asset
dealers.
Sec. 406. Requirements of digital asset brokers and digital asset
dealers.
Sec. 407. Rules related to conflicts of interest.
Sec. 408. Treatment of certain digital assets in connection with
federally regulated intermediaries.
Sec. 409. Exclusion for decentralized finance activities.
Sec. 410. Registration and requirements for notice-registered digital
asset clearing agencies.
Sec. 411. Treatment of custody activities by banking institutions.
Sec. 412. Effective date; administration.
Sec. 413. Discretionary Surplus Fund.

TITLE V--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE COMMODITY
FUTURES TRADING COMMISSION

Sec. 501. Commission jurisdiction over digital commodity transactions.
Sec. 502. Requiring futures commission merchants to use qualified
digital commodity custodians.
Sec. 503. Trading certification and approval for digital commodities.
Sec. 504. Registration of digital commodity exchanges.
Sec. 505. Qualified digital commodity custodians.
Sec. 506. Registration and regulation of digital commodity brokers and
dealers.
Sec. 507. Registration of associated persons.
Sec. 508. Registration of commodity pool operators and commodity
trading advisors.
Sec. 509. Exclusion for decentralized finance activities.
Sec. 510. Funding for implementation and enforcement.
Sec. 511. Effective date.

TITLE VI--INNOVATION AND TECHNOLOGY IMPROVEMENTS

Sec. 601. Findings; sense of Congress.
Sec. 602. Codification of the SEC Strategic Hub for Innovation and
Financial Technology.
Sec. 603. Codification of LabCFTC.
Sec. 604. CFTC-SEC Joint Advisory Committee on Digital Assets.
Sec. 605. Study on decentralized finance.
Sec. 606. Study on non-fungible digital assets.
Sec. 607. Study on expanding financial literacy amongst digital asset
holders.
Sec. 608. Study on financial market infrastructure improvements.

TITLE I--DEFINITIONS; RULEMAKING; NOTICE OF INTENT TO REGISTER

SEC. 101. DEFINITIONS UNDER THE SECURITIES ACT OF 1933.

Section 2(a) of the Securities Act of 1933 (15 U.S.C.
77b(a)) is amended by adding at the end the following:
``(20) Affiliated person.--
``(A) In general.--The term `affiliated person' means a
person (including a related person) that--
``(i) with respect to a digital asset issuer--

``(I) directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such digital asset issuer; or
``(II) was described under clause (i) at any point in the
previous 3-month period; or

``(ii) with respect to any digital asset--

``(I) beneficially owns 5 percent or more of the units of
such digital asset that are then outstanding; or
``(II) was described under clause (i) at any point in the
previous 3-month period.

``(B) Beneficial ownership disclosure.--The Commission
shall issue rules to require a person that beneficially owns
5 percent or more of the units of a digital asset that are
then outstanding to file with the Commission a report at such
time as the Commission determines appropriate.
``(21) Blockchain.--The term `blockchain' means any
technology--

[[Page H3433]]

``(A) where data is--
``(i) shared across a network to create a public ledger of
verified transactions or information among network
participants;
``(ii) linked using cryptography to maintain the integrity
of the public ledger and to execute other functions; and
``(iii) distributed among network participants in an
automated fashion to concurrently update network participants
on the state of the public ledger and any other functions;
and
``(B) composed of source code that is publicly available.
``(22) Blockchain protocol.--The term `blockchain protocol'
means any executable software deployed to a blockchain
composed of source code that is publicly available and
accessible, including a smart contract or any network of
smart contracts.
``(23) Blockchain system.--The term `blockchain system'
means any blockchain or blockchain protocol.
``(24) Decentralized governance system.--
``(A) In general.--The term `decentralized governance
system' means, with respect to a blockchain system, any
rules-based system permitting persons using the blockchain
system or the digital assets related to such blockchain
system to form consensus or reach agreement in the
development, provision, publication, management, or
administration of such blockchain system.
``(B) Relationship of persons to decentralized governance
systems.--Persons acting through a decentralized governance
system shall be treated as separate persons unless such
persons are under common control.
``(C) Exclusion.--The term `decentralized governance
system' does not include a system in which--
``(i) a person or group of persons under common control
have the ability to--

``(I) unilaterally alter the rules of consensus or
agreement for the blockchain system; or
``(II) determine the final outcome of decisions related to
the development, provision, publication, management, or
administration of such blockchain system;

``(ii) a person or group of persons is directly engaging in
an activity that requires registration with the Commission or
the Commodity Futures Trading Commission other than--

``(I) developing, providing, publishing, managing, or
administering a blockchain system; or
``(II) an activity with respect to which the organization
is exempt from such registration; or

``(iii) a person or group of persons seeking to knowingly
evade the requirements imposed on a digital asset issuer, a
related person, an affiliated person, or any other person
registered (or required to be registered) under the
securities laws, the Financial Innovation and Technology for
the 21st Century Act, or the Commodity Exchange Act.
``(25) Decentralized system.--With respect to a blockchain
system to which a digital asset relates, the term
`decentralized system' means the following conditions are
met:
``(A) During the previous 12-month period, no person--
``(i) had the unilateral authority, directly or indirectly,
through any contract, arrangement, understanding,
relationship, or otherwise, to control or materially alter
the functionality or operation of the blockchain system; or
``(ii) had the unilateral authority to restrict or prohibit
any person who is not a digital asset issuer, related person,
or an affiliated person from--

``(I) using, earning, or transmitting the digital asset;
``(II) deploying software that uses or integrates with the
blockchain system;
``(III) participating in a decentralized governance system
with respect to the blockchain system; or
``(IV) operating a node, validator, or other form of
computational infrastructure with respect to the blockchain
system.

``(B) During the previous 12-month period--
``(i) no digital asset issuer or affiliated person
beneficially owned, in the aggregate, 20 percent or more of
the total amount of units of such digital asset that--

``(I) can be created, issued, or distributed in such
blockchain system; and
``(II) were freely transferrable or otherwise used or
available to be used for the purposes of such blockchain
system;

``(ii) no digital asset issuer or affiliated person had the
unilateral authority to direct the voting, in the aggregate,
of 20 percent or more of the outstanding voting power of such
digital asset or related decentralized governance system; or
``(iii) the digital asset did not include voting power with
respect to any decentralized governance system of the
blockchain system.
``(C) During the previous 3-month period, the digital asset
issuer, any affiliated person, or any related person has not
implemented or contributed any intellectual property to the
source code of the blockchain system that materially alters
the functionality or operation of the blockchain system,
unless such implementation or contribution to the source
code--
``(i) addressed vulnerabilities, errors, regular
maintenance, cybersecurity risks, or other technical changes
to the blockchain system; or
``(ii) were adopted through the consensus or agreement of a
decentralized governance system.
``(D) During the previous 3-month period, neither any
digital asset issuer nor any affiliated person described
under paragraph (20)(A) has marketed to the public the
digital assets as an investment.
``(E) During the previous 12-month period, all issuances of
units of such digital asset through the programmatic
functioning of the blockchain system were end user
distributions. For purposes of the previous sentence, any
units of such digital asset that are made available over time
and were created in the initial block of the blockchain
system shall be considered issued at the point in time of
creation.
``(26) Digital asset.--
``(A) In general.--The term `digital asset' means any
fungible digital representation of value that can be
exclusively possessed and transferred, person to person,
without necessary reliance on an intermediary, and is
recorded on a cryptographically secured public distributed
ledger.
``(B) Exclusions.--The term `digital asset' does not
include--
``(i) any note, stock, treasury stock, security future,
security-based swap, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable
share, voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, privilege on
any security, certificate of deposit, or group or index of
securities (including any interest therein or based on the
value thereof); or
``(ii) any asset which, based on its terms and other
characteristics, is, represents, or is functionally
equivalent to an agreement, contract, or transaction that
is--

``(I) a contract of sale of a commodity (as defined under
section 1a of the Commodity Exchange Act) for future delivery
or an option thereon;
``(II) a security futures product;
``(III) a swap;
``(IV) an agreement, contract, or transaction described in
section 2(c)(2)(C)(i) or 2(c)(2)(D)(i) of the Commodity
Exchange Act;
``(V) a commodity option authorized under section 4c of the
Commodity Exchange Act; or
``(VI) a leverage transaction authorized under section 19
of the Commodity Exchange Act.

``(C) Rule of construction.--Nothing in this paragraph
shall be construed to create a presumption that a digital
asset is a representation of any type of security not
excluded from the definition of digital asset.
``(D) Relationship to a blockchain system.--A digital asset
is considered to relate to a blockchain system if the digital
asset is intrinsically linked to the blockchain system,
including--
``(i) where the digital asset's value is reasonably
expected to be generated by the programmatic functioning of
the blockchain system;
``(ii) where the digital asset has voting rights with
respect to the decentralized governance system of the
blockchain system; or
``(iii) where the digital asset is issued through the
programmatic functioning of the blockchain system.
``(E) Treatment of certain digital assets sold pursuant to
an investment contract.--A digital asset offered or sold or
intended to be offered or sold pursuant to an investment
contract is not and does not become a security as a result of
being sold or otherwise transferred pursuant to that
investment contract.
``(27) Digital asset issuer.--
``(A) In general.--With respect to a digital asset, the
term `digital asset issuer' means any person that, in
exchange for any consideration--
``(i) issues or causes to be issued a unit of such digital
asset to a person; or
``(ii) offers or sells a right to a future issuance of a
unit of such digital asset to a person.
``(B) Exclusion.--The term `digital asset issuer' does not
include any person solely because such person deploys source
code that creates or issues units of a digital asset that are
only distributed in end user distributions.
``(C) Prohibition on evasion.--It shall be unlawful for any
person to knowingly evade classification as a `digital asset
issuer' and facilitate an arrangement for the primary purpose
of effecting a sale, distribution, or other issuance of a
digital asset.
``(28) Digital asset maturity date.--The term `digital
asset maturity date' means, with respect to any digital
asset, the first date on which 20 percent or more of the
total units of such digital asset that are then outstanding
as of such date are--
``(A) digital commodities; or
``(B) digital assets that have been registered with the
Commission.
``(29) Digital commodity.--The term `digital commodity' has
the meaning given that term under section 1a of the Commodity
Exchange Act (7 U.S.C. 1a).
``(30) End user distribution.--
``(A) In general.--The term `end user distribution' means
an issuance of a unit of a digital asset that--
``(i) does not involve an exchange of more than a nominal
value of cash, property, or other assets; and
``(ii) is distributed in a broad, equitable, and non-
discretionary manner based on conditions capable of being
satisfied by any participant in the blockchain system,
including, as incentive-based rewards--

``(I) to users of the digital asset or any blockchain
system to which the digital asset relates;
``(II) for activities directly related to the operation of
the blockchain system, such as mining, validating, staking,
or other activity directly tied to the operation of the
blockchain system; or
``(III) to the existing holders of another digital asset,
in proportion to the total units of such other digital asset
as are held by each person.

``(B) Prohibition on evasion.--It shall be unlawful for any
person to facilitate an end user distribution to knowingly
evade classification as a digital asset issuer, related
person, or an affiliated person, or the requirements related
to a digital asset issuance.
``(31) Functional system.--With respect to a blockchain
system to which a digital asset relates, the term `functional
system' means the

[[Page H3434]]

network allows network participants to use such digital asset
for--
``(A) the transmission and storage of value on the
blockchain system;
``(B) the participation in services provided by or an
application running on the blockchain system; or
``(C) the participation in the decentralized governance
system of the blockchain system.
``(32) Permitted payment stablecoin.--
``(A) In general.--The term `permitted payment stablecoin'
means a digital asset--
``(i) that is or is designed to be used as a means of
payment or settlement;
``(ii) the issuer of which--

``(I) is obligated to convert, redeem, or repurchase for a
fixed amount of monetary value; or
``(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;

``(iii) the issuer of which is subject to regulation by a
Federal or State regulator with authority over entities that
issue payment stablecoins; and
``(iv) 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)).

``(B) Monetary value defined.--For purposes of subparagraph
(A), the term `monetary value' means a national currency,
deposit (as defined under section 3 of the Federal Deposit
Insurance Act), or an equivalent instrument that is
denominated in a national currency.
``(33) Related person.--With respect to a digital asset
issuer, the term `related person' means--
``(A) a founder, promoter, employee, consultant, advisor,
or person serving in a similar capacity;
``(B) any person that is or was in the previous 6-month
period an executive officer, director, trustee, general
partner, advisory board member, or person serving in a
similar capacity;
``(C) any equity holder or other security holder; or
``(D) any other person that received a unit of digital
asset from such digital asset issuer through--
``(i) an exempt offering, other than an offering made in
reliance on section 4(a)(8); or
``(ii) a distribution that is not an end user distribution
described under section 42(d)(1) of the Securities Exchange
Act of 1934.
``(34) Restricted digital asset.--
``(A) In general.--The term `restricted digital asset'
means--
``(i) prior to the first date on which each blockchain
system to which a digital asset relates is a functional
system and certified to be a decentralized system under
section 44 of the Securities Exchange Act of 1934, any unit
of the digital asset held by a person, other than the digital
asset issuer, a related person, or an affiliated person, that
was--

``(I) issued to such person through a distribution, other
than an end user distribution described under section
42(d)(1) of the Securities Exchange Act of 1934; or
``(II) acquired by such person in a transaction that was
not executed on a digital commodity exchange;

``(ii) during any period when any blockchain system to
which a digital asset relates is not a functional system or
not certified to be a decentralized system under section 44
of the Securities Exchange Act of 1934, any digital asset
held by a related person or an affiliated person; and
``(iii) any unit of a digital asset held by the digital
asset issuer.
``(B) Exclusion.--The term `restricted digital asset' does
not include a permitted payment stablecoin.
``(35) Securities laws.--The term `securities laws' has the
meaning given that term under section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)).
``(36) Source code.--With respect to a blockchain system,
the term `source code' means a listing of commands to be
compiled or assembled into an executable computer program.''.

SEC. 102. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF
1934.

Section 3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)) is amended--
(8) by redesignating the second paragraph (80) (relating to
funding portals) as paragraph (81); and
(9) by adding at the end the following:
``(82) Bank secrecy act.--The term `Bank Secrecy Act'
means--
``(A) section 21 of the Federal Deposit Insurance Act (12
U.S.C. 1829b);
``(B) chapter 2 of title I of Public Law 91-508 (12 U.S.C.
1951 et seq.); and
``(C) subchapter II of chapter 53 of title 31, United
States Code.
``(83) Digital asset broker.--The term `digital asset
broker'--
``(A) means any person engaged in the business of effecting
transactions in restricted digital assets for the account of
others; and
``(B) does not include--
``(i) a blockchain protocol or a person or group of persons
solely because of their development of a blockchain protocol;
or
``(ii) a bank engaging in certain banking activities with
respect to a restricted digital asset in the same manner as a
bank is excluded from the definition of a broker under
paragraph (4).
``(84) Digital asset custodian.--The term `digital asset
custodian' means an entity in the business of providing
custodial or safekeeping services for restricted digital
assets for others.
``(85) Digital asset dealer.--The term `digital asset
dealer'--
``(A) means any person engaged in the business of buying
and selling restricted digital assets for such person's own
account through a broker or otherwise; and
``(B) does not include--
``(i) a person that buys or sells restricted digital assets
for such person's own account, either individually or in a
fiduciary capacity, but not as a part of a regular business;
``(ii) a blockchain protocol or a person or group of
persons solely because of their development of a blockchain
protocol; or
``(iii) a bank engaging in certain banking activities with
respect to a restricted digital asset in the same manner as a
bank is excluded from the definition of a dealer under
paragraph (5).
``(86) Digital asset trading system.--The term `digital
asset trading system'--
``(A) means any organization, association, person, or group
of persons, whether incorporated or unincorporated, that
constitutes, maintains, or provides a market place or
facilities for bringing together purchasers and sellers of
restricted digital assets or for otherwise performing with
respect to restricted digital assets the functions commonly
performed by a stock exchange within the meaning of section
240.3b-16 of title 17, Code of Federal Regulations, as in
effect on the date of enactment of this paragraph; and
``(B) does not include a blockchain protocol or a person or
group of persons solely because of their development of a
blockchain protocol.
``(87) Notice-registered digital asset clearing agency.--
The term `notice-registered digital asset clearing agency'
means a clearing agency that has registered with the
Commission pursuant to section 17A(b)(9).
``(88) Additional digital asset-related terms.--
``(A) Securities act of 1933.--The terms `affiliated
person', `blockchain system', `decentralized governance
system', `decentralized system', `digital asset', `digital
asset issuer', `digital asset maturity date', `end user
distribution', `functional system', `permitted payment
stablecoin', `related person', `restricted digital asset',
and `source code' have the meaning given those terms,
respectively, under section 2(a) of the Securities Act of
1933 (15 U.S.C. 77b(a)).
``(B) Commodity exchange act.--The terms `digital
commodity', `digital commodity broker', `digital commodity
dealer', and `digital commodity exchange' have the meaning
given those terms, respectively, under section 1a of the
Commodity Exchange Act (7 U.S.C. 1a).''.

SEC. 103. DEFINITIONS UNDER THE COMMODITY EXCHANGE ACT.

Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is
amended--
(1) in paragraph (10)(A)--
(A) by redesignating clauses (iii) and (iv) as clauses (iv)
and (v), respectively; and
(B) by inserting after clause (ii) the following:
``(iii) digital commodity;'';
(2) in paragraph (11)--
(A) in subparagraph (A)(i)--
(i) by redesignating subclauses (III) and (IV) as
subclauses (IV) and (V), respectively; and
(ii) by inserting after subclause (II) the following:

``(III) digital commodity;''; and

(B) by redesignating subparagraph (B) as subparagraph (C)
and inserting after subparagraph (A) the following:
``(B) Exclusion.--The term `commodity pool operator' does
not include--
``(i) a decentralized governance system; or
``(ii) any excluded activity, as described in section
4v.'';
(3) in paragraph (12)(A)(i)--
(A) in subclause (II), by adding at the end a semicolon;
(B) by redesignating subclauses (III) and (IV) as
subclauses (IV) and (V), respectively; and
(C) by inserting after subclause (II) the following:

``(III) a digital commodity;'';

(4) in paragraph (40)--
(A) by striking ``and'' at the end of subparagraph (E);
(B) by striking the period at the end of subparagraph (F)
and inserting ``; and''; and
(C) by adding at the end the following:
``(G) a digital commodity exchange registered under section
5i.''; and
(5) by adding at the end the following:
``(52) Associated person of a digital commodity broker.--
``(A) In general.--Except as provided in subparagraph (B),
the term `associated person of a digital commodity broker'
means a person who is associated with a digital commodity
broker as a partner, officer, employee, or agent (or any
person occupying a similar status or performing similar
functions) in any capacity that involves--
``(i) the solicitation or acceptance of an order for the
purchase or sale of a digital commodity; or
``(ii) the supervision of any person engaged in the
solicitation or acceptance of an order for the purchase or
sale of a digital commodity.
``(B) Exclusion.--The term `associated person of a digital
commodity broker' does not include any person associated with
a digital commodity broker the functions of which are solely
clerical or ministerial.
``(53) Associated person of a digital commodity dealer.--
``(A) In general.--Except as provided in subparagraph (B),
the term `associated person of a digital commodity dealer'
means a person who is associated with a digital commodity
dealer as a partner, officer, employee, or agent (or any
person occupying a similar status or performing similar
functions) in any capacity that involves--
``(i) the solicitation or acceptance of an order for the
purchase or sale of a digital commodity; or
``(ii) the supervision of any person engaged in the
solicitation or acceptance of an order for the purchase or
sale of a digital commodity.
``(B) Exclusion.--The term `associated person of a digital
commodity dealer' does not include any person associated with
a digital commodity dealer the functions of which are solely
clerical or ministerial.

[[Page H3435]]

``(54) Bank secrecy act.--The term `Bank Secrecy Act'
means--
``(A) section 21 of the Federal Deposit Insurance Act (12
U.S.C. 1829b);
``(B) chapter 2 of title I of Public Law 91-508 (12 U.S.C.
1951 et seq.); and
``(C) subchapter II of chapter 53 of title 31, United
States Code.
``(55) Digital commodity.--
``(A) In general.--The term `digital commodity' means--
``(i) any unit of a digital asset held by a person, other
than the digital asset issuer, a related person, or an
affiliated person, before the first date on which each
blockchain system to which the digital asset relates is a
functional system and certified to be a decentralized system
under section 44 of the Securities Exchange Act of 1934, that
was--

``(I) issued to the person through an end user distribution
described under section 42(d)(1) of the Securities Exchange
Act of 1934; or
``(II) acquired by such person in a transaction that was
executed on a digital commodity exchange;

``(ii) any unit of a digital asset held by a person, other
than the digital asset issuer, a related person, or an
affiliated person, after the first date on which each
blockchain system to which the digital asset relates is a
functional system and certified to be a decentralized system
under section 44 of the Securities Exchange Act of 1934; and
``(iii) any unit of a digital asset held by a related
person or an affiliated person during any period when any
blockchain system to which the digital asset relates is a
functional system and certified to be a decentralized system
under section 44 of the Securities Exchange Act of 1934.
``(B) Exclusion.--The term `digital commodity' does not
include a permitted payment stablecoin.
``(C) Treatment of adjudicated non-securities.--If, before
enactment of this paragraph, a Federal court in a Securities
and Exchange Commission enforcement action determines that a
digital asset transaction is not an offer or sale of a
security, any unit of a digital asset transferred pursuant to
the transaction shall be considered a digital commodity,
unless the determination is overturned.
``(56) Digital commodity broker.--
``(A) In general.--The term `digital commodity broker'
means any person who, in a digital commodity cash or spot
market, is--
``(i) engaged in soliciting or accepting orders for the
purchase or sale of a unit of a digital commodity from a
person that is not an eligible contract participant;
``(ii) engaged in soliciting or accepting orders for the
purchase or sale of a unit of a digital commodity from a
person on or subject to the rules of a registered entity; or
``(iii) registered with the Commission as a digital
commodity broker.
``(B) Exceptions.--The term `digital commodity broker' does
not include a person solely because the person--
``(i) enters into a digital commodity transaction the
primary purpose of which is to make, send, receive, or
facilitate payments, whether involving a payment service
provider or on a peer-to-peer basis;
``(ii) validates a digital commodity transaction, operates
a node, or engages in similar activity to participate in
facilitating, operating, or securing a blockchain system; or
``(iii) is a bank (as defined under section 3(a) of the
Securities Exchange Act of 1934) engaging in certain banking
activities with respect to a digital commodity in the same
manner as a bank is excluded from the definition of a broker
under section 3(a)(4) of the Securities Exchange Act of 1934.
``(57) Digital commodity custodian.--The term `digital
commodity custodian' means an entity in the business of
holding, maintaining, or safeguarding digital commodities for
others.
``(58) Digital commodity dealer.--
``(A) In general.--The term `digital commodity dealer'
means any person who--
``(i) in digital commodity cash or spot markets--

``(I) holds itself out as a dealer in a digital commodity;
``(II) makes a market in a digital commodity;
``(III) has an identifiable business of dealing in a
digital commodity as principal for its own account; or
``(IV) engages in any activity causing the person to be
commonly known in the trade as a dealer or market maker in a
digital commodity;

``(ii) has an identifiable business of entering into any
agreement, contract, or transaction described in subsection
(c)(2)(D)(i) involving a digital commodity; or
``(iii) is registered with the Commission as a digital
commodity dealer.
``(B) Exception.--The term `digital commodity dealer' does
not include a person solely because the person--
``(i) enters into a digital commodity transaction with an
eligible contract participant;
``(ii) enters into a digital commodity transaction on or
through a registered digital commodity exchange;
``(iii) enters into a digital commodity transaction for the
person's own account, either individually or in a fiduciary
capacity, but not as a part of a regular business;
``(iv) enters into a digital commodity transaction the
primary purpose of which is to make, send, receive, or
facilitate payments, whether involving a payment service
provider or on a peer-to-peer basis;
``(v) validates a digital commodity transaction, operates a
node, or engages in similar activity to participate in
facilitating, operating, or securing a blockchain system; or
``(vi) is a bank (as defined under section 3(a) of the
Securities Exchange Act of 1934) engaging in certain banking
activities with respect to a digital commodity in the same
manner as a bank is excluded from the definition of a dealer
under section 3(a)(5) of the Securities Exchange Act of 1934.
``(59) Digital commodity exchange.--The term `digital
commodity exchange' means a trading facility that offers or
seeks to offer a cash or spot market in at least 1 digital
commodity.
``(60) Digital asset-related definitions.--
``(A) Securities act of 1933.--The terms `affiliated
person', `blockchain system', `decentralized governance
system', `decentralized system', `digital asset', `digital
asset issuer', `end user distribution', `functional system',
`permitted payment stablecoin', `related person', and
`restricted digital asset' have the meaning given the terms,
respectively, under section 2(a) of the Securities Act of
1933 (15 U.S.C. 77b(a)).
``(B) Securities exchange act of 1934.--The terms `digital
asset broker' and `digital asset dealer' have the meaning
given those terms, respectively, under section 3(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
``(61) Mixed digital asset transaction.--The term `mixed
digital asset transaction' means an agreement, contract, or
transaction involving a digital commodity and--
``(A) a security; or
``(B) a restricted digital asset.''.

SEC. 104. DEFINITIONS UNDER THIS ACT.

In this Act:
(1) Definitions under the commodity exchange act.--The
terms ``digital commodity'', ``digital commodity broker'',
``digital commodity dealer'', ``digital commodity exchange'',
and ``mixed digital asset transaction'' have the meaning
given those terms, respectively, under section 1a of the
Commodity Exchange Act (7 U.S.C. 1a).
(2) Definitions under the securities act of 1933.--The
terms ``affiliated person'', ``blockchain'', ``blockchain
system'', ``blockchain protocol'', ``decentralized system'',
``digital asset'', ``digital asset issuer'', ``digital asset
maturity date'', ``digital asset trading system'', ``end user
distribution'', ``functional system'', ``permitted payment
stablecoin'', ``restricted digital asset'', ``securities
laws'', and ``source code'' have the meaning given those
terms, respectively, under section 2(a) of the Securities Act
of 1933 (15 U.S.C. 77b(a)).
(3) Definitions under the securities exchange act of
1934.--The terms ``Bank Secrecy Act'', ``digital asset
broker'', ``digital asset dealer'', ``digital asset trading
system'', and ``self-regulatory organization'' have the
meaning given those terms, respectively, under section 3(a)
of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).

SEC. 105. RULEMAKINGS.

(a) Definitions.--The Commodity Futures Trading Commission
and the Securities and Exchange Commission shall jointly
issue rules to further define the following terms:
(1) The terms ``affiliated person'', ``blockchain'',
``blockchain system'', ``blockchain protocol'',
``decentralized system'', ``decentralized governance
system'', ``digital asset'', ``digital asset issuer'',
``digital asset maturity date'', ``end user distribution'',
``functional system'', ``related person'', ``restricted
digital asset'', and ``source code'', as defined under
section 2(a) of the Securities Act of 1933.
(2) The term ``digital commodity'', as defined under
section 1a of the Commodity Exchange Act.
(b) Joint Rulemaking for Exchanges and Intermediaries.--The
Commodity Futures Trading Commission and the Securities and
Exchange Commission shall jointly issue rules to exempt
persons dually registered with the Commodity Futures Trading
Commission and the Securities and Exchange Commission from
duplicative, conflicting, or unduly burdensome provisions of
this Act, the securities laws, and the Commodity Exchange Act
and the rules thereunder, to the extent such exemption would
foster the development of fair and orderly markets in digital
assets, be necessary or appropriate in the public interest,
and be consistent with the protection of investors.
(c) Joint Rulemaking for Mixed Digital Asset
Transactions.--The Commodity Futures Trading Commission and
the Securities and Exchange Commission shall jointly issue
rules applicable to mixed digital asset transactions under
this Act and the amendments made by this Act, including by
further defining such term.
(d) Protection of Self-custody.--
(1) In general.--The Financial Crimes Enforcement Network
may not issue any rule or order that would prohibit a U.S.
individual from--
(A) maintaining a hardware wallet, software wallet, or
other means to facilitate such individual's own custody of
digital assets; or
(B) conducting transactions with and self-custody of
digital assets for any lawful purpose.
(2) Rule of construction.--Paragraph (1) may not be
construed to limit the ability of Financial Crimes
Enforcement Network to carry out any enforcement action.
(e) Joint Rulemaking, Procedures, or Guidance for
Delisting.--Not later than 30 days after the date of the
enactment of this Act, the Commodity Futures Trading
Commission and the Securities and Exchange Commission shall
jointly issue rules, procedures, or guidance (as determined
appropriate by the Commissions) regarding the process to
delist an asset for trading under sections 106 and 107 of
this Act if the Commissions determine that the listing is
inconsistent with the Commodity Exchange Act, the securities
laws (including regulations under those laws), or this Act.

[[Page H3436]]

(f) Joint Rulemaking for Capital Requirements.--The
Commodity Futures Trading Commission and the Securities and
Exchange Commission shall jointly issue rules to require a
person with multiple registrations with the Commodity Futures
Trading Commission, the Securities and Exchange Commission,
or both such agencies to maintain sufficient capital to
comply with the stricter of any applicable capital
requirements to which such person is subject to by reason of
such registrations.

SEC. 106. NOTICE OF INTENT TO REGISTER FOR DIGITAL COMMODITY
EXCHANGES, BROKERS, AND DEALERS.

(a) In General.--
(1) Notice of intent to register.--Any person may file a
notice of intent to register with the Commodity Futures
Trading Commission (in this subsection referred to as the
``Commission'') as a--
(A) digital commodity exchange, for a person intending to
register as a digital commodity exchange under section 5i of
the Commodity Exchange Act;
(B) digital commodity broker, for a person intending to
register as a digital commodity broker under section 4u of
such Act; or
(C) digital commodity dealer, for a person intending to
register as a digital commodity dealer under section 4u of
such Act.
(2) Conditions.--A person filing a notice of intent to
register under paragraph (1) shall be in compliance with this
section if the person--
(A) submits to the Commission and continues to materially
update a statement of the nature of the registrations the
filer intends to pursue;
(B) submits to the Commission and continues to materially
update the information required by subsections (b) and (c);
(C) complies with subsection (d);
(D) is a member of a futures association registered under
section 17 of the Commodity Exchange Act, and complies with
the rules of the association, including the rules of the
association pertaining to customer disclosures and protection
of customer assets; and
(E) pays all fees and penalties imposed on the person under
section 510 of this Act.
(b) Disclosure of General Information.--A person filing a
notice of intent to register under subsection (a) shall
disclose to the Commission the following:
(1) Information concerning the management of the person,
including information describing--
(A) the ownership and management of the person;
(B) the financial condition of the person;
(C) affiliated entities;
(D) potential conflicts of interest;
(E) the address of the person, including--
(i) the place of incorporation;
(ii) principal place of business; and
(iii) an address for service of process; and
(F) a list of the States in which the person has
operations.
(2) Information concerning the operations of the person,
including--
(A) a general description of the person's business and the
terms of service for United States customers;
(B) a description of the person's account approval process;
(C) any rulebook or other customer order fulfilment rules;
(D) risk management procedures;
(E) a description of the product listing process; and
(F) anti-money laundering policies and procedures.
(c) Listing Information.--A person filing a notice of
intent to register under subsection (a) shall provide to the
Commission and the Securities and Exchange Commission a
detailed description of--
(1) the specific characteristics of each digital asset
listed or offered by the person, including information
regarding the digital asset's market activity, distribution,
and functional use; and
(2) the product listing determination made by the person
for each asset listed or offered for trading by the person.
(d) Requirements.--A person filing a notice of intent to
register under subsection (a) shall comply with the following
requirements:
(1) Statutory disqualifications.--Except to the extent
otherwise specifically provided by Commission or registered
futures association rule, regulation, or order, the person
shall not permit an individual who is subject to a statutory
disqualification under paragraph (2) or (3) of section 8a of
the Commodity Exchange Act to effect or be involved in
effecting transactions on behalf of the person, if the person
knew, or in the exercise of reasonable care should have
known, of the statutory disqualification.
(2) Books and records.--The person shall keep their books
and records open to inspection and examination by the
Commission and by any registered futures association of which
the person is a member.
(3) Customer disclosures.--The person shall disclose to
customers--
(A) information about the material risks and
characteristics of the assets listed for trading on the
person;
(B) information about the material risks and
characteristics of the transactions facilitated by the
person;
(C) information about the location and manner in which the
digital assets of the customer will be and are custodied;
(D) information concerning the policies and procedures of
the person that are related to the protection of the data of
customers of the person; and
(E) in their disclosure documents, offering documents, and
promotional material--
(i) in a prominent manner, that they are not registered
with or regulated by the Commission; and
(ii) the contact information for the whistleblower,
complaint, and reparation programs of the Commission.
(4) Customer assets.--
(A) In general.--The person shall--
(i) hold customer money, assets, and property in a manner
to minimize the risk of loss to the customer or unreasonable
delay in customer access to money, assets, and property of
the customer;
(ii) treat and deal with all money, assets, and property,
including any rights associated with any such money, assets,
or property, of any customer received as belonging to the
customer;
(iii) calculate the total digital asset obligations of the
person, and at all times hold money, assets, or property
equal to or in excess of the total digital asset obligations;
and
(iv) not commingle such money, assets and property held to
meet the total commodity obligation with the funds of the
person or use the money, assets, or property to margin,
secure, or guarantee any trade or contract, or to secure or
extend the credit, of any customer or person other than the
one for whom the same are held, except that--

(I) the money, assets, and property of any customer may be
commingled with that of any other customer, if separately
accounted for; and
(II) the share of the money, assets, and property, as in
the normal course of business are necessary to margin,
guarantee, secure, transfer, adjust, or settle a contract of
sale of a commodity asset, may be withdrawn and applied to do
so, including the payment of commissions, brokerage,
interest, taxes, storage, and other charges lawfully accruing
in connection with the contract of sale of a digital
commodity.

(B) Additional resources.--
(i) In general.--This section shall not prevent or be
construed to prevent the person from adding to the customer
money, assets, and property required to be segregated under
subparagraph (A), additional amounts of money, assets, or
property from the account of the person as the person
determines necessary to hold money, assets, or property equal
to or in excess of the total digital asset obligations of the
person.
(ii) Treatment as customer funds.--Any money, assets, or
property deposited pursuant to clause (i) shall be considered
customer property within the meaning of this subsection.
(e) Compliance.--
(1) In general.--A person who has filed a notice of intent
to register under this section and is in compliance with this
section shall be exempt from Securities and Exchange
Commission rules and regulations pertaining to registering as
a national securities exchange, broker, dealer, or clearing
agency, for activities related to a digital asset.
(2) Noncompliance.--Paragraph (1) shall not apply if, after
notice from the Commission and a reasonable opportunity to
correct the deficiency, a person who has submitted a notice
of intent to register is not in compliance with this section.
(3) Anti-fraud and anti-manipulation.--Paragraph (1) shall
not be construed to limit any anti-fraud, anti-manipulation,
or false reporting enforcement authority of the Commission,
the Securities and Exchange Commission, a registered futures
association, or a national securities association.
(4) Delisting.--Paragraph (1) shall not be construed to
limit the authority of the Commission and the Securities and
Exchange Commission to jointly require a person to delist an
asset for trading if the Commission and the Securities and
Exchange Commission determines that the listing is
inconsistent with the Commodity Exchange Act, the securities
laws (including regulations under those laws), or this Act.
(f) Registration.--
(1) In general.--A person may not file a notice of intent
to register with the Commission after the Commission has
finalized its rules for the registration of digital commodity
exchanges, digital commodity brokers, or digital commodity
dealers, as appropriate.
(2) Transition to registration.--Subsection (e)(1) shall
not apply to a person who has submitted a notice of intent to
register if--
(A) the Commission--
(i) determines that the person has failed to comply with
the requirements of this section; or
(ii) denies the application of the person to register; or
(B) the digital commodity exchange, digital commodity
broker, or digital commodity dealer that filed a notice of
intent to register failed to apply for registration as such
with the Commission within 180 days after the effective date
of the final rules of the Commission for the registration of
digital commodity exchanges, digital commodity brokers, or
digital commodity dealers, as appropriate.
(g) Rulemaking.--
(1) In general.--Within 180 days after the date of the
enactment of this Act, a registered futures association shall
adopt and enforce rules applicable to persons required by
subsection (a)(3) to be members of the association.
(2) Fees.--The rules adopted under paragraph (1) may
provide for dues in accordance with section 17(b)(6) of the
Commodity Exchange Act.
(3) Effect.--A registered futures association shall submit
to the Commission any rule adopted under paragraph (1), which
shall take effect pursuant to the requirements of section
17(j) of the Commodity Exchange Act.
(h) Liability of the Filer.--It shall be unlawful for any
person to provide false information in support of a filing
under this section if the person knew or reasonably should
have known that the information was false.
(i) Whistleblower Enforcement.--For purposes of section 23
of the Commodity Exchange Act, the term ``this Act'' includes
this section.

SEC. 107. NOTICE OF INTENT TO REGISTER FOR DIGITAL ASSET
BROKERS, DEALERS, AND TRADING SYSTEMS.

(a) In General.--
(1) Notice of intent to register.--Any person may file a
notice of intent to register with

[[Page H3437]]

the Securities and Exchange Commission (in this section
referred to as the ``Commission'') as--
(A) a digital asset trading system, for a person intending
to register as a digital asset trading system under section
6(m) of the Securities Exchange Act of 1934;
(B) a digital asset broker, for a person intending to
register as a digital asset broker under section 15H of the
Securities Exchange Act of 1934; or
(C) a digital asset dealer, for a person intending to
register as a digital asset dealer under section 15H of the
Securities Exchange Act of 1934.
(2) Conditions.--A person filing a notice of intent to
register under paragraph (1) shall be in compliance with this
section if the person--
(A) submits to the Commission and continues to materially
update a statement of the nature of the registrations the
filer intends to pursue;
(B) submits to the Commission and continues to materially
update the information required by subsections (b) and (c);
(C) complies with the requirements of subsection (d); and
(D) is a member of a national securities association
registered under section 15A of the Securities Exchange Act
of 1934 (15 U.S.C. 78o-3) and complies with the rules of the
association, including the rules of the association
pertaining to customer disclosures and protection of customer
assets.
(b) Disclosure of General Information.--A person filing a
notice of intent to register under subsection (a) shall
disclose to the Commission the following:
(1) Information concerning the management of the person,
including information describing--
(A) the ownership and management of the person;
(B) the financial condition of the person;
(C) affiliated entities;
(D) potential conflicts of interest;
(E) the address of the person, including--
(i) the place of incorporation;
(ii) the principal place of business; and
(iii) an address for service of process; and
(F) a list of the States in which the person has
operations.
(2) Information concerning the operations of the person,
including--
(A) a general description of the person's business and the
terms of service for United States customers;
(B) a description of the person's account approval process;
(C) any rulebook or other customer order fulfilment rules;
(D) risk management procedures;
(E) a description of the product listing process; and
(F) anti-money laundering policies and procedures.
(c) Listing Information.--A person filing a notice of
intent to register under subsection (a) shall provide to the
Commission and the Commodity Futures Trading Commission a
detailed description of--
(1) the specific characteristics of each digital asset
listed or offered for trading by the person, including
information regarding the digital asset's market activity,
distribution, and functional use; and
(2) the product listing determination made by the person
for each asset listed or offered for trading by the person.
(d) Requirements.--A person filing a notice of intent to
register under subsection (a) shall comply with the following
requirements:
(1) Statutory disqualification.--Except to the extent
otherwise specifically provided by Commission or a national
securities association rule, regulation, or order, the person
may not permit an individual who is subject to a statutory
disqualification (as defined under section 3(a) of the
Securities Exchange Act of 1934) to effect or be involved in
effecting transactions on behalf of the person if the person
knows, or in the exercise of reasonable discretion should
know, the individual is subject to a statutory
disqualification.
(2) Books and records.--The person shall keep their books
and records open to inspection and examination by the
Commission and any national securities association of which
they are a member.
(3) Customer disclosures.--The person shall disclose to
customers--
(A) information about the material risks and
characteristics of the assets listed for trading on the
person;
(B) information about the material risks and
characteristics of the transactions facilitated by the
person;
(C) information about the location and manner in which the
digital assets of the customer will be and are custodied;
(D) information concerning the person's policies and
procedures related to the protection of customers' data; and
(E) in their disclosure documents, offering documents, and
promotional material--
(i) in a prominent manner, that they are not registered
with or regulated by the Commission; and
(ii) the contact information for the whistleblower,
complaint, and reparation programs of the Commission.
(4) Customer assets.--
(A) In general.--The person shall--
(i) hold customer money, assets, and property in a manner
to minimize the risk of loss to the customer or unreasonable
delay in customer access to money, assets, and property of
the customer;
(ii) treat and deal with all money, assets, and property,
including any rights associated with any such money, assets,
or property, of any customer received as belonging to the
customer;
(iii) segregate all money, assets, and property received
from any customer of the person from the funds of the person,
except that--

(I) the money, assets, and property of any customer may be
commingled with that of any other customer, if separately
accounted for; and
(II) the share of the money, assets, and property, as in
the normal course of business are necessary to margin,
guarantee, secure, transfer, adjust, or settle a contract of
sale of a digital asset, may be withdrawn and applied to do
so, including the payment of commissions, brokerage,
interest, taxes, storage, and other charges lawfully accruing
in connection with the contract of sale of a digital asset.

(B) Additional resources.--
(i) In general.--This section shall not prevent or be
construed to prevent the person from adding to the customer
money, assets, and property required to be segregated under
subparagraph (A) additional amounts of money, assets, or
property from the account of the person as the person
determines necessary to hold money, assets, or property equal
to or in excess of the total digital asset obligation of the
person.
(ii) Treatment as customer funds.--Any money, assets, or
property deposited pursuant to clause (i) shall be considered
customer property within the meaning of this subsection.
(e) Compliance.--
(1) In general.--A person who has filed a notice of intent
to register under this section and is in compliance with this
section shall be exempt from Commission rules and regulations
pertaining to registering as a national securities exchange,
broker, dealer, or clearing agency, for activities related to
a digital asset.
(2) Noncompliance.--Paragraph (1) shall not apply if, after
notice from the Commission and a reasonable opportunity to
correct the deficiency, a person who has submitted a notice
of intent to register is not in compliance with this section.
(3) Anti-fraud and anti-manipulation.--Paragraph (1) shall
not be construed to limit any fraud, anti-manipulation, or
false reporting enforcement authority of the Commission, the
Commodity Futures Trading Commission, a registered futures
association, or a national securities association.
(4) Delisting.--Paragraph (1) shall not be construed to
limit the authority of the Commission and the Commodity
Futures Trading Commission to jointly require a person to
delist an asset for trading if the Commission and the
Commodity Futures Trading Commission determines that the
listing is inconsistent with the Commodity Exchange Act, the
securities laws (including regulations under those laws), or
this Act.
(f) Registration.--
(1) In general.--A person may not file a notice of intent
to register with the Commission after the Commission has
finalized its rules for the registration of digital asset
brokers, digital asset dealers, digital asset trading
systems, and notice-registered clearing agencies, as
appropriate.
(2) Transition to registration.--Subsection (e)(1) shall
not apply to a person who has submitted a notice of intent to
register if--
(A) the Commission--
(i) determines that the person has failed to comply with
the requirements of this section; or
(ii) denies the application of the person to register; or
(B) the digital asset broker, digital asset dealer, or
digital asset trading system that filed a notice of intent to
register failed to apply for registration as such with the
Commission within 180 days after the effective date of the
Commission's final rules for the registration of digital
asset brokers, digital asset dealers, and digital asset
trading systems, as appropriate.
(g) Liability of the Filer.--It shall be unlawful for any
person to provide false information in support of a filing
under this section if the person knew or reasonably should
have known that the information was false.
(h) National Securities Association.--
(1) In general.--A national securities association may
adopt and enforce rules written specifically for persons
filing a notice of intent to register under subsection (a),
including rules that prescribe reasonable fees and charges to
defray the costs of the national securities association
related to overseeing such persons.
(2) Approval by the commission.--With respect to a
provisional rule described under paragraph (1) filed with the
Commission, the Commission shall--
(A) not later than 90 days following the date of such
filing, approve the rule if the Commission determines that
the rule effectuates the purposes of this section; and
(B) make such approval on a summary basis pursuant to
section 19(b)(3)(B) of the Securities Exchange Act of 1934.
(i) Whistleblower Enforcement.--For purposes of section 21F
of the Securities Exchange Act of 1934 (15 U.S.C. 78u-6), the
term ``securities laws'' includes this section.

SEC. 108. COMMODITY EXCHANGE ACT SAVINGS PROVISIONS.

(a) In General.--Nothing in this Act shall affect or apply
to, or be interpreted to affect or apply to--
(1) any agreement, contract, or transaction that is subject
to the Commodity Exchange Act as--
(A) a contract of sale of a commodity for future delivery
or an option on such a contract;
(B) a swap;
(C) a security futures product;
(D) an option authorized under section 4c of such Act;
(E) an agreement, contract, or transaction described in
section 2(c)(2)(C)(i) of such Act; or
(F) a leverage transaction authorized under section 19 of
such Act; or
(2) the activities of any person with respect to any such
agreement, contract, or transaction.
(b) Prohibitions on Spot Digital Commodity Entities.--
Nothing in this Act authorizes, or shall be interpreted to
authorize, a digital commodity exchange, digital commodity

[[Page H3438]]

broker, or digital commodity dealer to engage in any
activities involving any transaction, contract, or agreement
described in subsection (a)(1), solely by virtue of being
registered or filing notice of intent to register as a
digital commodity exchange, digital commodity broker, or
digital commodity dealer.
(c) Definitions.--In this section, each term shall have the
meaning provided in the Commodity Exchange Act or the
regulations prescribed under such Act.

SEC. 109. ADMINISTRATIVE REQUIREMENTS.

(a) Securities and Exchange Act of 1934.--Section 21A of
the Securities and Exchange Act of 1934 (15 U.S.C. 78u-1) is
amended by adding at the end the following:
``(j) Duty of Members and Federal Employees Related to
Digital Assets.--
``(1) In general.--Solely for purposes of the insider
trading prohibitions arising under this Act, including
section 10 and Rule 10b-5 thereunder, each individual who is
a Member of Congress, an employee of Congress, or an employee
or agent of any department or agency of the Federal
Government owes a duty arising from a relationship of trust
and confidence to the Congress, the United States Government,
and the citizens of the United States with respect to
material, nonpublic information related to a restricted
digital asset that is derived from such individual's position
as a Member of Congress, employee of Congress, or as an
employee or agent of a department or agency of the Federal
Government or gained from the performance of such
individual's official responsibilities.
``(2) Definitions.--ln this subsection, the terms `Member
of Congress' and `employee of Congress' have the meaning
given those terms, respectively, under subsection (g)(2).''.
(b) Commodity Exchange Act.--Section 4c(a) of the Commodity
Exchange Act (7 U.S.C. 6c(a)) is amended--
(1) in paragraph (3)--
(A) in subparagraph (B), by striking ``or'' at the end;
(B) in subparagraph (C), by striking the period and
inserting ``; or''; and
(C) by adding at the end the following:
``(D) a contract of sale of a digital commodity.'';
(2) in paragraph (4)--
(A) in subparagraph (A)--
(i) in clause (ii), by striking ``or'' at the end;
(ii) in clause (iii), by striking the period and inserting
``; or''; and
(iii) by adding at the end the following:
``(iv) a contract of sale of a digital commodity.'';
(B) in subparagraph (B)--
(i) in clause (ii), by striking ``or'' at the end;
(ii) in clause (iii), by striking the period and inserting
``; or''; and
(iii) by adding at the end the following:
``(iv) a contract of sale of a digital commodity.''; and
(C) in subparagraph (C)--
(i) in clause (ii), by striking ``or'' at the end;
(ii) by striking ``(iii) a swap, provided however,'' and
inserting the following:
``(iii) a swap; or
``(iv) a contract of sale of a digital commodity,
provided, however,''; and
(iii) by striking ``clauses (i), (ii), or (iii)'' and
insert ``any of clauses (i) through (iv)''.

SEC. 110. INTERNATIONAL HARMONIZATION.

In order to promote effective and consistent global
regulation of digital assets, the Commodity Futures Trading
Commission and the Securities and Exchange Commission, as
appropriate--
(1) shall consult and coordinate with foreign regulatory
authorities on the establishment of consistent international
standards with respect to the regulation of digital assets,
restricted digital assets, and digital commodities; and
(2) may agree to such information-sharing arrangements as
may be deemed to be necessary or appropriate in the public
interest or for the protection of investors, customers, and
users of digital assets.

SEC. 111. IMPLEMENTATION.

(a) Global Rulemaking Timeframe.--Unless otherwise provided
in this Act or an amendment made by this Act, the Commodity
Futures Trading Commission and the Securities and Exchange
Commission, or both, shall individually, and jointly where
required, promulgate rules and regulations required of each
Commission under this Act or an amendment made by this Act
not later than 360 days after the date of enactment of this
Act.
(b) Rules and Registration Before Final Effective Dates.--
(1) In general.--In order to prepare for the implementation
of this Act, the Commodity Futures Trading Commission and the
Securities and Exchange Commission may, before any effective
date provided in this Act--
(A) promulgate rules, regulations, or orders permitted or
required by this Act;
(B) conduct studies and prepare reports and recommendations
required by this Act;
(C) register persons under this Act; and
(D) exempt persons, agreements, contracts, or transactions
from provisions of this Act, under the terms contained in
this Act.
(2) Limitation on effectiveness.--An action by the
Commodity Futures Trading Commission or the Securities and
Exchange Commission under paragraph (1) shall not become
effective before the effective date otherwise applicable to
the action under this Act.

TITLE II--CLARITY FOR ASSETS OFFERED AS PART OF AN INVESTMENT CONTRACT

SEC. 201. SHORT TITLE.

This title may be referred to as the ``Securities Clarity
Act of 2024''.

SEC. 202. TREATMENT OF INVESTMENT CONTRACT ASSETS.

(a) Securities Act of 1933.--Section 2(a) of the Securities
Act of 1933 (15 U.S.C. 77b(a)), as amended by section 101, is
further amended--
(1) in paragraph (1), by adding at the end the following:
``The term `security' does not include an investment contract
asset.''; and
(2) by adding at the end the following:
``(37) The term `investment contract asset' means a
fungible digital representation of value--
``(A) that can be exclusively possessed and transferred,
person to person, without necessary reliance on an
intermediary, and is recorded on a cryptographically secured
public distributed ledger;
``(B) sold or otherwise transferred, or intended to be sold
or otherwise transferred, pursuant to an investment contract;
and
``(C) that is not otherwise a security pursuant to the
first sentence of paragraph (1).''.
(b) 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 an investment contract asset (as
such term is defined under section 2(a) of the Securities Act
of 1933).''.
(c) 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 an investment contract asset (as
such term is defined under section 2(a) of the Securities Act
of 1933).''.
(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 an investment contract asset (as
such term is defined under section 2(a) of the Securities Act
of 1933).''.
(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 an
investment contract asset (as such term is defined under
section 2(a) of the Securities Act of 1933).''.

TITLE III--OFFERS AND SALES OF DIGITAL ASSETS

SEC. 301. EXEMPTED TRANSACTIONS IN DIGITAL ASSETS.

(a) In General.--The Securities Act of 1933 (15 U.S.C. 77a
et seq.) is amended--
(1) in section 4(a), by adding at the end the following:
``(8) transactions involving the offer or sale of units of
a digital asset by a digital asset issuer, if--
``(A) the aggregate amount of units of the digital asset
sold by the digital asset issuer in reliance on the exemption
provided under this paragraph, during the 12-month period
preceding the date of such transaction, including the amount
sold in such transaction, is not more than $75,000,000 (as
such amount is annually adjusted by the Commission to reflect
the change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics of the
Department of Labor);
``(B) with respect to a transaction involving the purchase
of units of a digital asset by a person who is not an
accredited investor, the aggregate amount of all units of
digital assets purchased by such person during the 12-month
period preceding the date of such transaction, including the
unit of a digital asset purchased in such transaction, does
not exceed the greater of--
``(i) 10 percent of the person's annual income or joint
income with that person's spouse or spousal equivalent; or
``(ii) 10 percent of the person's net worth or joint net
worth with the person's spouse or spousal equivalent;
``(C) after the completion of the transaction, the
purchaser does not own more than 10 percent of the total
amount of the units of the digital asset sold in reliance on
the exemption under this paragraph;
``(D) the transaction does not involve the offer or sale of
any digital asset not offered as part of an investment
contract;
``(E) the transaction does not involve the offer or sale of
a unit of a digital asset by a digital asset issuer that--
``(i) is not organized under the laws of a State, a
territory of the United States, or the District of Columbia;
``(ii) is a development stage company that either--

``(I) has no specific business plan or purpose; or
``(II) has indicated that the business plan of the company
is to merge with or acquire an unidentified company;

``(iii) is an investment company, as defined in section 3
of the Investment Company Act of 1940 (15 U.S.C. 80a-3), or
is excluded from the definition of investment company by
section 3(b) or section 3(c) of that Act (15 U.S.C. 80a-3(b)
or 80a-3(c));
``(iv) is issuing fractional undivided interests in oil or
gas rights, or a similar interest in other mineral rights;
``(v) is, or has been, subject to any order of the
Commission entered pursuant to section 12(j) of the
Securities Exchange Act of 1934 during the 5-year period
before the filing of the offering statement; or
``(vi) is disqualified pursuant to section 230.262 of title
17, Code of Federal Regulations; and
``(F) the issuer meets the requirements of section
4B(a).''; and
(2) by inserting after section 4A the following:

``SEC. 4B. REQUIREMENTS WITH RESPECT TO CERTAIN DIGITAL ASSET
TRANSACTIONS.

``(a) Requirements for Digital Asset Issuers.--

[[Page H3439]]

``(1) Information required in statement.--A digital asset
issuer offering or selling a unit of digital asset in
reliance on section 4(a)(8) shall file with the Commission a
statement containing the following information:
``(A) The name, legal status (including the jurisdiction in
which the issuer is organized and the date of organization),
and website of the digital asset issuer.
``(B) The address and telephone number of the issuer or a
legal representative of the issuer.
``(C) A certification that the digital asset issuer meets
the relevant requirements described under section 4(a)(8).
``(D) An overview of the material aspects of the offering.
``(E) A description of the purpose and intended use of the
offering proceeds.
``(F) A description of the plan of distribution of any unit
of a digital asset that is to be offered.
``(G) A description of the material risks surrounding
ownership of a unit of a digital asset.
``(H) A description of the material aspects of the digital
asset issuer's business.
``(I) A description of exempt offerings conducted within
the past three years by the digital asset issuer.
``(J) A description of the digital asset issuer and the
current number of employees of the digital asset issuer.
``(K) A description of any material transactions or
relationships between the digital asset issuer and affiliated
persons.
``(L) A description of exempt offerings conducted within
the past three years.
``(2) Information required for purchasers.--A digital asset
issuer that has filed a statement under paragraph (1) to
offer and sell a unit of a digital asset in reliance on
section 4(a)(8) shall disclose the information described
under section 43 of the Securities Exchange Act of 1934 on a
freely accessible public website.
``(3) Ongoing disclosure requirements.--A digital asset
issuer that has filed a statement under paragraph (1) to
offer and sell a unit of a digital asset in reliance on
section 4(a)(8) shall file the following with the Commission:
``(A) Annual reports.--An annual report that includes any
material changes to the information described under paragraph
(2) for the current fiscal year and for any fiscal year
thereafter, unless the issuer is no longer obligated to file
such annual report pursuant to paragraph (4).
``(B) Semiannual reports.--Along with each annual report
required under subparagraph (A), and separately six months
thereafter, a report containing--
``(i) an updated description of the current state and
timeline for the development of the blockchain system to
which the digital asset relates, showing how and when the
blockchain system intends or intended to be considered a
functional system and a decentralized system;
``(ii) the amount of money raised by the digital asset
issuer in reliance on section 4(a)(8), how much of that money
has been spent, and the general categories and amounts on
which that money has been spent; and
``(iii) any material changes to the information in the most
recent annual report.
``(C) Current reports.--A current report shall be filed
with the Commission reflecting any material changes to the
information previously reported to the Commission by the
digital asset issuer.
``(4) Termination of reporting requirements.--
``(A) In general.--The ongoing reporting requirements under
paragraph (3) shall not apply to a digital asset issuer 180
days after the end of the covered fiscal year.
``(B) Covered fiscal year defined.--In this paragraph, the
term `covered fiscal year' means the first fiscal year of an
issuer in which the blockchain system to which the digital
asset relates is a functional system and certified to be a
decentralized system under section 44 of the Securities
Exchange Act of 1934.
``(b) Requirements for Intermediaries.--
``(1) In general.--A person acting as an intermediary in a
transaction involving the offer or sale of a unit of a
digital asset in reliance on section 4(a)(8) shall--
``(A) register with the Commission as a digital asset
broker; and
``(B) be a member of a national securities association
registered under section 15A of the Securities Exchange Act
of 1934 (15 U.S.C. 78o-3).
``(2) Purchaser qualification.--
``(A) In general.--Each time, before accepting any
commitment (including any additional commitment from the same
person), an intermediary or digital asset issuer shall have a
reasonable basis for believing that the purchaser satisfies
the requirements of section 4(a)(8).
``(B) Reliance on purchaser's representations.--For
purposes of subparagraph (A), an intermediary or digital
asset issuer may rely on a purchaser's representations
concerning the purchaser's annual income and net worth and
the amount of the purchaser's other investments made, unless
the intermediary or digital asset issuer has reason to
question the reliability of the representation.
``(C) Reliance on issuer.--For purposes of determining
whether a transaction meets the requirements described under
subparagraph (A) through (C) of section 4(a)(8), an
intermediary may rely on the efforts of a digital asset
issuer.
``(c) Additional Provisions.--
``(1) Acceptance of written offers; sales.--After an issuer
files a statement under paragraph (1) to offer and sell a
digital asset in reliance on section 4(a)(8)--
``(A) written offers of the digital asset may be made; and
``(B) the issuer may sell the digital assets in reliance on
section 4(a)(8), if such sales meet all other requirements.
``(2) Solicitation of interest.--
``(A) In general.--At any time before the filing of a
statement under paragraph (1), a digital asset issuer may
communicate orally or in writing to determine whether there
is any interest in a contemplated offering. Such
communications are deemed to be an offer of a unit of a
digital asset for sale for purposes of the anti-fraud
provisions of the Federal securities laws. No solicitation or
acceptance of money or other consideration, nor of any
commitment, binding or otherwise, from any person is
permitted until the statement is filed.
``(B) Conditions.--In any communication described under
subparagraph (A), the digital asset issuer shall--
``(i) state that no money or other consideration is being
solicited, and if sent in response, will not be accepted;
``(ii) state that no offer to buy a unit of a digital asset
can be accepted and no part of the purchase price can be
received until the statement is filed and then only through
an intermediary; and
``(iii) state that a person's indication of interest
involves no obligation or commitment of any kind.
``(C) Indications of interest.--Any written communication
described under subparagraph (A) may include a means by which
a person may indicate to the digital asset issuer that such
person is interested in a potential offering. A digital asset
issuer may require a name, address, telephone number, or
email address in any response form included with a
communication described under subparagraph (A).
``(3) Disqualification provisions.--The Commission shall
issue rules to apply the disqualification provisions under
section 230.262 of title 17, Code of Federal Regulations, to
the exemption provided under section 4(a)(8).''.
(b) Additional Exemptions.--
(1) Certain registration requirements.--Section 12(g)(6) of
the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(6)) is
amended by striking ``under section 4(6)'' and inserting
``under section 4(a)(6) or 4(a)(8)''.
(2) Exemption from state regulation.--Section 18(b)(4) of
the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is amended--
(A) in section (B), by striking ``section 4(4)'' and
inserting ``section 4(a)(4)'';
(B) in section (C), by striking ``section 4(6)'' and
inserting ``section 4(a)(6)'';
(C) in subparagraph (F)--
(i) by striking ``section 4(2)'' each place such term
appears and inserting ``section 4(a)(2)'';
(ii) by striking ``or'' at the end;
(D) in subparagraph (G), by striking the period and
inserting ``; or''; and
(E) by adding at the end the following:
``(H) section 4(a)(8).''.

SEC. 302. REQUIREMENTS FOR OFFERS AND SALES OF CERTAIN
DIGITAL ASSETS.

(a) In General.--Title I of the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) is amended by adding at the end
the following:

``SEC. 42. REQUIREMENTS FOR OFFERS AND SALES OF CERTAIN
DIGITAL ASSETS.

``(a) Offers and Sales of Certain Restricted Digital
Assets.--
``(1) In general.--Notwithstanding any other provision of
law, subject to paragraph (2), a restricted digital asset may
be offered and sold on a digital asset trading system by any
person other than a digital asset issuer if, at the time of
such offer or sale, any blockchain system to which the
restricted digital asset relates is a functional system and
the information described in section 43 has been certified
and made publicly available for any blockchain system to
which the restricted digital asset relates.
``(2) Additional rules for related persons and affiliated
persons.--Except as provided under subsection (c), a
restricted digital asset owned by a related person or an
affiliated person may only be offered or sold after 12 months
after the later of--
``(A) the date on which such restricted digital asset was
acquired; or
``(B) the digital asset maturity date.
``(b) Offers and Sales of Certain Digital Commodities.--
``(1) In general.--Subject to paragraph (2), a digital
commodity may be offered and sold by any person.
``(2) Rules for related and affiliated persons.--Except as
provided under subsection (c), a digital commodity may only
be offered or sold by a related person or an affiliated
person if--
``(A) the holder of the digital commodity originally
acquired the digital asset while it was a restricted digital
asset not less than 12 months after the later of--
``(i) the date on which such restricted digital asset was
acquired; or
``(ii) the digital asset maturity date;
``(B) any blockchain system to which the digital commodity
relates is certified to be a decentralized system under
section 44; and
``(C) the digital commodity is offered or sold on or
subject to the rules of a digital commodity exchange
registered under section 5i of the Commodity Exchange Act.
``(3) Not an investment contract.--For purposes of the
securities laws, an offer or sale of a digital commodity that
does not violate paragraph (2) shall not be a transaction in
an investment contract.
``(c) Sales Restrictions for Affiliated Persons.--A digital
asset may be offered and sold by an affiliated person under
subsection (a) or (b) if--
``(1) the aggregate amount of such digital assets sold in
any 3-month period by the affiliated person is not greater
than one percent of the digital assets then outstanding; or
``(2) the affiliated person promptly, following the
placement of an order to sell one percent or more of the
digital assets then outstanding during any 3-month period,
reports the sale to--
``(A) the Commodity Futures Trading Commission, in the case
of an order to sell a digital

[[Page H3440]]

commodity on or subject to the rules of a digital commodity
exchange; or
``(B) the Securities and Exchange Commission, in the case
of a sell order for a restricted digital asset placed with a
digital asset trading system.
``(d) Treatment of Certain End User Distributions Under the
Securities Laws.--
``(1) In general.--With respect to a digital asset, an end
user distribution is described under this paragraph if--
``(A) each blockchain system to which such digital asset
relates is a functional system; and
``(B) with respect to the digital asset and each blockchain
system to which such digital asset relates, the information
described in section 43 has been certified and made publicly
available.
``(2) Not an investment contract.--For purposes of the
securities laws, an end user distribution described under
paragraph (1) shall not be a transaction in an investment
contract.
``(3) Exemption.--Section 5 of the Securities Act of 1933
(15 U.S.C. 77e) shall not apply to an end user distribution
described under paragraph (1) or a transaction in a unit of
digital asset issued in such a distribution.''.
(b) Rule of Construction.--Nothing in this Act or the
amendments made by this Act may be construed to restrict the
use of a digital asset, except as expressly provided in
connection with--
(1) the offer or sale of a restricted digital asset or
digital commodity; or
(2) an intermediary's custody of a restricted digital asset
or digital commodity.

SEC. 303. ENHANCED DISCLOSURE REQUIREMENTS.

Title I of the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.), as amended by section 302, is further amended
by adding at the end the following:

``SEC. 43. ENHANCED DISCLOSURE REQUIREMENTS WITH RESPECT TO
DIGITAL ASSETS.

``(a) Disclosure Information.--With respect to a digital
asset and any blockchain system to which the digital asset
relates, the information described under this section is as
follows:
``(1) Source code.--The source code for any blockchain
system to which the digital asset relates.
``(2) Transaction history.--A description of the steps
necessary to independently access, search, and verify the
transaction history of any blockchain system to which the
digital asset relates.
``(3) Digital asset economics.--A description of the
purpose of any blockchain system to which the digital asset
relates and the operation of any such blockchain system,
including--
``(A) information explaining the launch and supply process,
including the number of digital assets to be issued in an
initial allocation, the total number of digital assets to be
created, the release schedule for the digital assets, and the
total number of digital assets then outstanding;
``(B) information on any applicable consensus mechanism or
process for validating transactions, method of generating or
mining digital assets, and any process for burning or
destroying digital assets on the blockchain system;
``(C) an explanation of governance mechanisms for
implementing changes to the blockchain system or forming
consensus among holders of such digital assets; and
``(D) sufficient information for a third party to create a
tool for verifying the transaction history of the digital
asset.
``(4) Plan of development.--The current state and timeline
for the development of any blockchain system to which the
digital asset relates, showing how and when the blockchain
system intends or intended to be considered a functional
system and decentralized system.
``(5) Development disclosures.--A list of all persons who
are related persons or affiliated persons who have been
issued a unit of a digital asset by a digital asset issuer or
have a right to a unit of a digital asset from a digital
asset issuer.
``(6) Risk factor disclosures.--A description of the
material risks surrounding ownership of a unit of a digital
asset.
``(b) Certification.--
``(1) In general.--With respect to a digital asset and any
blockchain system to which the digital asset relates, the
information described under this section has been certified
if the digital asset issuer, an affiliated person, a
decentralized governance system, or a digital commodity
exchange certifies on a quarterly basis to the Commodity
Futures Trading Commission and the Securities and Exchange
Commission that the information is true and correct.
``(2) Prior disclosures.--Information described under this
section which was made available to the public prior to the
date of enactment of this section may be certified as true
and correct on the date such information was published in
final form.
``(3) Rulemaking.--The Commission and the Commodity Futures
Trading Commission may jointly issue rules regarding the
certification process described under paragraph (1).''.

SEC. 304. CERTIFICATION OF CERTAIN DIGITAL ASSETS.

Title I of the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.), as amended by section 303, is further amended
by adding at the end the following:

``SEC. 44. CERTIFICATION OF CERTAIN DIGITAL ASSETS.

``(a) Certification.--Any person may certify to the
Securities and Exchange Commission that the blockchain system
to which a digital asset relates is a decentralized system.
``(b) Filing Requirements.--A certification described under
subsection (a) shall be filed with the Commission, and
include--
``(1) information regarding the person making the
certification;
``(2) a description of the blockchain system and the
digital asset which relates to such blockchain system,
including--
``(A) the operation of the blockchain system;
``(B) the functionality of the related digital asset;
``(C) any decentralized governance system which relates to
the blockchain system; and
``(D) the process to develop consensus or agreement within
such decentralized governance system;
``(3) a description of the development of the blockchain
system and the digital asset which relates to the blockchain
system, including--
``(A) a history of the development of the blockchain system
and the digital asset which relates to such blockchain
system;
``(B) a description of the issuance process for the digital
asset which relates to the blockchain system;
``(C) information identifying the digital asset issuer of
the digital asset which relates to the blockchain system; and
``(D) a list of any affiliated person related to the
digital asset issuer;
``(4) an analysis of the factors on which such person based
the certification that the blockchain system is a
decentralized system, including--
``(A) an explanation of the protections and prohibitions
available during the previous 12 months against any one
person being able to--
``(i) control or materially alter the blockchain system;
``(ii) exclude any other person from using or participating
on the blockchain system; and
``(iii) exclude any other person from participating in a
decentralized governance system;
``(B) information regarding the beneficial ownership of the
digital asset which relates to such blockchain system and the
distribution of voting power in any decentralized governance
system during the previous 12 months;
``(C) information regarding the history of upgrades to the
source code for such blockchain system during the previous 3
months, including--
``(i) a description of any consensus or agreement process
utilized to process or approve changes to the source code;
``(ii) a list of any material changes to the source code,
the purpose and effect of the changes, and the contributor of
the changes, if known; and
``(iii) any changes to the source code made by the digital
asset issuer, a related person, or an affiliated person;
``(D) information regarding any activities conducted to
market the digital asset which relates to the blockchain
system during the previous 3 months by the digital asset
issuer or an affiliated person of the digital asset issuer;
and
``(E) information regarding any issuance of a unit of the
digital asset which relates to such blockchain system during
the previous 12 months; and
``(5) with respect to a blockchain system for which a
certification has previously been rebutted under this section
or withdrawn under section 5i(m) of the Commodity Exchange
Act, specific information relating to the analysis provided
in subsection (f)(2) in connection with such rebuttal or such
section 5i(m)(1)(C) in connection with such withdrawal.
``(c) Rebuttable Presumption.--The Commission may rebut a
certification described under subsection (a) with respect to
a blockchain system if the Commission, within 60 days of
receiving such certification, determines that the blockchain
system is not a decentralized system.
``(d) Certification Review.--
``(1) In general.--Any blockchain system that relates to a
digital asset for which a certification has been made under
subsection (a) shall be considered a decentralized system 60
days after the date on which the Commission receives a
certification under subsection (a), unless the Commission
notifies the person who made the certification within such
time that the Commission is staying the certification due
to--
``(A) an inadequate explanation by the person making the
certification; or
``(B) any novel or complex issues which require additional
time to consider.
``(2) Public notice.--The Commission shall make the
following available to the public and provide a copy to the
Commodity Futures Trading Commission:
``(A) Each certification received under subsection (a).
``(B) Each stay of the Commission under this section, and
the reasons therefore.
``(C) Any response from a person making a certification
under subsection (a) to a stay of the certification by the
Commission.
``(3) Consolidation.--The Commission may consolidate and
treat as one submission multiple certifications made under
subsection (a) for the same blockchain system which relates
to a digital asset which are received during the review
period provided under this subsection.
``(e) Stay of Certification.--
``(1) In general.--A notification by the Commission
pursuant to subsection (d)(1) shall stay the certification
once for up to an additional 120 days from the date of the
notification.
``(2) Public comment period.--Before the end of the 60-day
period described under subsection (d)(1), the Commission may
begin a public comment period of at least 30 days in
conjunction with a stay under this section.
``(f) Disposition of Certification.--
``(1) In general.--A certification made under subsection
(a) shall--
``(A) become effective--
``(i) upon the publication of a notification from the
Commission to the person who made the certification that the
Commission does not object to the certification; or
``(ii) at the expiration of the certification review
period; and
``(B) not become effective upon the publication of a
notification from the Commission to the person who made the
certification that the Commission has rebutted the
certification.

[[Page H3441]]

``(2) Detailed analysis included with rebuttal.--The
Commission shall include, with each publication of a
notification of rebuttal described under paragraph (1)(B), a
detailed analysis of the factors on which the decision was
based.
``(g) Recertification.--With respect to a blockchain system
for which a certification has been rebutted under this
section, no person may make a certification under subsection
(a) with respect to such blockchain system during the 90-day
period beginning on the date of such rebuttal.
``(h) Appeal of Rebuttal.--
``(1) In general.--If a certification is rebutted under
this section, the person making such certification may appeal
the decision to the United States Court of Appeals for the
District of Columbia, not later than 60 days after the notice
of rebuttal is made.
``(2) Review.--In an appeal under paragraph (1), the court
shall have de novo review of the determination to rebut the
certification.''.

SEC. 305. EFFECTIVE DATE.

Unless otherwise provided in this title, this title and the
amendments made by this title shall take effect 360 days
after the date of enactment of this Act, except that, to the
extent a provision of this title requires a rulemaking, the
provision shall take effect on the later of--
(1) 360 days after the date of enactment of this Act; or
(2) 60 days after the publication in the Federal Register
of the final rule implementing the provision.

TITLE IV--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE
SECURITIES AND EXCHANGE COMMISSION

SEC. 401. TREATMENT OF DIGITAL COMMODITIES AND OTHER DIGITAL
ASSETS.

(a) Securities Act of 1933.--Section 2(a)(1) of the
Securities Act of 1933 (15 U.S.C. 77b(a)(1)) is amended by
adding at the end the following: ``The term does not include
a digital commodity or permitted payment stablecoin.''.
(b) Securities Exchange Act of 1934.--Section 3(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is
amended--
(1) in paragraph (1), by adding at the end the following:
``The term `exchange' does not include a digital asset
trading system or a blockchain protocol offering digital
assets, or any person or group of persons solely because of
their development of such a blockchain protocol.'';
(2) in paragraph (2), by adding at the end the following:
``A digital asset trading system is not a `facility' of an
exchange.'';
(3) in paragraph (4)(A), by inserting ``, other than
restricted digital assets,'' after ``securities'';
(4) in paragraph (5)(A), by inserting ``restricted digital
assets or'' after ``not including'';
(5) in paragraph (26) by inserting ``(other than a notice-
registered digital asset clearing agency)'' after ``or
registered clearing agency'';
(6) in paragraph (28) by inserting ``(other than a notice-
registered digital asset clearing agency)'' after
``registered clearing agency''; and
(7) in paragraph (10), by adding at the end the following:
``The term does not include a digital commodity or permitted
payment stablecoin.''.
(c) Investment Advisers Act of 1940.--Section 202(a) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2) is
amended--
(1) in paragraph (18), by adding at the end the following:
``The term does not include a digital commodity or permitted
payment stablecoin.'';
(2) by redesignating the second paragraph (29) (relating to
commodity pools) as paragraph (31);
(3) by adding at the end, the following:
``(32) Digital asset-related terms.--The terms `digital
commodity' and `permitted payment stablecoin' have the
meaning given those terms, respectively, under section 2(a)
of the Securities Act of 1933 (15 U.S.C. 77b(a)).''.
(d) Investment Company Act of 1940.--Section 2(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2) is amended--
(1) in paragraph (36), by adding at the end the following:
``The term does not include a digital commodity or permitted
payment stablecoin.''; and
(2) by adding at the end, the following:
``(55) Digital asset-related terms.--The terms `digital
commodity' and `permitted payment stablecoin' have the
meaning given those terms, respectively, under section 2(a)
of the Securities Act of 1933 (15 U.S.C. 77b(a)).''.

SEC. 402. AUTHORITY OVER PERMITTED PAYMENT STABLECOINS AND
RESTRICTED DIGITAL ASSETS.

(a) In General.--Section 10 of the Securities Exchange Act
of 1934 (15 U.S.C. 78j) is amended--
(1) by moving subsection (c) so as to appear after
subsection (b);
(2) by designating the undesignated matter at the end of
that section as subsection (d); and
(3) by adding at the end the following:
``(e)(1) Rules promulgated under subsection (b) that
prohibit fraud, manipulation, or insider trading (but not
rules imposing or specifying reporting or recordkeeping
requirements, procedures, or standards as prophylactic
measures against fraud, manipulation, or insider trading),
and judicial precedents decided under subsection (b) and
rules promulgated thereunder that prohibit fraud,
manipulation, or insider trading, shall apply with respect to
permitted payment stablecoin transactions and restricted
digital assets transactions engaged in by a broker, dealer,
digital asset broker, or digital asset dealer or through an
alternative trading system or digital asset trading system to
the same extent as they apply to securities transactions.
``(2) Judicial precedents decided under section 17(a) of
the Securities Act of 1933 and sections 9, 15, 16, 20, and
21A of this title, and judicial precedents decided under
applicable rules promulgated under such sections, shall apply
to permitted payment stablecoins and restricted digital
assets with respect to those circumstances in which the
permitted payment stablecoins or restricted digital assets
are brokered, traded, or custodied by a broker, dealer,
digital asset broker, digital asset dealer, or through an
alternative trading system or digital asset trading system to
the same extent as they apply to securities.
``(3) Nothing in this subsection may be construed to
provide the Commission authority to make any rule,
regulation, or requirement or impose any obligation or
limitation on a permitted payment stablecoin issuer or a
digital asset issuer regarding any aspect of the operations
of a permitted payment stablecoin issuer, a digital asset
issuer, a permitted payment stablecoin, or a restricted
digital asset.''.
(b) Treatment of Permitted Payment Stablecoins.--Title I of
the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
as amended by section 404, is amended by inserting after
section 6B the following

``SEC. 6C. TREATMENT OF TRANSACTIONS IN PERMITTED PAYMENT
STABLECOINS.

``(a) Authority to Broker, Trade, and Custody Permitted
Payment Stablecoins.--Permitted payment stablecoins may be
brokered, traded, or custodied by a broker, dealer, digital
asset broker, or digital asset dealer or through an
alternative trading system or digital asset trading system.
``(b) Commission Jurisdiction.--The Commission shall only
have jurisdiction over a transaction in a permitted payment
stablecoin with respect to those circumstances in which a
permitted payment stablecoin is brokered, traded, or
custodied--
``(1) by a broker, dealer, digital asset broker, or digital
asset dealer; or
``(2) through an alternative trading system or digital
asset trading system.
``(c) Limitation.--Subsection (b) shall only apply to a
transaction described in subsection (b) for the purposes of
regulating the offer, execution, solicitation, or acceptance
of a permitted payment stablecoin in those circumstances in
which the permitted payment stablecoin is brokered, traded,
or custodied--
``(1) by a broker, dealer, digital asset broker, or digital
asset dealer; or
``(2) through an alternative trading system or digital
asset trading system.''.

SEC. 403. REGISTRATION OF DIGITAL ASSET TRADING SYSTEMS.

Section 6 of the Securities Exchange Act of 1934 (15 U.S.C.
78f) is amended by adding at the end the following:
``(m) Digital Asset Trading System.--
``(1) In general.--It shall be unlawful for any digital
asset trading system to make use of the mails or any means or
instrumentality of interstate commerce within or subject to
the jurisdiction of the United States to effect any
transaction in a restricted digital asset, unless such
digital asset trading system is registered with the
Commission.
``(2) Application.--A person desiring to register as a
digital asset trading system shall submit to the Commission
an application in such form and containing such information
as the Commission may require for the purpose of making the
determinations required for approval.
``(3) Exemptions.--A digital asset trading system that
offers or seeks to offer at least one restricted digital
asset shall not be required to register under this section
(and paragraph (1) shall not apply to such digital asset
trading system) if the trading system satisfies any exemption
contained on a list of exemptions prepared by the Commission
to be as close as practicable to those exemptions set forth
in section 240.3b-16(b) of title 17, Code of Federal
Regulations, applicable to the definition of an exchange.
``(4) Additional registrations.--
``(A) With the commission.--
``(i) In general.--A registered digital asset trading
system shall be permitted to maintain any other registration
with the Commission relating to the other activities of the
registered digital asset trading system, including as a--

``(I) national securities exchange;
``(II) broker;
``(III) dealer;
``(IV) alternative trading system, pursuant to part 242 of
title 17, Code of Federal Regulations, as in effect on the
date of enactment of this subsection;
``(V) digital asset broker; or
``(VI) digital asset dealer.

``(ii) Rulemaking.--The Commission shall prescribe rules
for an entity with multiple registrations described under
clause (i) to exempt the entity from duplicative,
conflicting, or unduly burdensome provisions of this Act and
the rules under this Act, to the extent such an exemption
would protect investors, maintain fair, orderly, and
efficient markets, and facilitate capital formation.
``(B) With the commodity futures trading commission.--A
registered digital asset trading system shall be permitted to
maintain a registration with the Commodity Futures Trading
Commission as a digital commodity exchange to offer contracts
of sale for digital commodities.''.

SEC. 404. REQUIREMENTS FOR DIGITAL ASSET TRADING SYSTEMS.

Title I of the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.) is amended by inserting after section 6 the
following:

``SEC. 6A. REQUIREMENTS FOR DIGITAL ASSET TRADING SYSTEMS.

``(a) Holding of Customer Assets.--
``(1) Qualified digital asset custodian required.--A
digital asset trading system shall hold customer restricted
digital assets with a qualified digital asset custodian
described under section 6B.

[[Page H3442]]

``(2) Custody prohibited.--A digital asset trading system,
in its capacity as such, may not hold custody of customer
money, assets, or property.
``(3) Custody in other capacity.--Nothing in this Act may
be construed to prohibit a person registered as a digital
asset trading system from holding custody of customer money,
assets, or property in any other permitted capacity,
including as a digital asset broker, digital asset dealer, or
qualified digital asset custodian in compliance with the
requirements of this Act.
``(b) Rulemaking.--The Commission shall prescribe rules for
digital asset trading systems relating to the following:
``(1) Notice.--Notice to the Commission of the initial
operation of a digital asset trading system or any material
change to the operation of the digital asset trading system.
``(2) Order display.--The thresholds at which a digital
asset trading system is required to display the orders of the
digital asset trading system, and the manner of such display.
``(3) Fair access.--The thresholds at which a digital asset
trading system is required to have policies regarding
providing fair access to the digital asset trading system.
``(4) Capacity, integrity, and security of automated
systems.--Policies and procedures reasonably designed to
ensure the capacity, integrity, and security of the digital
asset trading system, taking into account the particular
nature of digital asset trading systems.
``(5) Examinations, inspections, and investigations.--The
examination and inspection of the premises, systems, and
records of the digital asset trading system by the Commission
or by a self-regulatory organization of which such digital
asset trading system is a member.
``(6) Recordkeeping.--The making, keeping current, and
preservation of records related to trading activity on the
digital asset trading system.
``(7) Reporting.--The reporting of transactions in digital
assets that occur through the digital asset trading system.
``(8) Procedures.--The establishment of adequate written
safeguards and written procedures to protect confidential
trading information.
``(c) Name Requirement.--A digital asset trading system may
not use the word `exchange' in the name of the digital asset
trading system, unless the digital asset trading system--
``(1) is operated by a registered national securities
exchange; and
``(2) is clearly indicated as being provided outside of the
system's capacity as a national securities exchange.
``(d) Treatment Under the Bank Secrecy Act.--A digital
asset trading system shall be treated as a financial
institution for purposes of the Bank Secrecy Act.

``SEC. 6B. REQUIREMENTS FOR QUALIFIED DIGITAL ASSET
CUSTODIANS.

``(a) In General.--A digital asset custodian is a qualified
digital asset custodian if the digital asset custodian
complies with the requirements of this section.
``(b) Supervision Requirement.--A digital asset custodian
that is not subject to supervision and examination by an
appropriate Federal banking agency, the National Credit Union
Administration, the Commodity Futures Trading Commission, or
the Securities and Exchange Commission shall be subject to
adequate supervision and appropriate regulation by--
``(1) a State bank supervisor (within the meaning of
section 3 of the Federal Deposit Insurance Act);
``(2) a State credit union supervisor, as defined under
section 6003 of the Anti-Money Laundering Act of 2020; or
``(3) an appropriate foreign governmental authority in the
home country of the digital asset custodian.
``(c) Other Requirements.--
``(1) Not otherwise prohibited.--The digital asset
custodian has not been prohibited by a supervisor of the
digital asset custodian from engaging in an activity with
respect to the custody and safekeeping of digital assets.
``(2) Information sharing.--
``(A) In general.--A digital asset custodian shall share
information with the Commission on request and comply with
such requirements for periodic sharing of information
regarding customer accounts that the digital asset custodian
holds on behalf of an entity registered with the Commission
as the Commission determines by rule are reasonably necessary
to effectuate any of the provisions, or to accomplish any of
the purposes, of this Act.
``(B) Provision of information.--Any entity that is subject
to regulation and examination by an appropriate Federal
banking agency may satisfy any information request described
in subparagraph (A) by providing the Commission with a
detailed listing, in writing, of the restricted digital
assets of a customer within the custody or use of the entity.
``(d) Adequate Supervision and Appropriate Regulation.--
``(1) In general.--For purposes of subsection (b), the
terms `adequate supervision' and `appropriate regulation'
mean such minimum standards for supervision and regulation as
are reasonably necessary to protect the digital assets of
customers of an entity registered with the Commission,
including standards relating to the licensing, examination,
and supervisory processes that require the digital asset
custodian to, at a minimum--
``(A) receive a review and evaluation of ownership,
character and fitness, conflicts of interest, business model,
financial statements, funding resources, and policies and
procedures of the digital asset custodian;
``(B) hold capital sufficient for the financial integrity
of the digital asset custodian;
``(C) protect customer assets;
``(D) establish and maintain books and records regarding
the business of the digital asset custodian;
``(E) submit financial statements and audited financial
statements to the applicable supervisor described in
subsection (b);
``(F) provide disclosures to the applicable supervisor
described in subsection (b) regarding actions, proceedings,
and other items as determined by such supervisor;
``(G) maintain and enforce policies and procedures for
compliance with applicable State and Federal laws, including
those related to anti-money laundering and cybersecurity;
``(H) establish a business continuity plan to ensure
functionality in cases of disruption; and
``(I) establish policies and procedures to resolve
complaints.
``(2) Rulemaking with respect to definitions.--
``(A) In general.--For purposes of this section, the
Commission may, by rule, further define the terms `adequate
supervision' and `appropriate regulation' as necessary in the
public interest, as appropriate for the protection of
investors, and consistent with the purposes of this Act.
``(B) Conditional treatment of certain custodians before
rulemaking.--Before the effective date of a rulemaking under
subparagraph (A), a trust company is deemed subject to
adequate supervision and appropriate regulation if--
``(i) the trust company is expressly permitted by a State
bank supervisor to engage in the custody and safekeeping of
digital assets;
``(ii) the State bank supervisor has established licensing,
examination, and supervisory processes that require the trust
company to, at a minimum, meet the conditions described in
subparagraphs (A) through (I) of paragraph (1); and
``(iii) the trust company is in good standing with its
State bank supervisor.
``(C) Transition period for certain custodians.--In
implementing the rulemaking under subparagraph (A), the
Commission shall provide a transition period of not less than
two years for any trust company which is deemed subject to
adequate supervision and appropriate regulation under
subparagraph (B) on the effective date of the rulemaking.''.

SEC. 405. REGISTRATION OF DIGITAL ASSET BROKERS AND DIGITAL
ASSET DEALERS.

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)
is amended by inserting after section 15G the following:

``SEC. 15H. REGISTRATION OF DIGITAL ASSET BROKERS AND DIGITAL
ASSET DEALERS.

``(a) Registration.--
``(1) In general.--It shall be unlawful for any digital
asset broker or digital asset dealer (other than a natural
person associated with a registered digital asset broker or
registered digital asset dealer, and other than such a
digital asset broker or digital asset dealer whose business
is exclusively intrastate and who does not make use of a
digital asset trading system) to make use of the mails or any
means or instrumentality of interstate commerce to effect any
transactions in, or to induce or attempt to induce the
purchase or sale of, any restricted digital asset unless such
digital asset broker or digital asset dealer is registered in
accordance with this section.
``(2) Application.--A person desiring to register as a
digital asset broker or digital asset dealer shall submit to
the Commission an application in such form and containing
such information as the Commission may require for the
purpose of making the determinations required for approval.
``(b) National Securities Association Membership.--
``(1) In general.--A digital asset broker or digital asset
dealer may not register or maintain registration under this
section unless such digital asset broker or digital asset
dealer is a member of a national securities association
registered under section 15A.
``(2) Treatment under section 15a.--
``(A) In general.--For purposes of section 15A--
``(i) the term `broker' includes a digital asset broker and
the term `registered broker' includes a registered digital
asset broker;
``(ii) the term `dealer' includes a digital asset dealer
and the term `registered dealer' includes a registered
digital asset dealer; and
``(iii) the term `security' includes a restricted digital
asset.
``(B) Clarification.--Notwithstanding subparagraph (A), a
national securities association shall, with respect to the
restricted digital asset activities of a digital asset broker
or a digital asset dealer, only examine for and enforce
against such digital asset broker or digital asset dealer--
``(i) rules of such national securities association written
specifically for digital asset brokers or digital asset
dealers;
``(ii) the provisions of the Financial Innovation and
Technology for the 21st Century Act and rules issued
thereunder applicable to digital asset brokers and digital
asset dealers; and
``(iii) the provisions of the securities laws and the rules
thereunder applicable to digital asset brokers and digital
asset dealers.
``(c) Additional Registrations With the Commission.--
``(1) In general.--A registered digital asset broker or
registered digital asset dealer shall be permitted to
maintain any other registration with the Commission relating
to the other activities of the registered digital asset
broker or registered digital asset dealer, including as--
``(A) a national securities exchange;
``(B) a broker;
``(C) a dealer;
``(D) an alternative trading system, pursuant to part 242
of title 17, Code of Federal Regulations, as in effect on the
date of enactment of this section; or

[[Page H3443]]

``(E) a digital asset trading system.
``(2) Rulemaking.--The Commission shall prescribe rules for
an entity with multiple registrations described under
paragraph (1) to exempt the entity from duplicative,
conflicting, or unduly burdensome provisions of this Act and
the rules under this Act, to the extent such an exemption
would protect investors, maintain fair, orderly, and
efficient markets, and facilitate capital formation.
``(3) Self-regulatory organizations.--The Commission shall
require any self-regulatory organization with a registered
digital asset broker or registered digital asset dealer as a
member to provide such rules as may be necessary to further
compliance with this section, protect investors, maintain
fair, orderly, and efficient markets, and facilitate capital
formation.
``(d) Additional Registrations With the Commodity Futures
Trading Commission.--A registered digital asset broker or
registered digital asset dealer shall be permitted to
maintain a registration with the Commodity Futures Trading
Commission as a digital commodity broker or digital commodity
dealer, to list or trade contracts of sale for digital
commodities.''.

SEC. 406. REQUIREMENTS OF DIGITAL ASSET BROKERS AND DIGITAL
ASSET DEALERS.

(a) In General.--Section 15H of the Securities Exchange Act
of 1934, as added by section 405, is amended by adding at the
end the following:
``(e) Anti-fraud.--No digital asset broker or digital asset
dealer shall make use of the mails or any means or
instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the
purchase or sale of, any restricted digital asset by means of
any manipulative, deceptive, or other fraudulent device or
contrivance.
``(f) Holding of Customer Assets.--
``(1) In general.--A digital asset broker or digital asset
dealer shall hold customer money, assets, and property in a
manner to minimize the risk of loss to the customer or
unreasonable delay in the access to the money, assets, and
property of the customer.
``(2) Qualified digital asset custodian required.--A
digital asset broker or digital asset dealer shall hold
customer restricted digital assets described in paragraph (1)
with a qualified digital asset custodian described under
section 6B.
``(3) Segregation of funds.--
``(A) In general.--A digital asset broker or digital asset
dealer shall treat and deal with all money, assets, and
property held for a customer of the digital asset broker or
digital asset dealer, or that accrues to a customer as a
result of trading in restricted digital assets, as belonging
to the customer.
``(B) Commingling prohibited.--Money, assets, and property
of a customer described in subparagraph (A) shall be
separately accounted for and shall not be commingled with the
funds of the digital asset broker or digital asset dealer or
be used to margin, secure, or guarantee any trades of any
person other than the customer of the digital asset broker or
digital asset dealer for whom the same are held.
``(4) Exceptions.--
``(A) Use of funds.--
``(i) In general.--Notwithstanding paragraph (4), money,
assets, and property of customers of a digital asset broker
or digital asset dealer described in paragraph (4) may be
maintained and deposited in the same account or accounts with
any bank, trust company, or qualified digital asset custodian
described under section 6B, if the money, assets, and
property remain segregated from the money, assets, and
property of the digital asset broker or digital asset dealer.
``(ii) Withdrawal.--Notwithstanding paragraph (4), such
share of the money, assets, and property described in
paragraph (4) as in the normal course of business shall be
necessary to transfer, adjust, or settle a restricted digital
asset transaction pursuant to a customer's instruction
(standing or otherwise) may be withdrawn and applied to such
purposes, including the withdrawal and payment of
commissions, brokerage, interest, taxes, storage, and other
charges lawfully accruing in connection with a restricted
digital asset transaction.
``(iii) Commission action.--In accordance with such terms
and conditions as the Commission may prescribe by rule,
regulation, or order, any money, assets, or property of a
customer of a digital asset broker or digital asset dealer
described in paragraph (4) may be commingled and deposited as
provided in this section with any other money, assets, or
property received by the digital asset broker or digital
asset dealer and required by the Commission to be separately
accounted for and treated and dealt with as belonging to the
customer of the digital asset broker or digital asset dealer.
``(B) Participation in blockchain services.--
``(i) In general.--A customer shall have the right to waive
the restrictions in paragraph (4) for any unit of a digital
asset to be used under clause (ii), by affirmatively
electing, in writing to the digital asset broker or digital
asset dealer, to waive the restrictions.
``(ii) Use of funds.--Customer digital assets removed from
segregation under clause (i) may be pooled and used by the
digital asset broker or digital asset dealer or its designee
to provide a blockchain service for a blockchain system to
which the unit of the digital asset removed from segregation
under clause (i) relates.
``(iii) Limitations.--

``(I) In general.--The Commission may, by rule, establish
notice and disclosure requirements, and any other limitations
and rules related to the waiving of any restrictions under
this subparagraph that are reasonably necessary to protect
customers.
``(II) Customer choice.--A digital asset broker or digital
asset dealer may not require a waiver from a customer
described in clause (i) as a condition of doing business with
the digital asset broker or digital asset dealer.

``(iv) Blockchain service defined.--In this subparagraph,
the term `blockchain service' means any activity relating to
validating transactions on a blockchain system, providing
security for a blockchain system, or other similar activity
required for the ongoing operation of a blockchain system.
``(5) Further limitations.--No person shall treat or deal
with a restricted digital asset held on behalf of any
customer pursuant to paragraph (4) by utilizing any unit of
such restricted digital asset to participate in a blockchain
service (as defined in paragraph (5)(B)(iv)) or a
decentralized governance system associated with the
restricted digital asset or the blockchain system to which
the restricted digital asset relates in any manner other than
that which is expressly directed by the customer from which
such unit of a restricted digital asset was received.
``(g) Capital Requirements.--
``(1) In general.--Each registered digital asset broker and
registered digital asset dealer shall meet such minimum
capital requirements as the Commission may prescribe to
ensure that the digital asset broker or digital asset dealer
is able to--
``(A) conduct an orderly wind-down of the activities of the
digital asset broker or digital asset dealer; and
``(B) fulfill the customer obligations of the digital asset
broker or digital asset dealer.
``(2) Calculation.--For purposes of any Commission rule or
order adopted under this section or any interpretation
thereof regulating a digital asset broker or digital asset
dealer's financial responsibility obligations and capital
requirements, a registered digital asset broker or digital
asset dealer that maintains control of customer digital
assets in a manner that satisfies the rules issued by the
Commission under subsection (f)(2) shall not be required to
include the custodial obligation with respect to such digital
assets as liabilities or such digital assets as assets of the
digital asset broker or digital asset dealer.
``(h) Reporting and Recordkeeping.--Each registered digital
asset broker and digital asset dealer--
``(1) shall make such reports as are required by the
Commission by rule or regulation regarding the transactions,
positions, and financial condition of the digital asset
broker or digital asset dealer;
``(2) shall keep books and records in such form and manner
and for such period as may be prescribed by the Commission by
rule or regulation; and
``(3) shall keep the books and records open to inspection
and examination by any representative of the Commission.
``(i) Treatment Under the Bank Secrecy Act.--A digital
asset broker and a digital asset dealer shall be treated as a
financial institution for purposes of the Bank Secrecy
Act.''.
(b) Definition of Clearing Agency.--Section 3(a)(23)(B) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)(B))
is amended by inserting ``digital asset broker, digital asset
dealer,'' after ``broker, dealer,'' each place such term
appears.

SEC. 407. RULES RELATED TO CONFLICTS OF INTEREST.

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)
is amended by inserting after section 10D the following:

``SEC. 10E. CONFLICTS OF INTEREST RELATED TO DIGITAL ASSETS.

``Each registered digital asset trading system, registered
digital asset broker, registered digital asset dealer, and
notice-registered digital asset clearing agency shall
establish, maintain, and enforce written policies and
procedures reasonably designed, taking into consideration the
nature of such person's business, to mitigate any conflicts
of interest and transactions or arrangements with
affiliates.''.

SEC. 408. TREATMENT OF CERTAIN DIGITAL ASSETS IN CONNECTION
WITH FEDERALLY REGULATED INTERMEDIARIES.

Section 18(b) of the Securities Act of 1933 (15 U.S.C.
77r(b)) is amended by adding at the end the following:
``(5) Exemption for certain digital assets in connection
with federally regulated intermediaries.--A restricted
digital asset is treated as a covered security with respect
to a transaction that is exempt from registration under this
Act when it is--
``(A) brokered, traded, custodied, or cleared by a digital
asset broker or digital asset dealer registered under section
15H of the Securities Exchange Act of 1934; or
``(B) traded through a digital asset trading system.''.

SEC. 409. EXCLUSION FOR DECENTRALIZED FINANCE ACTIVITIES.

The Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.), as amended by section 405, is further amended by
inserting after section 15H the following:

``SEC. 15I. DECENTRALIZED FINANCE ACTIVITIES NOT SUBJECT TO
THIS ACT.

``(a) In General.--Notwithstanding any other provision of
this Act, a person shall not be subject to this Act and the
regulations thereunder based on the person directly or
indirectly engaging in any of the following activities,
whether singly or in combination thereof, in relation to the
operation of a blockchain system or in relation to
decentralized finance (as defined in section 605(d) of the
Financial Innovation and Technology for the 21st Century
Act):
``(1) Compiling network transactions, operating or
participating in a liquidity pool, relaying, searching,
sequencing, validating, or acting in a similar capacity with
respect to a digital asset.

[[Page H3444]]

``(2) Providing computational work, operating a node, or
procuring, offering, or utilizing network bandwidth, or other
similar incidental services with respect to a digital asset.
``(3) Providing a user-interface that enables a user to
read and access data about a blockchain system, send
messages, or otherwise interact with a blockchain system.
``(4) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing a blockchain system.
``(5) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing software or systems
that create or deploy a hardware or software wallet or other
system facilitating an individual user's own personal ability
to keep, safeguard, or custody such user's digital assets or
related private keys.
``(b) Exceptions.--Subsection (a) shall not be construed to
apply to the anti-fraud and anti-manipulation authorities of
the Commission.''.

SEC. 410. REGISTRATION AND REQUIREMENTS FOR NOTICE-REGISTERED
DIGITAL ASSET CLEARING AGENCIES.

Section 17A(b) of the Securities Exchange Act of 1934 (15
U.S.C. 78q-1(b)) is amended--
(1) in subsection (1), by inserting after the first
sentence the following: ``The previous sentence shall not
apply to a notice-registered digital asset clearing agency
with respect to a restricted digital asset.''; and
(2) by adding at the end the following:
``(9) Registration and requirements for notice-registered
digital asset clearing agency.--
``(A) Eligibility.--A person may register with the
Commission as a notice-registered digital asset clearing
agency if the person--
``(i) is otherwise registered as a digital asset broker or
digital asset dealer with the Commission and is engaging in a
business involving restricted digital assets, in compliance
with Commission rules pursuant to section 15H(f);
``(ii) is a bank; or
``(iii) is a clearing agency already registered with the
Commission pursuant to this section.
``(B) Registration.--A person may register with the
Commission as a notice-registered digital asset clearing
agency by filing with the Commission a notice of the
activities of the person or planned activities in such form
as the Commission determines appropriate.
``(C) Effectiveness of registration.--
``(i) In general.--The registration of a person filing a
notice described under subparagraph (B) as a notice-
registered digital asset clearing agency shall be effective
upon publication by the Commission of such notice, which
shall occur no later than 14 days after the date of such
filing.
``(ii) Initial registrations.--

``(I) In general.--A person registered as a notice-
registered digital asset clearing agency before the date on
which the Commission adopts rules under subparagraph (D)
shall, after such rules are adopted, renew the person's
registration pursuant to such rules.
``(II) Exception.--Notwithstanding subclause (I), a person
registered as a notice-registered digital asset clearing
agency before the end of the 2-year period beginning on the
date of the enactment of this section shall have such
registration remain in effect until the end of such 2-year
period.

``(D) Rulemaking.--The Commission may adopt rules, which
may not take effect until at least 360 days following the
date of enactment of this paragraph, with regard to the
activities of notice-registered digital asset clearing
agencies, taking into account the nature of restricted
digital assets.''.

SEC. 411. TREATMENT OF CUSTODY ACTIVITIES BY BANKING
INSTITUTIONS.

(a) Treatment of Custody Activities.--The appropriate
Federal banking agency (as defined under section 3 of the
Federal Deposit Insurance Act (12 U.S.C. 1813)), the National
Credit Union Administration (in the case of a credit union),
and the Securities and Exchange Commission may not require,
or take supervisory action that would cause, a depository
institution, national bank, Federal credit union, State
credit union, or trust company, or any affiliate (as such
term is defined under section 2 of the Bank Holding Company
Act of 1956) thereof--
(1) to include assets held in custody or safekeeping, or
the assets associated with a cryptographic key held in
custody or safekeeping, as a liability on such institution's
financial statement or balance sheet, except that cash held
for a third party by such institution that is commingled with
the general assets of such institution may be reflected as a
liability on a financial statement or balance sheet;
(2) to hold additional regulatory capital against assets in
custody or safekeeping, or the assets associated with a
cryptographic key held in custody or safekeeping, except as
necessary to mitigate against operational risks inherent with
the custody or safekeeping services, as determined by--
(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 with
respect to which such institution does not have beneficial
ownership if that liability would exceed the expense
recognized in the income statement as a result of the
corresponding obligation.
(b) Definitions.--In this section:
(1) Depository institution.--The term ``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. 412. EFFECTIVE DATE; ADMINISTRATION.

Except as otherwise provided under this title, this title
and the amendments made by this title shall take effect 360
days after the date of enactment of this Act, except that, to
the extent a provision of this title requires a rulemaking,
the provision shall take effect on the later of--
(1) 360 days after the date of enactment of this Act; or
(2) 60 days after the publication in the Federal Register
of the final rule implementing the provision.

SEC. 413. DISCRETIONARY SURPLUS FUND.

(a) In General.--The dollar amount specified under section
7(a)(3)(A) of the Federal Reserve Act (12 U.S.C.
289(a)(3)(A)) is reduced by $15,000,000.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect on September 30, 2034.

TITLE V--REGISTRATION FOR DIGITAL ASSET INTERMEDIARIES AT THE COMMODITY
FUTURES TRADING COMMISSION

SEC. 501. COMMISSION JURISDICTION OVER DIGITAL COMMODITY
TRANSACTIONS.

(a) Savings Clause.--Section 2(a)(1) of the Commodity
Exchange Act (7 U.S.C. 2(a)(1)) is amended by adding at the
end the following:
``(J) Except as expressly provided in this Act, nothing in
the Financial Innovation and Technology for the 21st Century
Act shall affect or apply to, or be interpreted to affect or
apply to--
``(i) any agreement, contract, or transaction that is
subject to this Act as--

``(I) a contract of sale of a commodity for future delivery
or an option on such a contract;
``(II) a swap;
``(III) a security futures product;
``(IV) an option authorized under section 4c of this Act;
``(V) an agreement, contract, or transaction described in
subparagraph (C)(i) or (D)(i) of subsection (c)(2) of this
section; or
``(VI) a leverage transaction authorized under section 19
of this Act; or

``(ii) the activities of any person with respect to any
such an agreement, contract, or transaction.''.
(b) Limitation on Authority Over Permitted Payment
Stablecoins.--Section 2(c)(1) of the Commodity Exchange Act
(7 U.S.C. 2(c)(1)) is amended--
(1) in subparagraph (F), by striking ``or'' at the end;
(2) in subparagraph (G), by striking the period and
inserting ``; or''; and
(3) by adding at the end the following:
``(H) permitted payment stablecoins.''.
(c) Commission Jurisdiction Over Digital Asset
Transactions.--Section 2(c)(2) of the Commodity Exchange Act
(7 U.S.C. 2(c)(2)) is amended--
(1) in subparagraph (D)--
(A) in clause (ii)--
(i) in subclause (I) by inserting ``(other than an
agreement, contract, or transaction in a permitted payment
stablecoin)'' after ``paragraph (1)'';
(ii) in subclause (III)--

(I) in the matter that precedes item (aa), by inserting
``of a commodity, other than a digital commodity or a
permitted payment stablecoin,'' before ``that''; and
(II) in item (bb), by striking ``or'' at the end; and

(iii) by redesignating subclauses (IV) and (V) as
subclauses (VI) and (VII) and inserting after subclause (III)
the following:

``(IV) a contract of sale of a digital commodity or a
permitted payment stablecoin that results in actual delivery,
as the Commission shall by rule determine, within 2 days or
such other period as the Commission may determine by rule or
regulation based upon the typical commercial practice in cash
or spot markets for the digital commodity involved;
``(V) a contract of sale of a digital commodity or a
permitted payment stablecoin that--

``(aa) is executed with a registered digital commodity
dealer--
``(AA) directly;
``(BB) through a registered digital commodity broker; or
``(CC) on or subject to the rules of a registered digital
commodity exchange; and
``(bb) is not a contract of sale of--
``(AA) a digital commodity or a permitted payment
stablecoin that references, represents an interest in, or is
functionally equivalent to an agricultural commodity, an
excluded commodity, or an exempt commodity, other than the
digital commodity itself, as shall be further defined by the
Commission; or
``(BB) a digital commodity or a permitted payment
stablecoin to which the Commission determines, by rule or
regulation, it is not in the public interest for this section
to apply;''; and
(B) by redesignating clause (iv) as clause (v) and
inserting after clause (iii) the following:
``(iv) The Commission shall adopt rules and regulations
applicable to digital commodity dealers and digital commodity
brokers in connection with the agreements, contracts or
transactions in digital commodities or permitted payment
stablecoins described in clause (ii)(V) of this subparagraph,
which shall set forth minimum requirements related to
disclosure, recordkeeping, margin and financing arrangements,
capital, reporting, business conduct, documentation, and
supervision of employees and agents. Except as prohibited in
subparagraph (G)(iii), the Commission may also make,
promulgate, and enforce such rules and regulations as, in the
judgment of the Commission, are reasonably necessary to
effectuate any of the provisions of,

[[Page H3445]]

or to accomplish any of the purposes of, this Act in
connection with agreements, contracts, or transactions
described in such clause (ii)(V), which may include, without
limitation, requirements regarding registration with the
Commission and membership in a registered futures
association.''; and
(2) by adding at the end the following:
``(F) Commission Jurisdiction With Respect to Digital
Commodity Transactions.--
``(i) In general.--Subject to sections 6d and 12(e), the
Commission shall have exclusive jurisdiction with respect to
any account, agreement, contract, or transaction involving a
contract of sale of a digital commodity in interstate
commerce, including in a digital commodity cash or spot
market, that is offered, solicited, traded, facilitated,
executed, cleared, reported, or otherwise dealt in--
``(I) on or subject to the rules of a registered entity or
an entity that is required to be registered as a registered
entity; or
``(II) by any other entity registered, or required to be
registered, with the Commission.
``(ii) Limitations.--Clause (i) shall not apply with
respect to custodial or depository activities for a digital
commodity, or custodial or depository activities for any
promise or right to a future digital commodity, of an entity
regulated by an appropriate Federal banking agency or a State
bank supervisor (within the meaning of section 3 of the
Federal Deposit Insurance Act).
``(iii) Mixed digital asset transactions.--
``(I) In general.--Clause (i) shall not apply to a mixed
digital asset transaction.
``(II) Reports on mixed digital asset transactions.--A
digital asset issuer, related person, affiliated person, or
other person registered with the Securities and Exchange
Commission that engages in a mixed digital asset transaction,
shall, on request, open to inspection and examination by the
Commodity Futures Trading Commission all books and records
relating to the mixed digital asset transaction, subject to
the confidentiality and disclosure requirements of section 8.
``(G) Agreements, Contracts, and Transactions in
Stablecoins.--
``(i) Treatment of permitted payment stablecoins on
commission-registered entities.--Subject to clauses (ii) and
(iii), the Commission shall have jurisdiction over a cash or
spot agreement, contract, or transaction in a permitted
payment stablecoin that is offered, offered to enter into,
entered into, executed, confirmed the execution of,
solicited, or accepted--
``(I) on or subject to the rules of a registered entity; or
``(II) by any other entity registered with the Commission.
``(ii) Permitted payment stablecoin transaction rules.--
This Act shall apply to a transaction described in clause (i)
only for the purpose of regulating the offer, execution,
solicitation, or acceptance of a cash or spot permitted
payment stablecoin transaction on a registered entity or by
any other entity registered with the Commission, as if the
permitted payment stablecoin were a digital commodity.
``(iii) No authority over permitted payment stablecoins.--
Notwithstanding clauses (i) and (ii), the Commission shall
not make a rule or regulation, impose a requirement or
obligation on a registered entity or other entity registered
with the Commission, or impose a requirement or obligation on
a permitted payment stablecoin issuer, regarding the
operation of a permitted payment stablecoin issuer or a
permitted payment stablecoin.''.
(d) Conforming Amendment.--Section 2(a)(1)(A) of such Act
(7 U.S.C. 2(a)(1)(A)) is amended in the 1st sentence by
inserting ``subparagraphs (F) and (G) of subsection (c)(2) of
this section or'' before ``section 19''.

SEC. 502. REQUIRING FUTURES COMMISSION MERCHANTS TO USE
QUALIFIED DIGITAL COMMODITY CUSTODIANS.

Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is
amended--
(1) in subsection (a)(2)--
(A) in the 1st proviso, by striking ``any bank or trust
company'' and inserting ``any bank, trust company, or
qualified digital commodity custodian''; and
(B) by inserting ``: Provided further, That any such
property that is a digital commodity shall be held in a
qualified digital commodity custodian'' before the period at
the end; and
(2) in subsection (f)(3)(A)(i), by striking ``any bank or
trust company'' and inserting ``any bank, trust company, or
qualified digital commodity custodian''.

SEC. 503. TRADING CERTIFICATION AND APPROVAL FOR DIGITAL
COMMODITIES.

Section 5c of the Commodity Exchange Act (7 U.S.C. 7a-2) is
amended--
(1) in subsection (a), by striking ``5(d) and 5b(c)(2)''
and inserting ``5(d), 5b(c)(2), and 5i(c)'';
(2) in subsection (b)--
(A) in each of paragraphs (1) and (2), by inserting
``digital commodity exchange,'' before ``derivatives''; and
(B) in paragraph (3), by inserting ``digital commodity
exchange,'' before ``derivatives'' each place it appears;
(3) in subsection (c)--
(A) in paragraph (2), by inserting ``or participants''
before ``(in'';
(B) in paragraph (4)(B), by striking ``1a(10)'' and
inserting ``1a(9)''; and
(C) in paragraph (5), by adding at the end the following:
``(D) Special rules for digital commodity contracts.--In
certifying any new rule or rule amendment, or listing any new
contract or instrument, in connection with a contract of sale
of a commodity for future delivery, option, swap, or other
agreement, contract, or transaction, that is based on or
references a digital commodity, a registered entity shall
make or rely on a certification under subsection (d) for the
digital commodity.''; and
(4) by inserting after subsection (c) the following:
``(d) Certifications for Digital Commodity Trading.--
``(1) In general.--Notwithstanding subsection (c), for the
purposes of listing or offering a digital commodity for
trading in a digital commodity cash or spot market, an
eligible entity shall issue a written certification that the
digital commodity meets the requirements of this Act
(including the regulations prescribed under this Act).
``(2) Contents of the certification.--
``(A) In general.--In making a written certification under
this paragraph, the eligible entity shall furnish to the
Commission--
``(i) an analysis of how the digital commodity meets the
requirements of section 5i(c)(3);
``(ii) information about the digital commodity regarding--

``(I) its purpose and use;
``(II) its unit creation or release process;
``(III) its consensus mechanism;
``(IV) its governance structure;
``(V) its participation and distribution; and
``(VI) its current and proposed functionality; and

``(iii) any other information, analysis, or documentation
the Commission may, by rule, require.
``(B) Reliance on prior disclosures.--In making a
certification under this subsection, an eligible entity may
rely on the records and disclosures of any relevant person
registered with the Securities and Exchange Commission or
other State or Federal agency.
``(3) Modifications.--
``(A) In general.--An eligible entity shall modify a
certification made under paragraph (1) to--
``(i) account for significant changes in any information
provided to the Commission under paragraph (2)(A)(ii); or
``(ii) permit or restrict trading in units of a digital
commodity held by a related person or an affiliated person.
``(B) Recertification.--Modifications required by this
subsection shall be subject to the same disapproval and
review process as a new certification under paragraphs (4)
and (5).
``(4) Disapproval.--
``(A) In general.--The written certification described in
paragraph (1) shall become effective unless the Commission
finds that the digital asset does not meet the requirements
of this Act or the rules and regulations thereunder.
``(B) Analysis required.--The Commission shall include,
with any findings referred to in subparagraph (A), a detailed
analysis of the factors on which the decision was based.
``(C) Public findings.--The Commission shall make public
any disapproval decision, and any related findings and
analysis, made under this paragraph.
``(5) Review.--
``(A) In general.--Unless the Commission makes a
disapproval decision under paragraph (4), the written
certification described in paragraph (1) shall become
effective, pursuant to the certification by the eligible
entity and notice of the certification to the public (in a
manner determined by the Commission) on the date that is--
``(i) 20 business days after the date the Commission
receives the certification (or such shorter period as
determined by the Commission by rule or regulation), in the
case of a digital commodity that has not been certified under
this section or for which a certification is being modified
under paragraph (3); or
``(ii) 2 business days after the date the Commission
receives the certification (or such shorter period as
determined by the Commission by rule or regulation) for any
digital commodity that has been certified under this section.
``(B) Extensions.--The time for consideration under
subparagraph (A) may be extended through notice to the
eligible entity that there are novel or complex issues that
require additional time to analyze, that the explanation by
the submitting eligible entity is inadequate, or of a
potential inconsistency with this Act--
``(i) once, for 30 business days, through written notice to
the eligible entity by the Chairman; and
``(ii) once, for an additional 30 business days, through
written notice to the digital commodity exchange from the
Commission that includes a description of any deficiencies
with the certification, including any--

``(I) novel or complex issues which require additional time
to analyze;
``(II) missing information or inadequate explanations; or
``(III) potential inconsistencies with this Act.

``(6) Certification required.--Notwithstanding any other
provision of this Act, a registered entity or other entity
registered with the Commission shall not list for trading,
accept for clearing, offer to enter into, enter into,
execute, confirm the execution of, or conduct any office or
business anywhere in the United States, its territories or
possessions, for the purpose of soliciting, or accepting any
order for, or otherwise dealing in, any transaction in, or in
connection with, a digital commodity, unless a certification
has been made under this section for the digital commodity.
``(7) Prior approval before registration.--
``(A) In general.--A person applying for registration with
the Commission for the purposes of listing or offering a
digital commodity for trading in a digital commodity cash or
spot market may request that the Commission grant prior
approval for the person to list or offer the digital
commodity on being registered with the Commission.
``(B) Request for prior approval.--A person seeking prior
approval under subparagraph (A) shall furnish the Commission
with a written certification that the digital commodity meets

[[Page H3446]]

the requirements of this Act (including the regulations
prescribed under this Act) and the information described in
paragraph (2).
``(C) Deadline.--The Commission shall take final action on
a request for prior approval not later than 90 business days
after submission of the request, unless the person submitting
the request agrees to an extension of the time limitation
established under this subparagraph.
``(D) Disapproval.--
``(i) In general.--The Commission shall approve a new
contract or other instrument unless the Commission finds that
the new contract or other instrument would violate this Act
(including a regulations prescribed under this Act).
``(ii) Analysis required.--The Commission shall include,
with any findings made under clause (i), a detailed analysis
of the factors on which the decision is based.
``(iii) Public findings.--The Commission shall make public
any disapproval decision, and any related findings and
analysis, made under this paragraph.
``(8) Eligible entity defined.--In this subsection, the
term `eligible entity' means a registered entity or group of
registered entities acting jointly.''.

SEC. 504. REGISTRATION OF DIGITAL COMMODITY EXCHANGES.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended
by inserting after section 5h the following:

``SEC. 5I. REGISTRATION OF DIGITAL COMMODITY EXCHANGES.

``(a) In General.--
``(1) Registration.--
``(A) In general.--A trading facility that offers or seeks
to offer a cash or spot market in at least 1 digital
commodity shall register with the Commission as a digital
commodity exchange.
``(B) Application.--A person desiring to register as a
digital commodity exchange shall submit to the Commission an
application in such form and containing such information as
the Commission may require for the purpose of making the
determinations required for approval.
``(C) Exemptions.--A trading facility that offers or seeks
to offer a cash or spot market in at least 1 digital
commodity shall not be required to register under this
section if the trading facility--
``(i) permits no more than a de minimis amount of trading
activity in a digital commodity; or
``(ii) serves only customers in a single State or
territory.
``(2) Additional registrations.--
``(A) With the commission.--
``(i) In general.--A registered digital commodity exchange
may also register as--

``(I) a designated contract market; or
``(II) a swap execution facility.

``(ii) Rules.--For an entity with multiple registrations
under clause (i), the Commission--

``(I) shall prescribe rules to exempt the entity from
duplicative, conflicting, or unduly burdensome provisions of
this Act and the rules under this Act, to the extent such an
exemption would foster the development of fair and orderly
cash or spot markets in digital commodities, be necessary or
appropriate in the public interest, and be consistent with
the protection of customers; and
``(II) may, after an analysis of the risks and benefits,
prescribe rules to provide for portfolio margining, as may be
necessary to protect market participants, promote fair and
equitable trading in digital commodity markets, and promote
responsible economic or financial innovation.

``(B) With the securities and exchange commission.--A
registered digital commodity exchange may register with the
Securities and Exchange Commission as a digital asset trading
system to list or trade contracts of sale for restricted
digital assets.
``(C) With a registered futures association.--
``(i) In general.--A registered digital commodity exchange
shall also be a member of a registered futures association
and comply with rules related to such activity, if the
registered digital commodity exchange accepts customer funds
required to be segregated under subsection (d).
``(ii) Rulemaking required.--The Commission shall require
any registered futures association with a digital commodity
exchange as a member to provide such rules as may be
necessary to further compliance with subsection (d), protect
customers, and promote the public interest.
``(D) Registration required.--A person required to be
registered as a digital commodity exchange under this section
shall register with the Commission as such regardless of
whether the person is registered with another State or
Federal regulator.
``(b) Trading.--
``(1) Prohibition on certain trading practices.--
``(A) Section 4b shall apply to any agreement, contract, or
transaction in a digital commodity as if the agreement,
contract, or transaction were a contract of sale of a
commodity for future delivery.
``(B) Section 4c shall apply to any agreement, contract, or
transaction in a digital commodity as if the agreement,
contract, or transaction were a transaction involving the
purchase or sale of a commodity for future delivery.
``(C) Section 4b-1 shall apply to any agreement, contract,
or transaction in a digital commodity as if the agreement,
contract, or transaction were a contract of sale of a
commodity for future delivery.
``(2) Prohibition on acting as a counterparty.--
``(A) In general.--A digital commodity exchange or any
affiliate of such an exchange shall not trade on or subject
to the rules of the digital commodity exchange for its own
account.
``(B) Exceptions.--The Commission shall, by rule, permit a
digital commodity exchange or any affiliate of a digital
commodity exchange to engage in trading on an affiliated
exchange so long as the trading is not solely for the purpose
of the profit of the exchange, including the following:
``(i) Customer direction.--A transaction for, or entered
into at the direction of, or for the benefit of, an
unaffiliated customer.
``(ii) Risk management.--A transaction to manage the risks
associated with the digital commodity business of the
exchange.
``(iii) Functional use.--A transaction related to the
functional operation of a blockchain network.
``(C) Notice requirement.--In order for a digital commodity
exchange or any affiliate of a digital commodity exchange to
engage in trading on the affiliated exchange pursuant to
subsection (B), notice must be given to the Commission that
shall enumerate how any proposed activity is consistent with
the exceptions in subsection (B) and the principles of the
Act.
``(D) Delegation.--The Commission may, by rule, delegate
authority to the Director of the Division of Market
Oversight, or such other employee or employees as the
Director of the Division of Market Oversight may designate
from time to time, to carry out these provisions.
``(3) Trading securities.--A registered digital commodity
exchange that is also registered with the Securities and
Exchange Commission may offer a contract of sale of a
restricted digital asset.
``(4) Rules for certain digital asset sales.--The digital
commodity exchange shall have in place such rules as may be
necessary to reasonably ensure the orderly sale of any unit
of a digital commodity sold by a related person or an
affiliated person.
``(c) Core Principles for Digital Commodity Exchanges.--
``(1) Compliance with core principles.--
``(A) In general.--To be registered, and maintain
registration, as a digital commodity exchange, a digital
commodity exchange shall comply with--
``(i) the core principles described in this subsection; and
``(ii) any requirement that the Commission may impose by
rule or regulation pursuant to section 8a(5).
``(B) Reasonable discretion of a digital commodity
exchange.--Unless otherwise determined by the Commission by
rule or regulation, a digital commodity exchange described in
subparagraph (A) shall have reasonable discretion in
establishing the manner in which the digital commodity
exchange complies with the core principles described in this
subsection.
``(2) Compliance with rules.--A digital commodity exchange
shall--
``(A) establish and enforce compliance with any rule of the
digital commodity exchange, including--
``(i) the terms and conditions of the trades traded or
processed on or through the digital commodity exchange; and
``(ii) any limitation on access to the digital commodity
exchange;
``(B) establish and enforce trading, trade processing, and
participation rules that will deter abuses and have the
capacity to detect, investigate, and enforce those rules,
including means--
``(i) to provide market participants with impartial access
to the market; and
``(ii) to capture information that may be used in
establishing whether rule violations have occurred; and
``(C) establish rules governing the operation of the
exchange, including rules specifying trading procedures to be
used in entering and executing orders traded or posted on the
facility.
``(3) Listing standards for digital commodities.--
``(A) In general.--A digital commodity exchange shall
permit trading only in a digital commodity that is not
readily susceptible to manipulation.
``(B) Public information requirements.--
``(i) In general.--A digital commodity exchange shall
permit trading only in a digital commodity if the information
required in clause (ii) is correct, current, and available to
the public.
``(ii) Required information.-- With respect to a digital
commodity and each blockchain system to which the digital
commodity relates for which the digital commodity exchange
will make the digital commodity available to the customers of
the digital commodity exchange, the information required in
this clause is as follows:

``(I) Source code.--The source code for any blockchain
system to which the digital commodity relates.
``(II) Transaction history.--A narrative description of the
steps necessary to independently access, search, and verify
the transaction history of any blockchain system to which the
digital commodity relates.
``(III) Digital asset economics.--A narrative description
of the purpose of any blockchain system to which the digital
asset relates and the operation of any such blockchain
system, including--

``(aa) information explaining the launch and supply
process, including the number of digital assets to be issued
in an initial allocation, the total number of digital assets
to be created, the release schedule for the digital assets,
and the total number of digital assets then outstanding;
``(bb) information detailing any applicable consensus
mechanism or process for validating transactions, method of
generating or mining digital assets, and any process for
burning or destroying digital assets on the blockchain
system;
``(cc) an explanation of governance mechanisms for
implementing changes to the blockchain system or forming
consensus among holders of the digital assets; and

[[Page H3447]]

``(dd) sufficient information for a third party to create a
tool for verifying the transaction history of the digital
asset.

``(IV) Trading volume and volatility.--The trading volume
and volatility of the digital commodity.
``(V) Additional information.--Such additional information
as the Commission may, by rule, determine to be necessary for
a customer to understand the financial and operational risks
of a digital commodity, and to be in the public interest or
in furtherance of the requirements of this Act.

``(iii) Format.--The Commission shall prescribe rules and
regulations for the standardization and simplification of
disclosures under clause (ii), including requiring that
disclosures--

``(I) be conspicuous;
``(II) use plain language comprehensible to customers; and
``(III) succinctly explain the information that is required
to be communicated to the customer.

``(C) Additional listing considerations.--In addition to
the requirements of subparagraphs (A) and (B), a digital
commodity exchange shall consider--
``(i) if a sufficient percentage of the units of the
digital asset are units of a digital commodity to permit
robust price discovery;
``(ii) if it is reasonably unlikely that the transaction
history can be fraudulently altered by any person or group of
persons acting collectively;
``(iii) if the operating structure and system of the
digital commodity is secure from cybersecurity threats;
``(iv) if the functionality of the digital commodity will
protect holders from operational failures;
``(v) if sufficient public information about the operation,
functionality, and use of the digital commodity is available;
and
``(vi) any other factor which the Commission has, by rule,
determined to be in the public interest or in furtherance of
the requirements of this Act.
``(D) Restricted digital assets.--A digital commodity
exchange shall not permit the trading of a unit of a digital
asset that is a restricted digital asset.
``(4) Treatment of customer assets.--A digital commodity
exchange shall establish standards and procedures that are
designed to protect and ensure the safety of customer money,
assets, and property.
``(5) Monitoring of trading and trade processing.--
``(A) In general.--A digital commodity exchange shall
provide a competitive, open, and efficient market and
mechanism for executing transactions that protects the price
discovery process of trading on the exchange.
``(B) Protection of markets and market participants.--A
digital commodity exchange shall establish and enforce
rules--
``(i) to protect markets and market participants from
abusive practices committed by any party, including abusive
practices committed by a party acting as an agent for a
participant; and
``(ii) to promote fair and equitable trading on the
exchange.
``(C) Trading procedures.--A digital commodity exchange
shall--
``(i) establish and enforce rules or terms and conditions
defining, or specifications detailing--

``(I) trading procedures to be used in entering and
executing orders traded on or through the facilities of the
digital commodity exchange; and
``(II) procedures for trade processing of digital
commodities on or through the facilities of the digital
commodity exchange; and

``(ii) monitor trading in digital commodities to prevent
manipulation, price distortion, and disruptions of the
delivery or cash settlement process through surveillance,
compliance, and disciplinary practices and procedures,
including methods for conducting real-time monitoring of
trading and comprehensive and accurate trade reconstructions.
``(6) Ability to obtain information.--A digital commodity
exchange shall--
``(A) establish and enforce rules that will allow the
facility to obtain any necessary information to perform any
of the functions described in this section;
``(B) provide the information to the Commission on request;
and
``(C) have the capacity to carry out such international
information-sharing agreements as the Commission may require.
``(7) Emergency authority.--A digital commodity exchange
shall adopt rules to provide for the exercise of emergency
authority, in consultation or cooperation with the Commission
or a registered entity, as is necessary and appropriate,
including the authority to facilitate the liquidation or
transfer of open positions in any digital commodity or to
suspend or curtail trading in a digital commodity.
``(8) Timely publication of trading information.--
``(A) In general.--A digital commodity exchange shall make
public timely information on price, trading volume, and other
trading data on digital commodities to the extent prescribed
by the Commission.
``(B) Capacity of digital commodity exchange.--A digital
commodity exchange shall have the capacity to electronically
capture and transmit trade information with respect to
transactions executed on the exchange.
``(9) Recordkeeping and reporting.--
``(A) In general.--A digital commodity exchange shall--
``(i) maintain records of all activities relating to the
business of the facility, including a complete audit trail,
in a form and manner acceptable to the Commission for a
period of 5 years;
``(ii) report to the Commission, in a form and manner
acceptable to the Commission, such information as the
Commission determines to be necessary or appropriate for the
Commission to perform the duties of the Commission under this
Act; and
``(iii) keep any such records of digital commodities which
relate to a security open to inspection and examination by
the Securities and Exchange Commission.
``(B) Information-sharing.--Subject to section 8, and on
request, the Commission shall share information collected
under subparagraph (A) with--
``(i) the Board;
``(ii) the Securities and Exchange Commission;
``(iii) each appropriate Federal banking agency;
``(iv) each appropriate State bank supervisor (within the
meaning of section 3 of the Federal Deposit Insurance Act);
``(v) the Financial Stability Oversight Council;
``(vi) the Department of Justice; and
``(vii) any other person that the Commission determines to
be appropriate, including--

``(I) foreign financial supervisors (including foreign
futures authorities);
``(II) foreign central banks; and
``(III) foreign ministries.

``(C) Confidentiality agreement.--Before the Commission may
share information with any entity described in subparagraph
(B), the Commission shall receive a written agreement from
the entity stating that the entity shall abide by the
confidentiality requirements described in section 8 relating
to the information on digital commodities that is provided.
``(D) Providing information.--A digital commodity exchange
shall provide to the Commission (including any designee of
the Commission) information under subparagraph (A) in such
form and at such frequency as is required by the Commission.
``(10) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, a digital
commodity exchange shall not--
``(A) adopt any rules or take any actions that result in
any unreasonable restraint of trade; or
``(B) impose any material anticompetitive burden on
trading.
``(11) Conflicts of interest.--A registered digital
commodity exchange shall implement conflict-of-interest
systems and procedures that--
``(A) establish structural and institutional safeguards--
``(i) to minimize conflicts of interest that might
potentially bias the judgment or supervision of the digital
commodity exchange and contravene the principles of fair and
equitable trading and the business conduct standards
described in this Act, including conflicts arising out of
transactions or arrangements with affiliates (including
affiliates engaging in digital commodity activities) or
between self-regulatory obligations and commercial interests,
which may include information partitions, restrictions on
employees and directors, and the legal separation of
different persons or entities involved in digital commodity
activities; and
``(ii) to ensure that the activities of any person within
the digital commodity exchange or any affiliated entity
relating to research or analysis of the price or market for
any digital commodity or acting in a role of providing
dealing, brokering, or advising activities are separated by
appropriate informational partitions within the digital
commodity exchange or any affiliated entity from the review,
pressure, or oversight of persons whose involvement in
pricing, trading, exchange, or clearing activities might
potentially bias their judgment or supervision and contravene
the core principles of open access and the business conduct
standards described in this Act; and
``(B) address such other issues as the Commission
determines to be appropriate.
``(12) Financial resources.--
``(A) In general.--A digital commodity exchange shall have
adequate financial, operational, and managerial resources, as
determined by the Commission, to discharge each
responsibility of the digital commodity exchange.
``(B) Minimum amount of financial resources.--A digital
commodity exchange shall possess financial resources that, at
a minimum, exceed the greater of--
``(i) the total amount that would enable the digital
commodity exchange to conduct an orderly wind-down of its
activities or
``(ii) the total amount that would enable the digital
commodity exchange to cover the operating costs of the
digital commodity exchange for a 1-year period, as calculated
on a rolling basis.
``(13) Disciplinary procedures.--A digital commodity
exchange shall establish and enforce disciplinary procedures
that authorize the digital commodity exchange to discipline,
suspend, or expel members or market participants that violate
the rules of the digital commodity exchange, or similar
methods for performing the same functions, including
delegation of the functions to third parties.
``(14) Governance fitness standards.--
``(A) Governance arrangements.--A digital commodity
exchange shall establish governance arrangements that are
transparent to fulfill public interest requirements.
``(B) Fitness standards.--A digital commodity exchange
shall establish and enforce appropriate fitness standards
for--
``(i) directors; and
``(ii) any individual or entity with direct access to, or
control of, customer assets.
``(15) System safeguards.--A digital commodity exchange
shall--
``(A) establish and maintain a program of risk analysis and
oversight to identify and minimize sources of operational and
security risks, through the development of appropriate
controls and procedures, and automated systems, that--

[[Page H3448]]

``(i) are reliable and secure; and
``(ii) have adequate scalable capacity;
``(B) establish and maintain emergency procedures, backup
facilities, and a plan for disaster recovery that allow for--
``(i) the timely recovery and resumption of operations; and
``(ii) the fulfillment of the responsibilities and
obligations of the digital commodity exchange; and
``(C) periodically conduct tests to verify that the backup
resources of the digital commodity exchange are sufficient to
ensure continued--
``(i) order processing and trade matching;
``(ii) price reporting;
``(iii) market surveillance; and
``(iv) maintenance of a comprehensive and accurate audit
trail.
``(d) Holding of Customer Assets.--
``(1) In general.--A digital commodity exchange shall hold
customer money, assets, and property in a manner to minimize
the risk of loss to the customer or unreasonable delay in the
access to the money, assets, and property of the customer.
``(A) Segregation of funds.--
``(i) In general.--A digital commodity exchange shall treat
and deal with all money, assets, and property that is
received by the digital commodity exchange, or accrues to a
customer as the result of trading in digital commodities, as
belonging to the customer.
``(ii) Commingling prohibited.--Money, assets, and property
of a customer described in clause (i) shall be separately
accounted for and shall not be commingled with the funds of
the digital commodity exchange or be used to margin, secure,
or guarantee any trades or accounts of any customer or person
other than the person for whom the same are held.
``(B) Exceptions.--
``(i) Use of funds.--

``(I) In general.--Notwithstanding subparagraph (A), money,
assets, and property of customers of a digital commodity
exchange described in subparagraph (A) may, for convenience,
be commingled and deposited in the same account or accounts
with any bank, trust company, derivatives clearing
organization, or qualified digital commodity custodian.
``(II) Withdrawal.--Notwithstanding subparagraph (A), such
share of the money, assets, and property described in item
(aa) as in the normal course of business shall be necessary
to margin, guarantee, secure, transfer, adjust, or settle a
contract of sale of a digital commodity with a registered
entity may be withdrawn and applied to such purposes,
including the payment of commissions, brokerage, interest,
taxes, storage, and other charges, lawfully accruing in
connection with the contract of sale of a digital commodity.

``(ii) Commission action.--Notwithstanding subparagraph
(A), in accordance with such terms and conditions as the
Commission may prescribe by rule, regulation, or order, any
money, assets, or property of the customers of a digital
commodity exchange described in subparagraph (A) may be
commingled and deposited in customer accounts with any other
money, assets, or property received by the digital commodity
exchange and required by the Commission to be separately
accounted for and treated and dealt with as belonging to the
customer of the digital commodity exchange.
``(2) Permitted investments.--Money described in
subparagraph (A) may be invested in obligations of the United
States, in general obligations of any State or of any
political subdivision of a State, and in obligations fully
guaranteed as to principal and interest by the United States,
or in any other investment that the Commission may by rule or
regulation prescribe, and such investments shall be made in
accordance with such rules and regulations and subject to
such conditions as the Commission may prescribe.
``(3) Customer protection during bankruptcy.--
``(A) Customer property.--All assets held on behalf of a
customer by a digital commodity exchange, and all money,
assets, and property of any customer received by a digital
commodity exchange for trading or custody, or to facilitate,
margin, guarantee, or secure contracts of sale of a digital
commodity (including money, assets, or property accruing to
the customer as the result of the transactions), shall be
considered customer property for purposes of section 761 of
title 11, United States Code.
``(B) Transactions.--A transaction involving a unit of a
digital commodity occurring on or subject to the rules of a
digital commodity exchange shall be considered a `contract
for the purchase or sale of a commodity for future delivery,
on or subject to the rules of, a contract market or board of
trade' for the purposes of the definition of a `commodity
contract' in section 761 of title 11, United States Code.
``(C) Exchanges.--A digital commodity exchange shall be
considered a futures commission merchant for purposes of
section 761 of title 11, United States Code.
``(D) Assets removed from segregation.--Assets removed from
segregation due to a customer election under paragraph (5)
shall not be considered customer property for purposes of
section 761 of title 11, United States Code.
``(4) Misuse of customer property.--
``(A) In general.--It shall be unlawful--
``(i) for any digital commodity exchange that has received
any customer money, assets, or property for custody to
dispose of, or use any such money, assets, or property as
belonging to the digital commodity exchange or any person
other than a customer of the digital commodity exchange; or
``(ii) for any other person, including any depository,
other digital commodity exchange, or digital commodity
custodian that has received any customer money, assets, or
property for deposit, to hold, dispose of, or use any such
money, assets, or property, or property, as belonging to the
depositing digital commodity exchange or any person other
than the customers of the digital commodity exchange.
``(B) Use further defined.--For purposes of this section,
`use' of a digital commodity includes utilizing any unit of a
digital asset to participate in a blockchain service defined
in paragraph (5) or a decentralized governance system
associated with the digital commodity or the blockchain
system to which the digital commodity relates in any manner
other than that expressly directed by the customer from whom
the unit of a digital commodity was received.
``(5) Participation in blockchain services.--
``(A) In general.--A customer shall have the right to waive
the restrictions in paragraph (1) for any unit of a digital
commodity to be used under subparagraph (B), by affirmatively
electing, in writing to the digital commodity exchange, to
waive the restrictions.
``(B) Use of funds.--Customer digital commodities removed
from segregation under subparagraph (A) may be pooled and
used by the digital commodity exchange or its designee to
provide a blockchain service for a blockchain system to which
the unit of the digital asset removed from segregation in
subparagraph (A) relates.
``(C) Limitations.--
``(i) In general.--The Commission may, by rule, establish
notice and disclosure requirements, and any other limitations
and rules related to the waiving of any restrictions under
this paragraph that are reasonably necessary to protect
customers, including eligible contract participants, non-
eligible contract participants, or any other class of
customers.
``(ii) Customer choice.--A digital commodity exchange may
not require a waiver from a customer described in
subparagraph (A) as a condition of doing business on the
exchange.
``(D) Blockchain service defined.--In this subparagraph,
the term `blockchain service' means any activity relating to
validating transactions on a blockchain system, providing
security for a blockchain system, or other similar activity
required for the ongoing operation of a blockchain system.
``(e) Market Access Requirements.--
``(1) In general.--A digital commodity exchange shall
require any person who is not an eligible contract
participant to access trading on the exchange through a
digital commodity broker.
``(2) Affiliated commodity brokers.--A registered digital
commodity exchange may permit an affiliated digital commodity
broker to facilitate access to the digital commodity
exchange.
``(3) Direct access for eligible contract participants.--
Nothing in this section shall prohibit a digital commodity
exchange in compliance with this section from permitting
direct access for eligible contract participants.
``(4) Additional requirements.--The Commission may, by
rule, impose any additional requirements related to the
operations and activities of the digital commodity exchange
and an affiliated digital commodity broker necessary to
protect market participants, promote fair and equitable
trading on the digital commodity exchange, and promote
responsible economic or financial innovation.
``(f) Designation of Chief Compliance Officer.--
``(1) In general.--A digital commodity exchange shall
designate an individual to serve as a chief compliance
officer.
``(2) Duties.--The chief compliance officer shall--
``(A) report directly to the board or to the senior officer
of the exchange;
``(B) review compliance with the core principles in this
subsection;
``(C) in consultation with the board of the exchange, a
body performing a function similar to that of a board, or the
senior officer of the exchange, resolve any conflicts of
interest that may arise;
``(D) establish and administer the policies and procedures
required to be established pursuant to this section;
``(E) ensure compliance with this Act and the rules and
regulations issued under this Act, including rules prescribed
by the Commission pursuant to this section; and
``(F) establish procedures for the remediation of
noncompliance issues found during compliance office reviews,
look backs, internal or external audit findings, self-
reported errors, or through validated complaints.
``(3) Requirements for procedures.--In establishing
procedures under paragraph (2)(F), the chief compliance
officer shall design the procedures to establish the
handling, management response, remediation, retesting, and
closing of noncompliance issues.
``(4) Annual reports.--
``(A) In general.--In accordance with rules prescribed by
the Commission, the chief compliance officer shall annually
prepare and sign a report that contains a description of--
``(i) the compliance of the digital commodity exchange with
this Act; and
``(ii) the policies and procedures, including the code of
ethics and conflict of interest policies, of the digital
commodity exchange.
``(B) Requirements.--The chief compliance officer shall--
``(i) submit each report described in subparagraph (A) with
the appropriate financial report of the digital commodity
exchange that is required to be submitted to the Commission
pursuant to this section; and
``(ii) include in the report a certification that, under
penalty of law, the report is accurate and complete.
``(g) Appointment of Trustee.--
``(1) In general.--If a proceeding under section 5e results
in the suspension or revocation of the registration of a
digital commodity exchange, or if a digital commodity
exchange

[[Page H3449]]

withdraws from registration, the Commission, on notice to the
digital commodity exchange, may apply to the appropriate
United States district court where the digital commodity
exchange is located for the appointment of a trustee.
``(2) Assumption of jurisdiction.--If the Commission
applies for appointment of a trustee under paragraph (1)--
``(A) the court may take exclusive jurisdiction over the
digital commodity exchange and the records and assets of the
digital commodity exchange, wherever located; and
``(B) if the court takes jurisdiction under subparagraph
(A), the court shall appoint the Commission, or a person
designated by the Commission, as trustee with power to take
possession and continue to operate or terminate the
operations of the digital commodity exchange in an orderly
manner for the protection of customers subject to such terms
and conditions as the court may prescribe.
``(h) Qualified Digital Commodity Custodian.--A digital
commodity exchange shall hold in a qualified digital
commodity custodian each unit of a digital commodity that
is--
``(1) the property of a customer of the digital commodity
exchange;
``(2) required to be held by the digital commodity exchange
under subsection (c)(12) of this section; or
``(3) otherwise so required by the Commission to reasonably
protect customers or promote the public interest.
``(i) Exemptions.--
``(1) In order to promote responsible economic or financial
innovation and fair competition, or protect customers, the
Commission may (on its own initiative or on application of
the registered digital commodity exchange) exempt, either
unconditionally or on stated terms or conditions or for
stated periods and either retroactively or prospectively, or
both, a registered digital commodity exchange from the
requirements of this section, if the Commission determines
that--
``(A) the exemption would be consistent with the public
interest and the purposes of this Act; and
``(B) the exemption will not have a material adverse effect
on the ability of the Commission or the digital commodity
exchange to discharge regulatory or self-regulatory duties
under this Act.
``(2) The Commission may exempt, conditionally or
unconditionally, a digital commodity exchange from
registration under this section if the Commission finds that
the digital commodity exchange is subject to comparable,
comprehensive supervision and regulation on a consolidated
basis by the appropriate governmental authorities in the home
country of the facility.
``(j) Customer Defined.--In this section, the term
`customer' means any person that maintains an account for the
trading of digital commodities directly with a digital
commodity exchange (other than a person that is owned or
controlled, directly or indirectly, by the digital commodity
exchange) for its own behalf or on behalf of any other
person.
``(k) Federal Preemption.--Notwithstanding any other
provision of law, the Commission shall have exclusive
jurisdiction over any digital commodity exchange registered
under this section.
``(l) Treatment Under the Bank Secrecy Act.--A digital
commodity exchange shall be treated as a financial
institution for purposes of the Bank Secrecy Act.
``(m) Withdrawal of Certification of a Blockchain System.--
``(1) In general.--
``(A) Determination by a digital commodity exchange.--With
respect to a certification of a blockchain system that
becomes effective pursuant to section 44(f) of the Securities
Exchange Act of 1934, if a digital commodity exchange
determines that the blockchain system may not be a
decentralized system, the digital commodity exchange shall
notify the Commission of such determination.
``(B) Withdrawal process.--With respect to each
notification received under subparagraph (A), the Commission
shall initiate a withdrawal process under which the
Commission shall--
``(i) publish a notice announcing the proposed withdrawal;
``(ii) provide a 30 day comment period with respect to the
proposed withdrawal; and
``(iii) after the end of the 30-day comment required under
clause (ii), publish either--

``(I) a notification of withdrawal of the applicable
certification; or
``(II) a notice that the Commission is not withdrawing the
certification.

``(C) Detailed analysis required.--The Commission shall
include, with each publication of a notification of
withdrawal described under subparagraph (B)(iii)(I), a
detailed analysis of the factors on which the decision was
based.
``(2) Recertification.--With respect to a blockchain system
for which a certification has been withdrawn under this
subsection, no person may make a certification under section
44(a) of the Securities Exchange Act of 1934 with respect to
such blockchain system during the 90-day period beginning on
the date of such withdrawal.
``(3) Appeal of withdrawal.--
``(A) In general.--If a certification is withdrawn under
this subsection, a person making may appeal the decision to
the United States Court of Appeals for the District of
Columbia, not later than 60 days after the notice of
withdrawal is made.
``(B) Review.--In an appeal under subparagraph (A), the
court shall have de novo review of the determination to
withdraw the certification.''.

SEC. 505. QUALIFIED DIGITAL COMMODITY CUSTODIANS.

The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended
by the preceding provisions of this Act, is amended by
inserting after section 5i the following:

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

``(a) In General.--A digital commodity custodian is a
qualified digital commodity custodian if the digital
commodity custodian complies with the requirements of this
section.
``(b) Supervision Requirement.--A digital commodity
custodian that is not subject to supervision and examination
by an appropriate Federal banking agency, the National Credit
Union Administration, the Commission, or the Securities and
Exchange Commission shall be subject to adequate supervision
and appropriate regulation by--
``(1) a State bank supervisor (within the meaning of
section 3 of the Federal Deposit Insurance Act);
``(2) a State credit union supervisor, as defined under
section 6003 of the Anti-Money Laundering Act of 2020; or
``(3) an appropriate foreign governmental authority in the
home country of the digital commodity custodian.
``(c) Other Requirements.--
``(1) Not otherwise prohibited.--The digital commodity
custodian has not been prohibited by a supervisor of the
digital commodity custodian from engaging in an activity with
respect to the custody and safekeeping of digital
commodities.
``(2) Information sharing.--
``(A) In general.--A digital commodity custodian shall
share information with the Commission on request and comply
with such requirements for periodic sharing of information
regarding customer accounts that the digital commodity
custodian holds on behalf of an entity registered with the
Commission as the Commission determines by rule are
reasonably necessary to effectuate any of the provisions, or
to accomplish any of the purposes, of this Act.
``(B) Provision of information.--Any entity that is subject
to regulation and examination by an appropriate Federal
banking agency may satisfy any information request described
in subparagraph (A) by providing the Commission with a
detailed listing, in writing, of the digital commodities of a
customer within the custody or use of the entity.
``(d) Adequate Supervision and Appropriate Regulation.--
``(1) In general.--For purposes of subsection (b), the
terms `adequate supervision' and `appropriate regulation'
mean such minimum standards for supervision and regulation as
are reasonably necessary to protect the digital commodities
of customers of an entity registered with the Commission,
including standards relating to the licensing, examination,
and supervisory processes that require the digital commodity
custodian to, at a minimum--
``(A) receive a review and evaluation of ownership,
character and fitness, conflicts of interest, business model,
financial statements, funding resources, and policies and
procedures of the digital commodity custodian;
``(B) hold capital sufficient for the financial integrity
of the digital commodity custodian;
``(C) protect customer assets;
``(D) establish and maintain books and records regarding
the business of the digital commodity custodian;
``(E) submit financial statements and audited financial
statements to the applicable supervisor described in
subsection (b);
``(F) provide disclosures to the applicable supervisor
described in subsection (b) regarding actions, proceedings,
and other items as determined by the supervisor;
``(G) maintain and enforce policies and procedures for
compliance with applicable State and Federal laws, including
those related to anti-money laundering and cybersecurity;
``(H) establish a business continuity plan to ensure
functionality in cases of disruption; and
``(I) establish policies and procedures to resolve
complaints.
``(2) Rulemaking with respect to definitions.--
``(A) In general.--For purposes of this section, the
Commission may, by rule, further define the terms `adequate
supervision' and `appropriate regulation' as necessary in the
public interest, as appropriate for the protection of
investors, and consistent with the purposes of this Act.
``(B) Conditional treatment of certain custodians before
rulemaking.--Before the effective date of a rulemaking under
subparagraph (A), a trust company is deemed subject to
adequate supervision and appropriate regulation if--
``(i) the trust company is expressly permitted by a State
bank supervisor to engage in the custody and safekeeping of
digital commodities;
``(ii) the State bank supervisor has established licensing,
examination, and supervisory processes that require the trust
company to, at a minimum, meet the conditions described in
subparagraphs (A) through (I) of paragraph (1); and
``(iii) the trust company is in good standing with its
State bank supervisor.
``(C) Transition period for certain custodians.--In
implementing the rulemaking under subparagraph (A), the
Commission shall provide a transition period of not less than
2 years for any trust company that is deemed subject to
adequate supervision and appropriate regulation under
subparagraph (B) on the effective date of the rulemaking.
``(e) Authority to Temporarily Suspend Standards.--The
Commission may, by rule or order, temporarily suspend, in
whole or in part, any requirement imposed under, or any
standard referred to in, this section if the Commission
determines that the suspension would be consistent with the
public interest and the purposes of this Act.''.

SEC. 506. REGISTRATION AND REGULATION OF DIGITAL COMMODITY
BROKERS AND DEALERS.

The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended
by the preceding provisions of

[[Page H3450]]

this Act, is amended by inserting after section 4t the
following:

``SEC. 4U. REGISTRATION AND REGULATION OF DIGITAL COMMODITY
BROKERS AND DEALERS.

``(a) Registration.--It shall be unlawful for any person to
act as a digital commodity broker or digital commodity dealer
unless the person is registered as such with the Commission.
``(b) Requirements.--
``(1) In general.--A person shall register as a digital
commodity broker or digital commodity dealer by filing a
registration application with the Commission.
``(2) Contents.--
``(A) In general.--The application shall be made in such
form and manner as is prescribed by the Commission, and shall
contain such information as the Commission considers
necessary concerning the business in which the applicant is
or will be engaged.
``(B) Continual reporting.--A person that is registered as
a digital commodity broker or digital commodity dealer shall
continue to submit to the Commission reports that contain
such information pertaining to the business of the person as
the Commission may require.
``(3) Statutory disqualification.--Except to the extent
otherwise specifically provided by rule, regulation, or
order, it shall be unlawful for a digital commodity broker or
digital commodity dealer to permit any person who is
associated with a digital commodity broker or a digital
commodity dealer and who is subject to a statutory
disqualification to effect or be involved in effecting a
contract of sale of a digital commodity on behalf of the
digital commodity broker or the digital commodity dealer,
respectively, if the digital commodity broker or digital
commodity dealer, respectively, knew, or in the exercise of
reasonable care should have known, of the statutory
disqualification.
``(4) Limitations on certain assets.--A digital commodity
broker or digital commodity dealer shall not offer, offer to
enter into, enter into, or facilitate any contract of sale of
a digital commodity that has not been certified under section
5c(d).
``(c) Additional Registrations.--
``(1) With the commission.--Any person required to be
registered as a digital commodity broker or digital commodity
dealer may also be registered as a futures commission
merchant, introducing broker, or swap dealer.
``(2) With the securities and exchange commission.--Any
person required to be registered as a digital commodity
broker or digital commodity dealer under this section may
register with the Securities and Exchange Commission as a
digital asset broker or digital asset dealer, pursuant to
section 15(b) of the Securities Exchange Act of 1934.
``(3) With membership in a registered futures
association.--Any person required to be registered as a
digital commodity broker or digital commodity dealer under
this section shall be a member of a registered futures
association.
``(4) Registration required.--Any person required to be
registered as a digital commodity broker or digital commodity
dealer under this section shall register with the Commission
as such regardless of whether the person is registered with
another State or Federal regulator.
``(d) Rulemaking.--
``(1) In general.--The Commission shall prescribe such
rules applicable to registered digital commodity brokers and
registered digital commodity dealers as are appropriate to
carry out this section, including rules in the public
interest that limit the activities of digital commodity
brokers and digital commodity dealers.
``(2) Multiple registrants.--The Commission shall prescribe
rules or regulations permitting, or may otherwise authorize,
exemptions or additional requirements applicable to persons
with multiple registrations under this Act, including as
futures commission merchants, introducing brokers, digital
commodity brokers, digital commodity dealers, or swap
dealers, as may be in the public interest to reduce
compliance costs and promote customer protection.
``(e) Capital Requirements.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall meet such minimum capital
requirements as the Commission may prescribe to address the
risks associated with digital commodity trading and to ensure
that the digital commodity broker or digital commodity
dealer, respectively, is able to--
``(A) meet, and continue to meet, at all times, the
obligations of such a registrant; and
``(B) in the case of a digital commodity dealer, fulfill
the counterparty obligations of the digital commodity dealer
for any margined, leveraged, or financed transactions.
``(2) Rule of construction.--Nothing in this section shall
limit, or be construed to limit, the authority of the
Securities and Exchange Commission to set financial
responsibility rules for a broker or dealer registered
pursuant to section 15(b) of the Securities Exchange Act of
1934 (15 U.S.C. 78o(b)) (except for section 15(b)(11) of such
Act (15 U.S.C. 78o(b)(11)) in accordance with section
15(c)(3) of such Act (15 U.S.C. 78o(c)(3)).
``(3) Futures commission merchants and other dealers.--Each
futures commission merchant, introducing broker, digital
commodity broker, digital commodity dealer, broker, and
dealer shall maintain sufficient capital to comply with the
stricter of any applicable capital requirements to which the
futures commission merchant, introducing broker, digital
commodity broker, digital commodity dealer, broker, or
dealer, respectively, is subject under this Act or the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
``(f) Reporting and Recordkeeping.--Each digital commodity
broker and digital commodity dealer--
``(1) shall make such reports as are required by the
Commission by rule or regulation regarding the transactions,
positions, and financial condition of the digital commodity
broker or digital commodity dealer, respectively;
``(2) shall keep books and records in such form and manner
and for such period as may be prescribed by the Commission by
rule or regulation; and
``(3) shall keep the books and records open to inspection
and examination by any representative of the Commission.
``(g) Daily Trading Records.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall maintain daily trading records
of the transactions of the digital commodity broker or
digital commodity dealer, respectively, and all related
records (including related forward or derivatives
transactions) and recorded communications, including
electronic mail, instant messages, and recordings of
telephone calls, for such period as the Commission may
require by rule or regulation.
``(2) Information requirements.--The daily trading records
shall include such information as the Commission shall
require by rule or regulation.
``(3) Counterparty records.--Each digital commodity broker
and digital commodity dealer shall maintain daily trading
records for each customer or counterparty in a manner and
form that is identifiable with each digital commodity
transaction.
``(4) Audit trail.--Each digital commodity broker and
digital commodity dealer shall maintain a complete audit
trail for conducting comprehensive and accurate trade
reconstructions.
``(h) Business Conduct Standards.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall conform with such business
conduct standards as the Commission, by rule or regulation,
prescribes related to--
``(A) fraud, manipulation, and other abusive practices
involving spot or margined, leveraged, or financed digital
commodity transactions (including transactions that are
offered but not entered into);
``(B) diligent supervision of the business of the
registered digital commodity broker or digital commodity
dealer, respectively; and
``(C) such other matters as the Commission deems
appropriate.
``(2) Business conduct requirements.--The Commission shall,
by rule, prescribe business conduct requirements which--
``(A) require disclosure by a registered digital commodity
broker and registered digital commodity dealer to any
counterparty to the transaction (other than an eligible
contract participant) of--
``(i) information about the material risks and
characteristics of the digital commodity;
``(ii) information about the material risks and
characteristics of the transaction;
``(B) establish a duty for such a digital commodity broker
and such a digital commodity dealer to communicate in a fair
and balanced manner based on principles of fair dealing and
good faith;
``(C) establish standards governing digital commodity
broker and digital commodity dealer marketing and
advertising, including testimonials and endorsements; and
``(D) establish such other standards and requirements as
the Commission may determine are--
``(i) in the public interest;
``(ii) appropriate for the protection of customers; or
``(iii) otherwise in furtherance of the purposes of this
Act.
``(3) Prohibition on fraudulent practices.--It shall be
unlawful for a digital commodity broker or digital commodity
dealer to--
``(A) employ any device, scheme, or artifice to defraud any
customer or counterparty;
``(B) engage in any transaction, practice, or course of
business that operates as a fraud or deceit on any customer
or counterparty; or
``(C) engage in any act, practice, or course of business
that is fraudulent, deceptive, or manipulative.
``(i) Duties.--
``(1) Risk management procedures.--Each digital commodity
broker and digital commodity dealer shall establish robust
and professional risk management systems adequate for
managing the day-to-day business of the digital commodity
broker or digital commodity dealer, respectively.
``(2) Disclosure of general information.--Each digital
commodity broker and digital commodity dealer shall disclose
to the Commission information concerning--
``(A) the terms and conditions of the transactions of the
digital commodity broker or digital commodity dealer,
respectively;
``(B) the trading operations, mechanisms, and practices of
the digital commodity broker or digital commodity dealer,
respectively;
``(C) financial integrity protections relating to the
activities of the digital commodity broker or digital
commodity dealer, respectively; and
``(D) other information relevant to trading in digital
commodities by the digital commodity broker or digital
commodity dealer, respectively.
``(3) Ability to obtain information.--Each digital
commodity broker and digital commodity dealer shall--
``(A) establish and enforce internal systems and procedures
to obtain any necessary information to perform any of the
functions described in this section; and
``(B) provide the information to the Commission, on
request.
``(4) Conflicts of interest.--Each digital commodity broker
and digital commodity dealer shall implement conflict-of-
interest systems and procedures that--
``(A) establish structural and institutional safeguards--
``(i) to minimize conflicts of interest that might
potentially bias the judgment or supervision of the digital
commodity broker or digital

[[Page H3451]]

commodity dealer, respectively, and contravene the principles
of fair and equitable trading and the business conduct
standards described in this Act, including conflicts arising
out of transactions or arrangements with affiliates
(including affiliates acting as digital asset issuers,
digital commodity dealers, or qualified digital commodity
custodians), which may include information partitions and the
legal separation of different persons involved in digital
commodity activities; and
``(ii) to ensure that the activities of any person within
the digital commodity broker or digital commodity dealer
relating to research or analysis of the price or market for
any digital commodity or acting in a role of providing
exchange activities or making determinations as to accepting
exchange customers are separated by appropriate informational
partitions within the digital commodity broker or digital
commodity dealer from the review, pressure, or oversight of
persons whose involvement in pricing, trading, exchange, or
clearing activities might potentially bias their judgment or
supervision and contravene the core principles of open access
and the business conduct standards described in this Act; and
``(B) address such other issues as the Commission
determines to be appropriate.
``(5) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, a digital
commodity broker or digital commodity dealer shall not--
``(A) adopt any process or take any action that results in
any unreasonable restraint of trade; or
``(B) impose any material anticompetitive burden on trading
or clearing.
``(j) Designation of Chief Compliance Officer.--
``(1) In general.--Each digital commodity broker and
digital commodity dealer shall designate an individual to
serve as a chief compliance officer.
``(2) Duties.--The chief compliance officer shall--
``(A) report directly to the board or to the senior officer
of the registered digital commodity broker or registered
digital commodity dealer;
``(B) review the compliance of the registered digital
commodity broker or registered digital commodity dealer with
respect to the registered digital commodity broker and
registered digital commodity dealer requirements described in
this section;
``(C) in consultation with the board of directors, a body
performing a function similar to the board, or the senior
officer of the organization, resolve any conflicts of
interest that may arise;
``(D) be responsible for administering each policy and
procedure that is required to be established pursuant to this
section;
``(E) ensure compliance with this Act (including
regulations), including each rule prescribed by the
Commission under this section;
``(F) establish procedures for the remediation of
noncompliance issues identified by the chief compliance
officer through any--
``(i) compliance office review;
``(ii) look-back;
``(iii) internal or external audit finding;
``(iv) self-reported error; or
``(v) validated complaint; and
``(G) establish and follow appropriate procedures for the
handling, management response, remediation, retesting, and
closing of noncompliance issues.
``(3) Annual reports.--
``(A) In general.--In accordance with rules prescribed by
the Commission, the chief compliance officer shall annually
prepare and sign a report that contains a description of--
``(i) the compliance of the registered digital commodity
broker or registered digital commodity dealer with respect to
this Act (including regulations); and
``(ii) each policy and procedure of the registered digital
commodity broker or registered digital commodity dealer of
the chief compliance officer (including the code of ethics
and conflict of interest policies).
``(B) Requirements.--The chief compliance officer shall
ensure that a compliance report under subparagraph (A)--
``(i) accompanies each appropriate financial report of the
registered digital commodity broker or registered digital
commodity dealer that is required to be furnished to the
Commission pursuant to this section; and
``(ii) includes a certification that, under penalty of law,
the compliance report is accurate and complete.
``(k) Segregation of Digital Commodities.--
``(1) Holding of customer assets.--
``(A) In general.--Each digital commodity broker and
digital commodity dealer shall hold customer money, assets,
and property in a manner to minimize the risk of loss to the
customer or unreasonable delay in customer access to the
money, assets, and property of the customer.
``(B) Qualified digital commodity custodian.--Each digital
commodity broker and digital commodity dealer shall hold in a
qualified digital commodity custodian each unit of a digital
commodity that is--
``(i) the property of a customer or counterparty of the
digital commodity broker or digital commodity dealer,
respectively;
``(ii) required to be held by the digital commodity broker
or digital commodity dealer under subsection (e); or
``(iii) otherwise so required by the Commission to
reasonably protect customers or promote the public interest.
``(2) Segregation of funds.--
``(A) In general.--Each digital commodity broker and
digital commodity dealer shall treat and deal with all money,
assets, and property that is received by the digital
commodity broker or digital commodity dealer, or accrues to a
customer as the result of trading in digital commodities, as
belonging to the customer.
``(B) Commingling prohibited.--
``(i) In general.--Except as provided in clause (ii), each
digital commodity broker and digital commodity dealer shall
separately account for money, assets, and property of a
digital commodity customer, and shall not commingle any such
money, assets, or property with the funds of the digital
commodity broker or digital commodity dealer, respectively,
or use any such money, assets, or property to margin, secure,
or guarantee any trades or accounts of any customer or person
other than the person for whom the money, assets, or property
are held.
``(ii) Exceptions.--

``(I) Use of funds.--

``(aa) In general.--A digital commodity broker or digital
commodity dealer may, for convenience, commingle and deposit
in the same account or accounts with any bank, trust company,
derivatives clearing organization, or qualified digital
commodity custodian money, assets, and property of customers.
``(bb) Withdrawal.--The share of the money, assets, and
property described in item (aa) as in the normal course of
business shall be necessary to margin, guarantee, secure,
transfer, adjust, or settle a contract of sale of a digital
commodity with a registered entity may be withdrawn and
applied to such purposes, including the payment of
commissions, brokerage, interest, taxes, storage, and other
charges, lawfully accruing in connection with the contract.

``(II) Commission action.--In accordance with such terms
and conditions as the Commission may prescribe by rule,
regulation, or order, any money, assets, or property of the
customers of a digital commodity broker or digital commodity
dealer may be commingled and deposited in customer accounts
with any other money, assets, or property received by the
digital commodity broker or digital commodity dealer,
respectively, and required by the Commission to be separately
accounted for and treated and dealt with as belonging to the
customer of the digital commodity broker or digital commodity
dealer, respectively.

``(3) Permitted investments.--Money described in paragraph
(2) may be invested in obligations of the United States, in
general obligations of any State or of any political
subdivision of a State, in obligations fully guaranteed as to
principal and interest by the United States, or in any other
investment that the Commission may by rule or regulation
allow.
``(4) Customer protection during bankruptcy.--
``(A) Customer property.--All money, assets, or property
described in paragraph (2) shall be considered customer
property for purposes of section 761 of title 11, United
States Code.
``(B) Transactions.--A transaction involving a unit of a
digital commodity occurring with a digital commodity dealer
shall be considered a `contract for the purchase or sale of a
commodity for future delivery, on or subject to the rules of,
a contract market or board of trade' for purposes of the
definition of a `commodity contract' in section 761 of title
11, United States Code.
``(C) Brokers and dealers.--A digital commodity dealer and
a digital commodity broker shall be considered a futures
commission merchant for purposes of section 761 of title 11,
United States Code.
``(D) Assets removed from segregation.--Assets removed from
segregation due to a customer election under paragraph (6)
shall not be considered customer property for purposes of
section 761 of title 11, United States Code.
``(5) Misuse of customer property.--
``(A) In general.--It shall be unlawful--
``(i) for any digital commodity broker or digital commodity
dealer that has received any customer money, assets, or
property for custody to dispose of, or use any such money,
assets, or property as belonging to the digital commodity
broker or digital commodity dealer, respectively, or any
person other than a customer of the digital commodity broker
or digital commodity dealer, respectively; or
``(ii) for any other person, including any depository,
digital commodity exchange, other digital commodity broker,
other digital commodity dealer, or digital commodity
custodian that has received any customer money, assets, or
property for deposit, to hold, dispose of, or use any such
money, assets, or property, as belonging to the depositing
digital commodity broker or digital commodity dealer or any
person other than the customers of the digital commodity
broker or digital commodity dealer, respectively.
``(B) Use further defined.--For purposes of this section,
`use' of a digital commodity includes utilizing any unit of a
digital asset to participate in a blockchain service defined
in paragraph (6) or a decentralized governance system
associated with the digital commodity or the blockchain
system to which the digital commodity relates in any manner
other than that expressly directed by the customer from whom
the unit of a digital commodity was received.
``(6) Participation in blockchain services.--
``(A) In general.--A customer shall have the right to waive
the restrictions in paragraph (1) for any unit of a digital
commodity to be used under subparagraph (B), by affirmatively
electing, in writing to the digital commodity broker or
digital commodity dealer, to waive the restrictions.
``(B) Use of funds.--Customer digital commodities removed
from segregation under subparagraph (A) may be pooled and
used by the digital commodity broker or digital commodity
dealer, or one of their designees, to provide a blockchain
service for a blockchain system to which the unit of the
digital asset removed from segregation in subparagraph (A)
relates.
``(C) Limitations.--

[[Page H3452]]

``(i) In general.--The Commission may, by rule, establish
notice and disclosure requirements, and any other limitations
and rules related to the waiving of any restrictions under
this paragraph that are reasonably necessary to protect
customers, including eligible contract participants, non-
eligible contract participants, or any other class of
customers.
``(ii) Customer choice.--A digital commodity broker or
digital commodity dealer may not require a waiver from a
customer described in subparagraph (A) as a condition of
doing business with the broker or dealer.
``(D) Blockchain service defined.--In this subparagraph,
the term `blockchain service' means any activity relating to
validating transactions on a blockchain system, providing
security for a blockchain system, or other similar activity
required for the ongoing operation of a blockchain system.
``(l) Federal Preemption.--Notwithstanding any other
provision of law, the Commission shall have exclusive
jurisdiction over any digital commodity broker or digital
commodity dealer registered under this section.
``(m) Exemptions.--In order to promote responsible economic
or financial innovation and fair competition, or protect
customers, the Commission may (on its own initiative or on
application of the registered digital commodity broker or
registered digital commodity dealer) exempt, unconditionally
or on stated terms or conditions, or for stated periods, and
retroactively or prospectively, or both, a registered digital
commodity broker or registered digital commodity dealer from
the requirements of this section, if the Commission
determines that--
``(1)(A) the exemption would be consistent with the public
interest and the purposes of this Act; and
``(B) the exemption will not have a material adverse effect
on the ability of the Commission to discharge regulatory
duties under this Act; or
``(2) the registered digital commodity broker or registered
digital commodity dealer is subject to comparable,
comprehensive supervision and regulation by the appropriate
government authorities in the home country of the registered
digital commodity broker or registered digital commodity
dealer, respectively.
``(n) Treatment Under the Bank Secrecy Act.--A digital
commodity broker and a digital commodity dealer shall be
treated as a financial institution for purposes of the Bank
Secrecy Act.''.

SEC. 507. REGISTRATION OF ASSOCIATED PERSONS.

(a) In General.--Section 4k of the Commodity Exchange Act
(7 U.S.C. 6k) is amended--
(1) by redesignating subsections (4) through (6) as
subsections (5) through (7), respectively; and
(2) by inserting after subsection (3) the following:
``(4) It shall be unlawful for any person to act as an
associated person of a digital commodity broker or an
associated person of a digital commodity dealer unless the
person is registered with the Commission under this Act and
such registration shall not have expired, been suspended (and
the period of suspension has not expired), or been revoked.
It shall be unlawful for a digital commodity broker or a
digital commodity dealer to permit such a person to become or
remain associated with the digital commodity broker or
digital commodity dealer if the digital commodity broker or
digital commodity dealer knew or should have known that the
person was not so registered or that the registration had
expired, been suspended (and the period of suspension has not
expired), or been revoked.''; and
(3) in subsection (5) (as so redesignated), by striking
``or of a commodity trading advisor'' and inserting ``of a
commodity trading advisor, of a digital commodity broker, or
of a digital commodity dealer''.
(b) Conforming Amendments.--The Commodity Exchange Act (7
U.S.C. 1a et seq.) is amended by striking ``section 4k(6)''
each place it appears and inserting ``section 4k(7)''.

SEC. 508. REGISTRATION OF COMMODITY POOL OPERATORS AND
COMMODITY TRADING ADVISORS.

(a) In General.--Section 4m(3) of the Commodity Exchange
Act (7 U.S.C. 6m(3)) is amended--
(1) in subparagraph (A)--
(A) by striking ``any commodity trading advisor'' and
inserting ``a commodity pool operator or commodity trading
advisor''; and
(B) by striking ``acting as a commodity trading advisor''
and inserting ``acting as a commodity pool operator or
commodity trading advisor''; and
(2) in subparagraph (C), by inserting ``digital
commodities,'' after ``physical commodities,''.
(b) Exemptive Authority.--Section 4m of such Act (7 U.S.C.
6m) is amended by adding at the end the following:.
``(4) Exemptive Authority.--The Commission shall promulgate
rules to provide appropriate exemptions for commodity pool
operators and commodity trading advisors, to provide relief
from duplicative, conflicting, or unduly burdensome
requirements or to promote responsible innovation, to the
extent the exemptions foster the development of fair and
orderly cash or spot digital commodity markets, are necessary
or appropriate in the public interest, and are consistent
with the protection of customers.''.

SEC. 509. EXCLUSION FOR DECENTRALIZED FINANCE ACTIVITIES.

The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended
by the preceding provisions of this Act, is amended by
inserting after section 4u the following:

``SEC. 4V. DECENTRALIZED FINANCE ACTIVITIES NOT SUBJECT TO
THIS ACT.

``(a) In General.--Notwithstanding any other provision of
this Act, a person shall not be subject to this Act and the
regulations promulgated under this Act based on the person
directly or indirectly engaging in any of the following
activities, whether singly or in combination, in relation to
the operation of a blockchain system or in relation to
decentralized finance (as defined in section 605(d) of the
Financial Innovation and Technology for the 21st Century
Act):
``(1) Compiling network transactions, operating or
participating in a liquidity pool, relaying, searching,
sequencing, validating, or acting in a similar capacity with
respect to contract of sale of a digital asset.
``(2) Providing computational work, operating a node, or
procuring, offering, or utilizing network bandwidth, or other
similar incidental services with respect to a contract of
sale of a digital asset.
``(3) Providing a user-interface that enables a user to
read, and access data about a blockchain system, send
messages, or otherwise interact with a blockchain system.
``(4) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing a blockchain system.
``(5) Developing, publishing, constituting, administering,
maintaining, or otherwise distributing software or systems
that create or deploy hardware or software, including wallets
or other systems, facilitating an individual user's own
personal ability to keep, safeguard, or custody the user's
digital commodities or related private keys.
``(b) Exceptions.--Subsection (a) shall not be interpreted
to apply to the anti-fraud, anti-manipulation, or false
reporting enforcement authorities of the Commission.''.

SEC. 510. FUNDING FOR IMPLEMENTATION AND ENFORCEMENT.

(a) Collection of Fees.--
(1) In general.--The Commodity Futures Trading Commission
(in this section referred to as the ``Commission'') shall
charge and collect a filing fee from each person who files
with the Commission a notice of intent to register as a
digital commodity exchange, digital commodity broker, or
digital commodity dealer pursuant to section 106.
(2) Amount.--The fees authorized under paragraph (1) may be
collected and available for obligation only in the amounts
provided in advance in an appropriation Act.
(2) Authority to adjust fees.--Notwithstanding the
preceding provisions of this subsection, to promote fair
competition or innovation, the Commission, in its sole
discretion, may reduce or eliminate any fee otherwise
required to be paid by a small or medium filer under this
subsection.
(b) Fee Schedule.--
(1) In general.--The Commission shall publish in the
Federal Register a schedule of the fees to be charged and
collected under this section.
(2) Content.--The fee schedule for a fiscal year shall
include a written analysis of the estimate of the Commission
of the total costs of carrying out the functions of the
Commission under this Act during the fiscal year.
(3) Submission to congress.--Before publishing the fee
schedule for a fiscal year, the Commission shall submit a
copy of the fee schedule to the Congress.
(4) Timing.--
(A) 1st fiscal year.--The Commission shall publish the fee
schedule for the fiscal year in which this Act is enacted,
within 30 days after the date of the enactment of this Act.
(B) Subsequent fiscal years.--The Commission shall publish
the fee schedule for each subsequent fiscal year, not less
than 90 days before the due date prescribed by the Commission
for payment of the annual fee for the fiscal year.
(c) Late Payment Penalty.--
(1) In general.--The Commission may impose a penalty
against a person that fails to pay an annual fee charged
under this section, within 30 days after the due date
prescribed by the Commission for payment of the fee.
(2) Amount.--The amount of the penalty shall be--
(A) 5 percent of the amount of the fee due; multiplied by
(B) the whole number of consecutive 30-day periods that
have elapsed since the due date.
(d) Reimbursement of Excess Fees.--To the extent that the
total amount of fees collected under this section during a
fiscal year that begins after the date of the enactment of
this Act exceeds the amount provided under subsection (a)(2)
with respect to the fiscal year, the Commission shall
reimburse the excess amount to the persons who have timely
paid their annual fees, on a pro-rata basis that excludes
penalties, and shall do so within 60 days after the end of
the fiscal year.
(e) Deposit of Fees Into the Treasury.--All amounts
collected under this section shall be credited to the
currently applicable appropriation, account, or fund of the
Commission as discretionary offsetting collections, and shall
be available for the purposes authorized in subsection (f)
only to the extent and in the amounts provided in advance in
appropriation Acts.
(f) Authorization of Appropriations.--In addition to
amounts otherwise authorized to be appropriated to the
Commission, there is authorized to be appropriated to the
Commission amounts collected under this section to cover the
costs the costs of carrying out the functions of the
Commission under this Act.
(g) Sunset.--The authority to charge and collect fees under
this section shall expire at the end of the 4th fiscal year
that begins after the date of the enactment of this Act.

SEC. 511. EFFECTIVE DATE.

[[Page H3453]]

(1) 360 days after the date of enactment of this Act; or
(2) 60 days after the publication in the Federal Register
of the final rule implementing the provision.

TITLE VI--INNOVATION AND TECHNOLOGY IMPROVEMENTS

SEC. 601. FINDINGS; SENSE OF CONGRESS.

(a) Findings.--Congress finds the following:
(1) Entrepreneurs and innovators are building and deploying
this next generation of the internet.
(2) Digital asset networks represent a new way for people
to join together and cooperate with one another to undertake
certain activities.
(3) Digital assets have the potential to be the
foundational building blocks of these networks, aligning the
economic incentive for individuals to cooperate with one
another to achieve a common purpose.
(4) The digital asset ecosystem has the potential to grow
our economy and improve everyday lives of Americans by
facilitating collaboration through the use of technology to
manage activities, allocate resources, and facilitate
decision making.
(5) Blockchain networks and the digital assets they empower
provide creator control, enhance transparency, reduce
transaction costs, and increase efficiency if proper
protections are put in place for investors, consumers, our
financial system, and our national security.
(6) Blockchain technology facilitates new types of network
participation which businesses in the United States may
utilize in innovative ways.
(7) Other digital asset companies are setting up their
operations outside of the United States, where countries are
establishing frameworks to embrace the potential of
blockchain technology and digital assets and provide
safeguards for consumers.
(8) Digital assets, despite the purported anonymity,
provide law enforcement with an exceptional tracing tool to
identify illicit activity and bring criminals to justice.
(9) The Financial Services Committee of the House of
Representatives has held multiple hearings highlighting
various risks that digital assets can pose to the financial
markets, consumers, and investors that must be addressed as
we seek to harness the benefits of these innovations.
(b) Sense of Congress.--It is the sense of Congress that--
(1) the United States should seek to prioritize
understanding the potential opportunities of the next
generation of the internet;
(2) the United States should seek to foster advances in
technology that have robust evidence indicating they can
improve our financial system and create more fair and
equitable access to financial services for everyday Americans
while protecting our financial system, investors, and
consumers;
(3) the United States must support the responsible
development of digital assets and the underlying technology
in the United States or risk the shifting of the development
of such assets and technology outside of the United States,
to less regulated countries;
(4) Congress should consult with public and private sector
stakeholders to understand how to enact a functional
framework tailored to the specific risks and unique benefits
of different digital asset-related activities, distributed
ledger technology, distributed networks, and decentralized
systems; and
(5) Congress should enact a functional framework tailored
to the specific risks of different digital asset-related
activities and unique benefits of distributed ledger
technology, distributed networks, and decentralized systems;
and
(6) consumers and market participants will benefit from a
framework for digital assets consistent with longstanding
investor protections in securities and commodities markets,
yet tailored to the unique benefits and risks of the digital
asset ecosystem.

SEC. 602. CODIFICATION OF THE SEC STRATEGIC HUB FOR
INNOVATION AND FINANCIAL TECHNOLOGY.

Section 4 of the Securities Exchange Act of 1934 (15 U.S.C.
78d) is amended by adding at the end the following:
``(l) Strategic Hub for Innovation and Financial
Technology.--
``(1) Office established.--There is established within the
Commission the Strategic Hub for Innovation and Financial
Technology (referred to in this section as the `FinHub').
``(2) Purposes.--The purposes of FinHub are as follows:
``(A) To assist in shaping the approach of the Commission
to technological advancements.
``(B) To examine financial technology innovations among
market participants.
``(C) To coordinate the response of the Commission to
emerging technologies in financial, regulatory, and
supervisory systems.
``(3) Director of finhub.--FinHub shall have a Director who
shall be appointed by the Commission, from among individuals
having experience in both emerging technologies and Federal
securities laws and serve at the pleasure of the Commission.
The Director shall report directly to the Commission and
perform such functions and duties as the Commission may
prescribe.
``(4) Responsibilities.--FinHub shall--
``(A) foster responsible technological innovation and fair
competition within the Commission, including around financial
technology, regulatory technology, and supervisory
technology;
``(B) provide internal education and training to the
Commission regarding financial technology;
``(C) advise the Commission regarding financial technology
that would serve the Commission's functions;
``(D) analyze technological advancements and the impact of
regulatory requirements on financial technology companies;
``(E) advise the Commission with respect to rulemakings or
other agency or staff action regarding financial technology;
``(F) provide businesses working in emerging financial
technology fields with information on the Commission, its
rules and regulations; and
``(G) encourage firms working in emerging technology fields
to engage with the Commission and obtain feedback from the
Commission on potential regulatory issues.
``(5) Access to documents.--The Commission shall ensure
that FinHub has full access to the documents and information
of the Commission and any self-regulatory organization, as
necessary to carry out the functions of FinHub.
``(6) Report to congress.--
``(A) In general.--Not later than October 31 of each year
after 2024, FinHub shall submit to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives a report
on the activities of FinHub during the immediately preceding
fiscal year.
``(B) Contents.--Each report required under subparagraph
(A) shall include--
``(i) the total number of persons that met with FinHub;
``(ii) the total number of market participants FinHub met
with, including the classification of those participants;
``(iii) a summary of general issues discussed during
meetings with persons;
``(iv) information on steps FinHub has taken to improve
Commission services, including responsiveness to the concerns
of persons;
``(v) recommendations--

``(I) with respect to the regulations of the Commission and
the guidance and orders of the Commission; and
``(II) for such legislative actions as FinHub determines
appropriate; and

``(vi) any other information, as determined appropriate by
the Director of FinHub.
``(C) Confidentiality.--A report under subparagraph (A) may
not contain confidential information.
``(7) Systems of records.--
``(A) In general.--The Commission shall establish a
detailed system of records (as defined under section 552a of
title 5, United States Code) to assist FinHub in
communicating with interested parties.
``(B) Entities covered by the system.--Entities covered by
the system required under subparagraph (A) include entities
or persons submitting requests or inquiries and other
information to Commission through FinHub.
``(C) Security and storage of records.--FinHub shall
store--
``(i) electronic records--

``(I) in the system required under subparagraph (A); or
``(II) on the secure network or other electronic medium,
such as encrypted hard drives or back-up media, of the
Commission; and

``(ii) paper records in secure facilities.
``(8) Effective date.--This subsection shall take effect on
the date that is 180 days after the date of the enactment of
this subsection.''.

SEC. 603. CODIFICATION OF LABCFTC.

(a) In General.--Section 18 of the Commodity Exchange Act
(7 U.S.C. 22) is amended by adding at the end the following:
``(c) LabCFTC.--
``(1) Establishment.--There is established in the
Commission LabCFTC.
``(2) Purpose.--The purposes of LabCFTC are to--
``(A) promote responsible financial technology innovation
and fair competition for the benefit of the American public;
``(B) serve as an information platform to inform the
Commission about new financial technology innovation; and
``(C) provide outreach to financial technology innovators
to discuss their innovations and the regulatory framework
established by this Act and the regulations promulgated
thereunder.
``(3) Director.--LabCFTC shall have a Director, who shall
be appointed by the Commission and serve at the pleasure of
the Commission. Notwithstanding section 2(a)(6)(A), the
Director shall report directly to the Commission and perform
such functions and duties as the Commission may prescribe.
``(4) Duties.--LabCFTC shall--
``(A) advise the Commission with respect to rulemakings or
other agency or staff action regarding financial technology;
``(B) provide internal education and training to the
Commission regarding financial technology;
``(C) advise the Commission regarding financial technology
that would bolster the Commission's oversight functions;
``(D) engage with academia, students, and professionals on
financial technology issues, ideas, and technology relevant
to activities under this Act;
``(E) provide persons working in emerging technology fields
with information on the Commission, its rules and
regulations, and the role of a registered futures
association; and
``(F) encourage persons working in emerging technology
fields to engage with the Commission and obtain feedback from
the Commission on potential regulatory issues.
``(5) Access to documents.--The Commission shall ensure
that LabCFTC has full access to the documents and information
of the Commission and any self-regulatory organization or
registered futures association, as necessary to carry out the
functions of LabCFTC.
``(6) Report to congress.--
``(A) In general.--Not later than October 31 of each year
after 2024, LabCFTC shall submit to the Committee on
Agriculture of the House of Representatives and the Committee
on Agriculture, Nutrition, and Forestry of the Senate a
report on its activities.

[[Page H3454]]

``(B) Contents.--Each report required under paragraph (1)
shall include--
``(i) the total number of persons that met with LabCFTC;
``(ii) a summary of general issues discussed during
meetings with the person;
``(iii) information on steps LabCFTC has taken to improve
Commission services, including responsiveness to the concerns
of persons;
``(iv) recommendations made to the Commission with respect
to the regulations, guidance, and orders of the Commission
and such legislative actions as may be appropriate; and
``(v) any other information determined appropriate by the
Director of LabCFTC.
``(C) Confidentiality.--A report under paragraph (A) shall
abide by the confidentiality requirements in section 8.
``(7) Systems of records.--
``(A) In general.--The Commission shall establish a
detailed system of records (as defined in section 552a of
title 5, United States Code) to assist LabCFTC in
communicating with interested parties.
``(B) Persons covered by the system.--The persons covered
by the system of records shall include persons submitting
requests or inquiries and other information to the Commission
through LabCFTC.
``(C) Security and storage of records.--The system of
records shall store records electronically or on paper in
secure facilities, and shall store electronic records on the
secure network of the Commission and on other electronic
media, such as encrypted hard drives and back-up media, as
needed.''.
(b) Conforming Amendments.--Section 2(a)(6)(A) of such Act
(7 U.S.C. 2(a)(6)(A)) is amended--
(1) by striking ``paragraph and in'' and inserting
``paragraph,''; and
(2) by inserting ``and section 18(c)(3),'' before ``the
executive''.
(c) Effective Date.--The Commodity Futures Trading
Commission shall implement the amendments made by this
section (including complying with section 18(c)(7) of the
Commodity Exchange Act) within 180 days after the date of the
enactment of this Act.

SEC. 604. CFTC-SEC JOINT ADVISORY COMMITTEE ON DIGITAL
ASSETS.

(a) Establishment.--The Commodity Futures Trading
Commission and the Securities and Exchange Commission (in
this section referred to as the ``Commissions'') shall
jointly establish the Joint Advisory Committee on Digital
Assets (in this section referred to as the ``Committee'').
(b) Purpose.--
(1) In general.--The Committee shall--
(A) provide the Commissions with advice on the rules,
regulations, and policies of the Commissions related to
digital assets;
(B) further the regulatory harmonization of digital asset
policy between the Commissions;
(C) examine and disseminate methods for describing,
measuring, and quantifying digital asset--
(i) decentralization;
(ii) functionality;
(iii) information asymmetries; and
(iv) transaction and network security;
(D) examine the potential for digital assets, blockchain
systems, and distributed ledger technology to improve
efficiency in the operation of financial market
infrastructure and better protect financial market
participants, including services and systems which provide--
(i) improved customer protections;
(ii) public availability of information;
(iii) greater transparency regarding customer funds;
(iv) reduced transaction cost; and
(v) increased access to financial market services; and
(E) discuss the implementation by the Commissions of this
Act and the amendments made by this Act.
(2) Review by agencies.--Each Commission shall--
(A) review the findings and recommendations of the
Committee;
(B) promptly issue a public statement each time the
Committee submits a finding or recommendation to a
Commission--
(i) assessing the finding or recommendation of the
Committee;
(ii) disclosing the action or decision not to take action
made by the Commission in response to a finding or
recommendation; and
(iii) explaining the reasons for the action or decision not
to take action; and
(C) each time the Committee submits a finding or
recommendation to a Commission, provide the Committee with a
formal response to the finding or recommendation not later
than 3 months after the date of the submission of the finding
or recommendation.
(c) Membership and Leadership.--
(1) Non-federal members.--
(A) In general.--The Commissions shall appoint at least 20
nongovernmental stakeholders who represent a broad spectrum
of interests, equally divided between the Commissions, to
serve as members of the Committee. The appointees shall
include--
(i) digital asset issuers;
(ii) persons registered with the Commissions and engaged in
digital asset related activities;
(iii) individuals engaged in academic research relating to
digital assets; and
(iv) digital asset users.
(B) Members not commission employees.--Members appointed
under subparagraph (A) shall not be deemed to be employees or
agents of a Commission solely by reason of membership on the
Committee.
(2) Co-designated federal officers.--
(A) Number; appointment.--There shall be 2 co-designated
Federal officers of the Committee, as follows:
(i) The Director of LabCFTC of the Commodity Futures
Trading Commission.
(ii) The Director of the Strategic Hub for Innovation and
Financial Technology of the Securities and Exchange
Commission.
(B) Duties.--The duties required by chapter 10 of title 5,
United States Code, to be carried out by a designated Federal
officer with respect to the Committee shall be shared by the
co-designated Federal officers of the Committee.
(3) Committee leadership.--
(A) Composition; election.--The Committee members shall
elect, from among the Committee members--
(i) a chair;
(ii) a vice chair;
(iii) a secretary; and
(iv) an assistant secretary.
(B) Term of office.--Each member elected under subparagraph
(A) in a 2-year period referred to in section 1013(b)(2) of
title 5, United States Code, shall serve in the capacity for
which the member was so elected, until the end of the 2-year
period.
(d) No Compensation for Committee Members.--
(1) Non-federal members.--All Committee members appointed
under subsection (c)(1) shall--
(A) serve without compensation; and
(B) while away from the home or regular place of business
of the member in the performance of services for the
Committee, be allowed travel expenses, including per diem in
lieu of subsistence, in the same manner as persons employed
intermittently in the Government service are allowed expenses
under section 5703(b) of title 5, United States Code.
(2) No compensation for co-designated federal officers.--
The co-designated Federal officers shall serve without
compensation in addition to that received for their services
as officers or employees of the United States.
(e) Frequency of Meetings.--The Committee shall meet--
(1) not less frequently than twice annually; and
(2) at such other times as either Commission may request.
(f) Duration.--Section 1013(a)(2) of title 5, United States
Code, shall not apply to the Committee.
(g) Time Limits.--The Commissions shall--
(1) adopt a joint charter for the Committee within 90 days
after the date of the enactment of this section;
(2) appoint members to the Committee within 120 days after
such date of enactment; and
(3) hold the initial meeting of the Committee within 180
days after such date of enactment.
(h) Funding.--Subject to the availability of funds, the
Commissions shall jointly fund the Committee.

SEC. 605. STUDY ON DECENTRALIZED FINANCE.

(a) In General.--The Commodity Futures Trading Commission
and the Securities and Exchange Commission shall jointly
carry out a study on decentralized finance that analyzes--
(1) the nature, size, role, and use of decentralized
finance blockchain protocols;
(2) the operation of blockchain protocols that comprise
decentralized finance;
(3) the interoperability of blockchain protocols and
blockchain systems;
(4) the interoperability of blockchain protocols and
software-based systems, including websites and wallets;
(5) the decentralized governance systems through which
blockchain protocols may be developed, published,
constituted, administered, maintained, or otherwise
distributed, including--
(A) whether the systems enhance or detract from--
(i) the decentralization of the decentralized finance; and
(ii) the inherent benefits and risks of the decentralized
governance system; and
(B) any procedures, requirements, or best practices that
would mitigate the risks identified in subparagraph (A)(ii);
(6) the benefits of decentralized finance, including--
(A) operational resilience and availability of blockchain
systems;
(B) interoperability of blockchain systems;
(C) market competition and innovation;
(D) transaction efficiency;
(E) transparency and traceability of transactions; and
(F) disintermediation;
(7) the risks of decentralized finance, including--
(A) pseudonymity of users and transactions;
(B) disintermediation; and
(C) cybersecurity vulnerabilities;
(8) the extent to which decentralized finance has
integrated with the traditional financial markets and any
potential risks or improvements to the stability of the
markets;
(9) how the levels of illicit activity in decentralized
finance compare with the levels of illicit activity in
traditional financial markets;
(10) methods for addressing illicit activity in
decentralized finance and traditional markets that are
tailored to the unique attributes of each;
(11) how decentralized finance may increase the
accessibility of cross-border transactions; and
(12) the feasibility of embedding self-executing compliance
and risk controls into decentralized finance.
(b) Consultation.--In carrying out the study required under
subsection (a), the Commodity Futures Trading Commission and
the Securities and Exchange Commission shall consult with the
Secretary of the Treasury on the factors described under
paragraphs (7) through (10) of subsection (a).
(c) Report.--Not later than 1 year after the date of
enactment of this Act, the Commodity Futures Trading
Commission and the Securities and Exchange Commission shall
jointly submit

[[Page H3455]]

to the relevant congressional committees a report that
includes the results of the study required by subsection (a).
(d) GAO Study.--The Comptroller General of the United
States shall--
(1) carry out a study on decentralized finance that
analyzes the information described under paragraphs (1)
through (12) of subsection (a); and
(2) not later than 1 year after the date of enactment of
this Act, submit to the relevant congressional committees a
report that includes the results of the study required by
paragraph (1).
(e) Definitions.--In this section:
(1) Decentralized finance.--
(A) In general.--The term ``decentralized finance'' means
blockchain protocols that allow users to engage in financial
transactions in a self-directed manner so that a third-party
intermediary does not effectuate the transactions or take
custody of digital assets of a user during any part of the
transactions.
(B) Relationship to excluded activities.--The term
``decentralized finance'' shall not be interpreted to limit
or exclude any activity from the activities described in
section 15I(a) of the Securities Exchange Act of 1934 or
section 4v(a) of the Commodity Exchange Act.
(2) Relevant congressional committees.--The term ``relevant
congressional committees'' means--
(A) the Committees on Financial Services and Agriculture of
the House of Representatives; and
(B) the Committees on Banking, Housing, and Urban Affairs
and Agriculture, Nutrition, and Forestry of the Senate.

SEC. 606. STUDY ON NON-FUNGIBLE DIGITAL ASSETS.

(a) In General.--The Comptroller General of the United
States shall carry out a study of non-fungible digital assets
that analyzes--
(1) the nature, size, role, purpose, and use of non-
fungible digital assets;
(2) the similarities and differences between non-fungible
digital assets and other digital assets, including digital
commodities and payment stablecoins, and how the markets for
those digital assets intersect with each other;
(3) how non-fungible digital assets are minted by issuers
and subsequently administered to purchasers;
(4) how non-fungible digital assets are stored after being
purchased by a consumer;
(5) the interoperability of non-fungible digital assets
between different blockchain systems;
(6) the scalability of different non-fungible digital asset
marketplaces;
(7) the benefits of non-fungible digital assets, including
verifiable digital ownership;
(8) the risks of non-fungible tokens, including--
(A) intellectual property rights;
(B) cybersecurity risks; and
(C) market risks;
(9) whether and how non-fungible digital assets have
integrated with traditional marketplaces, including those for
music, real estate, gaming, events, and travel;
(10) whether non-fungible tokens can be used to facilitate
commerce or other activities through the representation of
documents, identification, contracts, licenses, and other
commercial, government, or personal records;
(11) any potential risks to traditional markets from such
integration; and
(12) the levels and types of illicit activity in non-
fungible digital asset markets.
(b) Report.--Not later than 1 year after the date of the
enactment of this Act, the Comptroller General, shall make
publicly available a report that includes the results of the
study required by subsection (a).

SEC. 607. STUDY ON EXPANDING FINANCIAL LITERACY AMONGST
DIGITAL ASSET HOLDERS.

(a) In General.-- The Commodity Futures Trading Commission
with the Securities and Exchange Commission shall jointly
conduct a study to identify--
(1) the existing level of financial literacy among retail
digital asset holders, including subgroups of investors
identified by the Commodity Futures Trading Commission with
the Securities and Exchange Commission;
(2) methods to improve the timing, content, and format of
financial literacy materials regarding digital assets
provided by the Commodity Futures Trading Commission and the
Securities and Exchange Commission;
(3) methods to improve coordination between the Securities
and Exchange Commission and the Commodity Futures Trading
Commission with other agencies, including the Financial
Literacy and Education Commission as well as nonprofit
organizations and State and local jurisdictions, to better
disseminate financial literacy materials;
(4) the efficacy of current financial literacy efforts with
a focus on rural communities and communities with majority
minority populations;
(5) the most useful and understandable relevant information
that retail digital asset holders need to make informed
financial decisions before engaging with or purchasing a
digital asset or service that is typically sold to retail
investors of digital assets;
(6) the most effective public-private partnerships in
providing financial literacy regarding digital assets to
consumers;
(7) the most relevant metrics to measure successful
improvement of the financial literacy of an individual after
engaging with financial literacy efforts; and
(8) in consultation with the Financial Literacy and
Education Commission, a strategy (including to the extent
practicable, measurable goals and objectives) to increase
financial literacy of investors regarding digital assets.
(b) Report.--Not later than 1 year after the date of the
enactment of this Act, the Commodity Futures Trading
Commission and the Securities and Exchange Commission shall
jointly submit a written report on the study required by
subsection (a) to the Committees on Financial Services and on
Agriculture of the House of Representatives and the
Committees on Banking, Housing, and Urban Affairs and on
Agriculture, Nutrition, and Forestry of the Senate.

SEC. 608. STUDY ON FINANCIAL MARKET INFRASTRUCTURE
IMPROVEMENTS.

(a) In General.--The Commodity Futures Trading Commission
and the Securities and Exchange Commission shall jointly
conduct a study to assess whether additional guidance or
rules are necessary to facilitate the development of
tokenized securities and derivatives products, and to the
extent such guidance or rules would foster the development of
fair and orderly financial markets, be necessary or
appropriate in the public interest, and be consistent with
the protection of investors and customers.
(b) Report.--
(1) Time limit.--Not later than 1 year after the date of
enactment of this Act, the Commodity Futures Trading
Commission and the Securities and Exchange Commission shall
jointly submit to the relevant congressional committees a
report that includes the results of the study required by
subsection (a).
(2) Relevant congressional committees defined.--In this
section, the term ``relevant congressional committees''
means--
(A) the Committees on Financial Services and on Agriculture
of the House of Representatives; and
(B) the Committees on Banking, Housing, and Urban Affairs
and on Agriculture, Nutrition, and Forestry of the Senate.
The Acting CHAIR: No further amendment to the bill, as amended, shall
be in order except those printed in part B of House Report 118-516.
Each such further amendment may be offered only in the order printed in
the report, by a member designated in the report, shall be considered
read, shall be debatable for the time specified in the report, equally
divided and controlled by the proponent and an opponent, shall not be
subject to amendment, and shall not be subject to a demand for division
of the question.

Amendment No. 1 Offered by Mr. Casar

The Acting CHAIR. It is now in order to consider amendment No. 1
printed in part B of House Report 118-516.
Mr. CASAR. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:

Page 68, line 11, strike ``$75,000,000'' and insert
``$5,000,000''.

The Acting CHAIR. Pursuant to House Resolution 1243, the gentleman
from Texas (Mr. Casar) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Texas.
Mr. CASAR. Mr. Chair, I yield myself such time as I may consume.
Mr. Chair, from 2017 to 2022, Americans who invested in the SSP Index
received about a 61 percent return on their investment, but Americans
who invested in one of the top 12 cryptocurrencies that existed during
that 5-year period did not make money. In fact, on average, they lost
about half of their money. Three out of every four bitcoin traders
during that time period also lost money. From FTX to Celsius to
Blockchain ATMs, the industry has repeatedly lost everyday Americans
their money.
Whether you are a crypto booster or a crypto sceptic, we can all
agree based on the facts that crypto investment is a risk.
Since it is a risk, we should want more oversight to protect
Americans. This bill before us today doesn't provide us more
regulation. It doesn't even provide many Americans the same level of
regulation as traditional finance.
Instead, it creates a light-touch regulatory regime that can be
manipulated by bad actors in both crypto and traditional finance,
putting Americans and our 90-year-old securities laws at risk.
My amendment focuses on one key area where everyday people who would
invest in crypto under this bill will, in fact, receive less protection
than Americans invested in traditional finance.
The current flawed bill before us creates a crowdfunding registration
exemption for crypto that is 15 times weaker than the crowdfunding
exemption that exists in traditional finance.
In the existing bill before us, someone could crowdfund up to $75
million from everyday Americans, and those Americans would receive just
the most minimal of protections. We would never allow that in the non-
crypto finance world.
My amendment changes the exemption cap to $5 million, putting that
cap

[[Page H3456]]

in line with other current laws, so at the very least Americans making
investments in crypto can get the same level of protection as
crowdfunding investors in traditional finance.
I hope that whether you are for the underlying bill or against the
underlying bill like me, we can agree that this commonsense amendment
will help protect everyday people, and I urge everyone to support it.
Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I rise in opposition to the amendment.
The Acting CHAIR. The gentleman from North Carolina is recognized for
5 minutes.
Mr. McHENRY. Mr. Chair, I am opposed to this amendment. Today,
digital asset issuers rely on exemptions under the current securities
regime. Each exemption includes its own requirements under traditional
securities law. What we provide in this act is purpose built for
digital assets. What this does today is if you are raising money for a
digital asset offering, the exemption is built for those other types of
securities in the space.
The SEC's disclosure regime is supposed to give investors the
information they need to make informed decisions, but it is not built
for digital assets.
What we do in this act is provide certain disclosures for investors
in digital assets, such as source code, token supply, government
mechanisms, and other aspects unique to crypto. That is what this bill
does.
What the gentleman from Texas is proposing to do is limit that
aperture from $75 million to $5 million of those folks that can invest
in these early-stage innovations. What he is doing is restricting the
opportunity for average, everyday investors to get options like high-
wealth investors get today under securities law.
The original exemption for regulation crowdfunding was something we
put in law with bipartisan support. Maxine Waters was my cosponsor on
the regulation crowdfunding, this very exemption.
I have enhanced this. I put additional requirements here to make sure
there are more disclosures, and we open up the aperture to $75 million
so more folks can participate and so those blockchains can develop.
When you make it $5 million, it makes it impossible for you to actually
scale up, especially with these inflationary times that our people are
facing.
What I would urge is the House reject this amendment. The gentleman's
arguments against this exemption have nothing to do with the exemption
but have everything to do with opposition to the bill.
Mr. Chair, I urge a ``no'' vote, and I reserve the balance of my
time.
Mr. CASAR. Mr. Chair, I yield 1 minute to the distinguished
gentlewoman from California (Ms. Waters).
Ms. WATERS. Mr. Chair, I thank the gentleman from Texas for
attempting this amendment. As a matter of fact, there have been any
number of Members from this side of the aisle who have been attempting
to amend this bill to try and make it better. While I have great
respect for all of those attempts, if my friends had listened, if they
had accepted, perhaps they could have made this a better bill.
Unfortunately, at this point in time, no, with all the work that this
gentleman has done, Mr. Casar and others, my friends will not accept
any amendments. They are not going to accept his amendment. They don't
think that the bill can be made better, and unfortunately, the bill is
so bad, I don't think it can be made better either.
Mr. McHENRY. Mr. Chair, I am prepared to close, and I reserve the
balance of my time.
Mr. CASAR. Mr. Chair, I am prepared to close, and I yield myself the
balance of my time.
Our securities laws were created after the Great Depression when this
country understood that strong regulation protects Americans and is
necessary for innovation and for our economy to thrive. We cannot
hold cryptocurrency to a lower standard than traditional finance.

My amendment ensures that when it comes to crowdfunding,
cryptocurrency is held to the same standard.
Mr. Chair, I urge all Members to support my amendment, and I yield
back the balance of my time.
Mr. McHENRY. Mr. Chair, may I inquire of the Chair how much time I
have remaining.
The Acting CHAIR. The gentleman from North Carolina has 3 minutes
remaining.
Mr. McHENRY. Mr. Chair, I yield myself the balance of my time. Let me
close with this, Mr. Chairman. We have this push and pull on the
Financial Services Committee. Generally speaking, we have elected
officials that say the American people's hard-earned savings are their
hard-earned savings. Then we have paternalistic amendments like the one
before us today that say: No, you are not smart enough to invest your
own money. We have to put in these safeguards to protect you from
yourself.
Well, I think that goes way too far.
What we have done with securities laws is take average, everyday
investors and disintermediate them from the greater economy so average,
everyday Americans don't get the benefit of economic growth, of Wall
Street doing great, and earnings going up in corporate America. We have
separated it because we have made it harder for average, everyday folks
to invest in companies and have ownership of companies.
What we are trying to do is open that up a little bit from $5 million
of an exemption when you are raising money to $75 million. In the scope
of our economy, in the scope of our capital markets, in the scope of
economic opportunity and innovation, which is a very small aperture we
are opening here. We have done that. We have constructed this provision
with a lot of Democratic input and Republican input, and that is how we
came to the number of $75 million.
It is already a compromise.
What the gentleman offers with this amendment is nothing more than
saying: I am paternalistic, and I am, therefore, going to restrict your
opportunity to invest your money as you see fit.
Reject the amendment. Vote ``no'' on this amendment, and vote ``yes''
on final passage.
Mr. Chair, I yield back the balance of my time.

{time} 1615

The Acting CHAIR. The question is on the amendment offered by the
gentleman from Texas (Mr. Casar).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
Mr. CASAR. Mr. Chair, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Texas will
be postponed.

Amendment No. 2 Offered by Ms. Pettersen

The Acting CHAIR. It is now in order to consider amendment No. 2
printed in part B of House Report 118-516.
Ms. PETTERSEN. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:

In title I, add at the end the following:

SEC. 112. APPLICATION OF THE BANK SECRECY ACT.

(a) In General.--Section 5312 of title 31, United States
Code, is amended--
(1) in subsection (a)(2)(G), by striking ``or dealer'' and
inserting ``, dealer, digital asset broker, digital asset
dealer, or digital asset trading system''; and
(2) in subsection (c)(1)(A)--
(A) by inserting ``digital commodity broker, digital
commodity dealer,'' after ``futures commission merchant,'';
and
(B) by inserting before the period the following: ``and any
digital commodity exchange registered, or required to
register, under the Commodity Exchange Act which permits
direct customer access''.
(b) GAO Study.--
(1) In general.--The Comptroller General of the United
States, in consultation with the Secretary of the Treasury,
shall conduct a study to--
(A) assess the risks posed by centralized intermediaries
that are primarily located in foreign jurisdictions that
provide services to U.S. persons without regulatory
requirements that are substantially similar to the
requirements of the Bank Secrecy Act; and
(B) provide any regulatory or legislative recommendations
to address these risks under subparagraph (A).
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General shall issue a
report to Congress containing all findings and determinations
made in carrying out the study required under paragraph (1).
Page 105, strike lines 1 through 4.

[[Page H3457]]

Page 121, strike line 7 and all that follows through ``Bank
Secrecy Act.'' on line 10.
Page 183, strike lines 14 through 17.
Page 215, strike line 6 and all that follows through ``Bank
Secrecy Act.'' on line 9.
The Acting CHAIR. Pursuant to House Resolution 1243, the gentlewoman
from Colorado (Ms. Pettersen) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from Colorado.
Ms. PETTERSEN. Mr. Chair, I yield myself such time as I may consume.
Mr. Chair, more than 20 percent of Americans have owned or traded
cryptocurrency.
Despite this, the U.S. still lacks a clear regulatory structure for
digital assets which is hurting American competitiveness and
incentivizing some companies, unfortunately, to move overseas.
While there may be disagreement about how to best establish the
appropriate market regulatory structure, there is broad bipartisan
agreement for preventing criminals from using cryptocurrencies for
illicit purposes, such as money laundering, terrorist financing, and
sanctioned evasion.
My amendment would provide clarity and conformity to how the Bank
Secrecy Act and regulations safeguarding our financial system from
criminals are applied to digital assets.
The base bill already calls for the Bank Secrecy Act to apply to
digital assets; however, by amending the BSA directly and explicitly
expanding the definition of financial institution in the BSA to cover
digital asset entities, we are providing certainty to the regulators
and the Department of Treasury in their authorities to protect our
financial system.
Additionally, the amendment would also require a study to assess the
risk posed by centralized intermediaries based in jurisdictions that
lack robust anti-money laundering enforcement.
While in most cases, American digital asset companies are already
complying with the applicable requirements under the Bank Secrecy Act,
we also have to be thinking about the threat of foreign companies with
U.S. touchpoints that are not complying with equivalent controls or
reporting standards.
I thank Chairman McHenry and Representative Hill for working with me
on this issue, and their commitment to strengthening the anti-money
laundering provisions in this bill.
This amendment, combined with the underlying bill, will help provide
more oversight into the digital asset market and support regulators'
work to protect consumers and investors. While there is more work to be
done to ensure the integrity of our digital assets market, this
amendment is an important step forward and I urge my colleagues to
support the adoption of the amendment and the underlying bill.
Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I ask unanimous consent to claim the time in
opposition, although I am not opposed to it.
The Acting CHAIR. Is there objection to the request of the gentleman?
There was no objection.
The gentleman is recognized for 5 minutes.
Mr. McHENRY. Mr. Chair, I am prepared to accept this amendment.
I think it is important that as we establish a new comprehensive
regulatory framework for the digital asset markets, we also have to
ensure that we have a consistent application of the Bank Secrecy Act
and anti-money laundering provisions in existing law. These
requirements on the digital asset intermediaries and exchanges are
necessary so that bad actors don't exploit these markets for nefarious
purposes.
Mr. Chair, I thank the gentlewoman from Colorado for her work on this
amendment. She has been focused on AML/BSA-related issues in the build
up to us writing FIT21 during the markup process in the Financial
Services Committee and then the process through the Rules Committee. I
appreciate her sincere engagement on this matter and for coming up with
a very good amendment.
Mr. Chair, I urge support of this amendment, and I reserve the
balance of my time.
Ms. PETTERSEN. Mr. Chair, I yield myself the balance of my time.
Mr. Chair, I, again, thank the chairman from North Carolina for
working with me and others to bring a bipartisan bill with broad
support to the House. This has been years in the making, and I
congratulate him for getting it to this point. I appreciate his
willingness to work with me. I also thank my team for helping me
address an issue that I had concerns about.
Mr. Chair, I ask for the support of my colleagues, and I yield back
the balance of my time.
Mr. McHENRY. Mr. Chair, I yield such time as he may consume to the
gentleman from Arkansas (Mr. Hill), the chair of the Digital Assets,
Financial Technology and Inclusion Subcommittee on the Financial
Services Committee.
Mr. HILL. Mr. Chair, I thank Chairman McHenry for the time.
Mr. Chair, I congratulate the gentlewoman from Colorado on this very
effective amendment because she shares that passion that we have all
had through this entire process, which is to recognize that we need to
have vigorous anti-money laundering/Bank Secrecy Act and Know Your
Customer protections around digital finance just like we do in the
analog financial services system. Her bill will strengthen that.
I was just reviewing the Treasury Department's 2024 national security
for combating terrorists and other illicit financing, and it brings to
mind what a better regime it is to have blockchain.
Because a blockchain, Mr. Chair, has the identity connected with the
transaction. It leaves an indelible mark cryptographically of those
transactions that makes illicit finance easier to identify, not less.
The Treasury Department points out that the top abusers, the top
concern about illicit finance, are misuse of cash, including bulk cash,
misuse of financial products and services like money orders; easy
formation and limited information required to create a legal entity. An
example is the use of casinos.
That is what the Treasury Department says are the toughest, most-
challenging aspects of terror finance, and that is why this study will
help us make sure that using blockchain is a more effective way to
counter illicit finance in the world.
Mr. Chair, I thank the gentlewoman from Colorado for her support and
for being such a constructive source of dynamic support for crafting
FIT21.
Mr. McHENRY. Mr. Chair, again, I will echo what Congressman Hill just
stated for the Record.
The gentlewoman from Colorado has been a sterling advocate for
enhanced BSA-AML protections, ensuring that we work against illicit
finance. I thank her for the efforts, and I am willing to accept the
amendment and urge its adoption.
Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentlewoman from Colorado (Ms. Pettersen).
The amendment was agreed to.

Amendment No. 3 Offered by Mr. Norman

The Acting CHAIR. It is now in order to consider amendment No. 3
printed in part B of House Report 118-516.
Mr. NORMAN. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:

At the end of title IV, add the following:

SEC. 414. STUDIES ON FOREIGN ADVERSARY PARTICIPATION.

(a) In General.--The Secretary of the Treasury, in
consultation with the Commodity Futures Trading Commission
and the Securities and Exchange Commission, shall, not later
than 1 year after date of the enactment of this section,
conduct a study and submit a report to the relevant
congressional committees that--
(1) identifies any digital asset registrants which are
owned by governments of foreign adversaries;
(2) determines whether any governments of foreign
adversaries are collecting personal data or trading data
about United States persons in the digital asset markets; and
(3) evaluates whether any proprietary intellectual property
of digital asset registrants is being misused or stolen by
any governments of foreign adversaries.
(b) GAO Study and Report.--
(1) In general.--The Comptroller General shall, not later
than 1 year after date of the enactment of this section,
conduct a study and submit a report to the relevant
congressional committees that--
(A) identifies any digital asset registrants which are
owned by governments of foreign adversaries;
(B) determines whether any governments of foreign
adversaries are collecting personal

[[Page H3458]]

data or trading data about United States persons in the
digital asset markets; and
(C) evaluates whether any proprietary intellectual property
of digital asset registrants is being misused or stolen by
any governments of foreign adversaries.
(c) Definitions.--In this section:
(1) Digital asset registrant.--The term ``digital asset
registrant'' means any person required to register as a
digital asset trading system, digital asset broker, digital
asset dealer, digital commodity exchange, digital commodity
broker, or digital commodity dealer under this Act.
(2) Foreign adversaries.--The term ``foreign adversaries''
means the foreign governments and foreign non-government
persons determined by the Secretary of Commerce to be foreign
adversaries under section 7.4(a) of title 15, Code of Federal
Regulations.
(3) Relevant congressional committees.--The term ``relevant
congressional committees'' means--
(A) the Committees on Financial Services and Agriculture of
the House of Representatives; and
(B) the Committees on Banking, Housing, and Urban Affairs
and Agriculture, Nutrition, and Forestry of the Senate.
The Acting CHAIR. Pursuant to House Resolution 1243, the gentleman
from South Carolina (Mr. Norman) and a Member opposed each will control
5 minutes.
The Chair recognizes the gentleman from South Carolina.
Mr. NORMAN. Mr. Chair, my amendment is pretty simple. It requires the
Treasury Secretary in consultation with the CFTC and the SEC to
complete a study and submit a report to Congress that identifies any
digital asset registrants that are owned by governments of foreign
adversaries.
The report will determine whether foreign adversary governments are
collecting or trading personal data about American citizens in the
digital asset markets and evaluate whether foreign adversary
governments are misusing or stealing any proprietary intellectual
property of digital asset registrants.
The GAO is required to complete a study and submit a report to
Congress on the very same issues.
This amendment would promote transparency regarding how our Nation's
strategic enemies may be exploiting the digital asset marketplace to
invade the privacy of Americans and steal valuable intellectual
property.
In June 2023, the Financial Services hearings that focused on the
very bill that we are considering today, Aaron Kaplan, the CEO of,
Prometheum, the first and only SEC/FINRA approved Special Purpose
Broker-Dealer for digital assets, stated that Prometheum and its CCP
partners entered into a joint agreement in December 2018 to develop a
blockchain trading system where the Chinese partner took a 20 percent
stake in Prometheum.
In case anyone has any doubts about the CCP ties, Prometheum's
Chinese partner company was founded in 1969 by a former senior CCP
official. In 2021, the party's central committee posthumously named him
a ``National Excellent Communist Party member.''
In July 2023, several of my colleagues and I sent a letter to the SEC
and the DOJ expressing our concerns with inconsistencies in
Prometheum's public filings and the CCP's ownership of an entity that
had the blessing of the SEC and FINRA to operate in the United States.
I followed up on this letter in a September 2023 hearing with the SEC
Chair Gary Gensler, where he dodged my question and did not take my
concerns of the 20 percent CCP ownership of Prometheum seriously.
The fact of the matter is that because Chinese companies are
generally required by Chinese law to share data with the Chinese
Government, these companies present substantial risks to United States
individual privacy and our national security. Chinese-owned broker-
dealers like Prometheum, Webull, and MooMoo operate as registered
entities here in the United States, and the Biden administration and
Chair Gensler do not seem to care, yet they attack American businesses
operating in good faith with no regulatory clarity.
This is simply how the CCP and other foreign adversaries operate.
They infiltrate our markets while the Biden administration looks the
other way and punishes American companies who are only trying to
operate in the United States but face endless regulation by enforcement
of the Biden administration.
We need to pass FIT21 into law because the SEC's current regulation
by enforcement is putting the United States at a disadvantage and
allowing foreign adversaries to gain an advantage in our U.S. crypto
markets, all while Gary Gensler attacks American public companies who
have tried to work with the SEC and come in and register.
I urge my colleagues to vote in favor of this amendment to protect
Americans from having their personal data shared with the CCP and other
foreign adversaries.
Mr. Chair, I reserve the balance of my time.
Ms. WATERS. Mr. Chair, I claim the time in opposition to the
amendment, but I am not opposed to it.
The Acting CHAIR. Without objection, the gentlewoman from California
is recognized for 5 minutes.
There was no objection.
Ms. WATERS. Mr. Chair, while I do not oppose this amendment, I will
emphasize that the broad deregulatory nature of the not fit for purpose
act is such that it would severely weaken our capital markets and make
us more vulnerable to bad actors, both domestic and foreign.
This amendment and the underlying bill do not protect consumers and
investors. This amendment only requires a study on whether or not
foreign adversaries are operating as digital asset registrants under
the bill and collecting data on the U.S. consumer or investors.
We should not just be studying this issue; we should be legislating
strong data privacy protections that apply all across the board.
Moreover, if TikTok was the inspiration for this bill, I will note
that TikTok is not directly owned by the Chinese Government. The
concern was that it was vulnerable to being unduly influenced by the
Chinese Communist Party. If a China-based company was operating as a
digital asset registrant under this bill, it would not fall within this
study unless it was directly owned by the Chinese Communist Party. It
would be easy for our adversaries to simply stand up proxy companies
that appear to have no direct affiliation with them to evade the
scrutiny of the study in the bill.
While I plan to support this amendment, I don't think it provides any
meaningful safeguards on consumer privacy and it certainly does nothing
to fix the underlying problems of the not fit for purpose act.
Mr. Chair, I reserve the balance of my time.

{time} 1630

Mr. NORMAN. Mr. Speaker, may I inquire as to how much time I have
remaining.
The Acting CHAIR. The gentleman from South Carolina has 45 seconds
remaining.
Mr. NORMAN. Mr. Chair, I yield the balance of my time to the
gentleman from Arkansas (Mr. Hill).
Mr. HILL. Mr. Chair, I thank the gentleman from South Carolina for
yielding to me to speak in support of this amendment. It allows me to
illustrate two things.
First is that Prometheum, while it was approved as a special purpose
broker-dealer for digital assets, has not accomplished anything. It has
no business, yet it also has this partnership with the CCP, so there is
an illustration that FIT21 would allow us to have the guidance on how
to register a broker-dealer.
Secondly, I fully support Mr. Norman and his concerns about the
influence of foreign adversaries on people registered in the United
States. It is a clear issue, and we have an investigation going on, on
why the SEC has not pursued this itself.
I rise in support of Mr. Norman's effort. It is a good amendment.
Let's add it to the bill and pass FIT21.
Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.
The bill's supporters have claimed that this bill is necessary to
provide legal clarity as to when a digital asset is considered a
security and when it is considered a commodity, but this bill is
anything but clear. It is 253 pages of highly convoluted and poorly
defined language.
At the Rules Committee hearing yesterday, the Republicans testifying
on the panel in defense of the bill could not answer a simple question
from a fellow Republican as to whether dogecoin would qualify as a
security or a commodity under this bill.

[[Page H3459]]

They pointed to their five-part decentralization test in the bill,
which is, again, anything but clear. The current test for determining
whether something is a security is called the Howey Test. It has stood
the test of time, with guidance from the SEC clarifying its
application, in addition to decades of case law expounding on how it
applies to a variety of different assets. Even the courts have agreed
with SEC's interpretation of the Howey Test, classifying digital assets
as securities in a strikingly consistent manner.
The five-part decentralization test in this bill has not been tested,
and it would create a slew of new litigation trying to decipher how it
applies. Instead of a study, we should remember the fact that Members
of Congress and legal experts struggling to agree on basic facts about
what this bill would do foreshadows the mountains of litigation that
this bill would result in to figure that out.
This bill provides the opposite of legal clarity, as the bill
supporters claim. Instead, it provides several more convoluted and
untested definitions to replace the time-tested Howey Test in place
today.
The only thing clear about this 253-page bill is that it results in
the substantial deregulation of crypto, just as the crypto industry has
asked for.
Mr. Chair, I yield to the gentleman from California (Mr. Sherman).
Mr. SHERMAN. Mr. Chair, this amendment gives the illusion that it
prevents the bill from being useful to our foreign adversaries when, in
fact, we see Iran using crypto to avoid sanctions, North Korea
profiting from crypto, and Hamas raising huge amounts of money and
being able to sneak around our efforts by using crypto. Finally, we see
the crypto advocates viewing this bill as their ticket to move crypto
into a competitor with the U.S. dollar. With tomorrow's bill, they try
to hobble the dollar by saying it can't be digital and we can't have a
better payment system involving the dollar, and that is their system
for having crypto outcompete the dollar.
The administration opposes this bill. Even if you looked at it a few
weeks ago, it has gotten much, much worse. I want to reemphasize that
they added a new title that allows crypto to be completely unregulated
and would allow for nonregulation of our stocks and bonds, so even if
you liked this bill when you saw it 3 weeks ago, vote ``no.''
Ms. WATERS. Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from South Carolina (Mr. Norman).
The question was taken; and the Acting Chair announced that the ayes
appeared to have it.
Ms. WATERS. Mr. Chair, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from South
Carolina will be postponed.

Amendment No. 4 Offered by Mr. Perry

The Acting CHAIR. It is now in order to consider amendment No. 4
printed in part B of House Report 118-516.
Mr. PERRY. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:

At the end of title V, add the following:

SEC. __. SENSE OF THE CONGRESS.

It is the sense of the Congress that nothing in this Act or
any amendment made by this Act should be interpreted to
authorize any entity to regulate any commodity, other than a
digital commodity, on any spot market.

The Acting CHAIR. Pursuant to House Resolution 1243, the gentleman
from Pennsylvania (Mr. Perry) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Pennsylvania.
Mr. PERRY. Mr. Chairman, I offer a simple but important amendment.
While the underlying legislation allows the Commodity Futures Trading
Commission the authority to regulate digital asset spot markets,
nothing in the bill should be construed as giving the CFTC power beyond
digital assets.
We all have seen good intentions around here, and nothing is punished
like good intentions, so let's make clear what the strike zone is for
everybody. We are trying to define that strike zone.
This amendment adds a sense of Congress that nothing in this act or
any amendment made by this act should be interpreted to authorize any
entity to regulate any commodity other than a digital commodity on any
spot market. That is it. That is the whole thing.
Again, this amendment simply aims to combat mission creep, if you
want to call it that, somewhere outside the strike zone and makes clear
that Congress' intent is to only address digital asset spot markets in
this bill and no more. With this amendment, the courts won't have any
questions, and Mr. Gensler can't say, ``Well, I am not sure they did
this,'' or ``They surely must have meant that.''
No. We cannot allow these agencies to take more and more power in the
absence of express congressional approval. We have already seen Mr.
Gensler aggressively pursue litigation against the crypto industry,
people trying to do it the right way.
While trying to rein him in, we ought to ensure the CFTC knows
exactly what they can and cannot do because he is not going to be there
forever. There is going to be some next person that comes along and
says that Congress wasn't really sure.
We are sure, and that is what this amendment does.
Madam Chair, I reserve the balance of my time.
Ms. WATERS. Madam Chair, I claim the time in opposition.
The Acting CHAIR (Mrs. Bice). The gentlewoman from California is
recognized for 5 minutes.
Ms. WATERS. Madam Chair, under H.R. 4763, crypto that is deemed to be
a digital commodity would come under the CFTC's purview, which would
include a new explicit authority for the CFTC to regulate crypto spot
markets. However, this amendment would ensure that this new authority
for the CFTC to regulate crypto spot markets does not include
traditional commodity spot markets.
It is already bad enough that this bill would result in mass
deregulation of crypto and even some traditional securities, too. This
amendment takes the bill to the next level by trying to preemptively
block the CFTC to oversee non-crypto spot markets.
The bill's supporters continue to insist that this bill is only about
crypto, but it has serious implications for traditional securities.
With this amendment, it would now appear to have serious implications
for traditional commodities also.
It is wholly unclear why Republicans, who have placed so much faith
in the CFTC to police the spot markets of digital commodities, think
that this agency is unable to oversee the spot markets of everyday
commodities they currently regulate, like oil, wheat, and livestock.
Excessive speculation in spot markets of tangible commodities is a real
problem that can harm working families' budgets.
For this reason, Democratic CFTC Commissioner Christy Goldsmith
Romero has called on the CFTC to study excessive and harmful
speculations in the commodities markets. Specifically, she has stated:
``The CFTC has an impressive surveillance program and an equally
impressive cadre of commodity markets experts to rely upon as it seeks
to understand these pressures of working families, farmers, and
producers. We should use them more, and more publicly.'' I agree with
her.
Madam Chair, I urge my colleagues to stand up for working families
and farmers by leaving the CFTC's existing authority to protect them
from speculation in the traditional securities market fully intact.
Madam Chair, I urge my colleagues to vote ``no'' on this amendment,
and I reserve the balance of my time.
Mr. PERRY. Madam Chair, I yield 2 minutes to the gentleman from South
Dakota (Mr. Johnson).
Mr. JOHNSON of South Dakota. Madam Chair, I commend the gentleman
from Pennsylvania for his thoughtful and forward-looking amendment.
I think it is important that we set the record straight. This
amendment would not, as some have alleged, strip the CFTC of all of its
spot market regulatory authority. All of the antifraud and
antimanipulation powers that they currently hold would remain in place.

[[Page H3460]]

This sense of Congress simply makes it clear that, within FIT21, it
does not provide the CFTC with grand new authorities over non-digital
asset spot markets.
I think it is important we do that. There are clear and important
differences between the traditional spot markets for commodities. Think
about people buying and selling barrels of oil. That is not something
everyday Americans are doing, but we do have everyday Americans engaged
in the spot market for digital assets.
Also, with regard to digital asset commodities, we also have a number
of intermediaries that would be interacting with these retail
consumers. Some of those intermediaries would certainly hold the cash
of consumers, either pending or after a trade. That is an important
situation that we need to protect for that is not exactly like that in
the traditional commodity markets--different marketplace, different
threats, different set of tools.
As chair of the Commodity Markets, Digital Assets, and Rural
Development Subcommittee, I want to make it clear that I support the
gentleman's amendment. I do not want any part of FIT21 to change the
CFTC's authority over non-digital asset commodities.
Madam Chair, I commend the gentleman for his work, and I urge a
``yes'' vote on the amendment.

Ms. WATERS. Madam Chair, at the Rules Committee hearing, Republicans
revealed their true intentions with this bill. My friend, Mr. Norman,
stated, regarding the investors who were defrauded by FTX:

I blame the investor. I mean, would I get on an airplane
with two wheels missing and one wing? They should have done
their homework.

Representative Austin Scott of Georgia on the Rules Committee doubled
down on this kind of victim blaming, saying that he believed we should
use a buyer-beware approach.
This is entirely offensive to consumers to simply say that they
should have known better than to get defrauded. The very definition of
fraud implies that the consumer could not have been expected to know or
understand some facet of a contract.
I would venture to say that this bill is even worse than just a
buyer-beware approach. This bill creates a facade of regulation that is
designed to make ordinary investors and consumers think they are
protected and that the investments are safe. In reality, this bill
would facilitate and legitimize fraud rather than warning consumers to
beware of the risk.
In addition to blaming millions of defrauded investors, Republicans
continue to move forward with a bill that exempts the same crypto firms
that were unlawfully issuing or facilitating crypto securities, giving
them a get-out-of-jail-free card.
This is what Republicans love to do. They blame consumers and
investors who have been defrauded while also advancing bills to protect
those same firms that are ripping off consumers and investors.
Madam Chair, I reserve the balance of my time.
Mr. PERRY. Madam Chair, I yield the balance of my time of my time to
the gentleman from Arkansas (Mr. Hill).
Mr. HILL. Madam Chair, I thank the gentleman from Pennsylvania for
his constructive amendment. I think it is the absolute right approach.
I want to associate myself with the comments from the chairman of the
Commodity Markets, Digital Assets, and Rural Development Subcommittee
from the House Ag Committee, Mr. Johnson, on that.
Madam Chair, FIT21 does exactly the opposite of what has been argued
by the minority today. It gives a clear regulatory framework. It
prevents fraud. It does require registration, custody, capital
requirements. It gives clarity for the first time in American history
to how we do securities and commodity oversight for digital assets.
The minority has also charged time and time again that somehow a
great securities loophole is being opened in this bill.

{time} 1645

It is just not true. It is not a factual statement. The term
``investment contract'' is a fungible, digital representation. It is
not all these other items.
In fact, the bill specifically says the term ``digital asset'' does
not include notes, stock, Treasury stock, securities, security-based
swaps, and a whole list. It does not open the loophole that the ranking
member of the Financial Services Committee charges.
I urge a ``yes'' vote on the bill and a ``yes'' vote for Mr. Perry's
amendment. Let's have regulatory credibility and clarity for a
competitive United States in the 21st century.
Ms. WATERS. Madam Chair, I yield the balance of my time to the
gentleman from California (Mr. Sherman).
Mr. SHERMAN. Mr. Chairman, this amendment illustrates the problem. A
commodity other than a digital commodity, but any commodity can become
a digital commodity, or you can have a contract or a derivative tied to
the physical commodity that now becomes a digital coin.
We are told that the bill does not allow stocks and bonds to be
digital assets, but it does allow them to be defined as investment
contracts. If you get defined as an investment contract, you are
without regulation.
As to the underlying bill, keep in mind, the administration opposes
it, and three-quarters of Democrats voted against it before it got much
worse.
The bill got much worse a few weeks ago. If you studied it before
then, and I know the bill has been out there since July of last year,
your analysis won't show you how this bill now allows digital crypto to
go without regulation and opens the door to taking our traditional
stocks and bonds out from the SEC.
Vote ``no'' on the amendment, but especially vote ``no'' on the bill.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Pennsylvania (Mr. Perry).
The question was taken; and the Acting Chair announced that the ayes
appeared to have it.
Ms. WATERS. Madam Chair, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Pennsylvania
will be postponed.

Announcement by the Acting Chair

The Acting CHAIR. Pursuant to clause 6 of rule XVIII, proceedings
will now resume on those amendments printed in part B of House Report
118-516 on which further proceedings were postponed, in the following
order:
Amendment No. 1 by Mr. Casar of Texas.
Amendment No. 3 by Mr. Norman of South Carolina.
Amendment No. 4 by Mr. Perry of Pennsylvania.
The Chair will reduce to 2 minutes the minimum time for any
electronic vote after the first vote in this series.

Amendment No. 1 Offered by Mr. Casar

The Acting CHAIR. The unfinished business is the demand for a
recorded vote on amendment No. 1, printed in B of House Report 118-516,
offered by the gentleman from Texas (Mr. Casar), on which further
proceedings were postponed and on which the noes prevailed by voice
vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.

Recorded Vote

The Acting CHAIR. A recorded vote has been demanded.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 204,
noes 209, not voting 23, as follows:

[Roll No. 223]

AYES--204

Adams
Aguilar
Allred
Amo
Auchincloss
Balint
Barragan
Beatty
Bera
Beyer
Bishop (GA)
Blunt Rochester
Bonamici
Bowman
Boyle (PA)
Brown
Brownley
Budzinski
Bush
Caraveo
Carbajal
Cardenas
Carson
Carter (LA)
Cartwright
Casar
Case
Casten
Castor (FL)
Castro (TX)
Cherfilus-McCormick
Chu
Clark (MA)
Clarke (NY)
Cleaver
Clyburn
Cohen
Connolly
Correa
Courtney
Craig
Crockett
Crow
Cuellar
Davids (KS)
Davis (IL)
Davis (NC)
Dean (PA)
DeGette
DeLauro
DelBene
Deluzio
DeSaulnier
Dingell
Doggett
Escobar
Eshoo
Espaillat
Fletcher
Foster
Foushee
Frankel, Lois
Frost
Gallego
Garamendi
Garcia (IL)
Garcia (TX)
Garcia, Robert
Golden (ME)
Goldman (NY)
Gomez
Gonzalez, Vicente
Gottheimer
Green, Al (TX)
Harder (CA)
Hayes

[[Page H3461]]

Himes
Horsford
Houlahan
Hoyer
Hoyle (OR)
Huffman
Ivey
Jackson (IL)
Jackson (NC)
Jacobs
Jayapal
Jeffries
Johnson (GA)
Kamlager-Dove
Kaptur
Keating
Kelly (IL)
Kennedy
Khanna
Kildee
Kilmer
Kim (NJ)
Krishnamoorthi
Kuster
Larsen (WA)
Larson (CT)
Lee (CA)
Lee (NV)
Lee (PA)
Leger Fernandez
Levin
Lieu
Lofgren
Lynch
Manning
Matsui
McBath
McClellan
McCollum
McGarvey
McGovern
Meeks
Menendez
Meng
Mfume
Morelle
Moskowitz
Moulton
Mrvan
Mullin
Nadler
Napolitano
Neal
Neguse
Nickel
Norcross
Norton
Ocasio-Cortez
Omar
Pallone
Panetta
Pappas
Pascrell
Pelosi
Peltola
Perez
Peters
Pettersen
Phillips
Pingree
Plaskett
Pocan
Porter
Pressley
Quigley
Ramirez
Raskin
Ross
Ruiz
Ruppersberger
Ryan
Salinas
Sanchez
Sarbanes
Scanlon
Schakowsky
Schiff
Schneider
Scholten
Schrier
Scott (VA)
Scott, David
Sewell
Sherman
Sherrill
Slotkin
Smith (WA)
Sorensen
Soto
Spanberger
Stanton
Stevens
Strickland
Suozzi
Swalwell
Sykes
Takano
Thanedar
Thompson (CA)
Thompson (MS)
Titus
Tlaib
Tokuda
Tonko
Torres (CA)
Torres (NY)
Trahan
Trone
Underwood
Vargas
Vasquez
Veasey
Wasserman Schultz
Waters
Watson Coleman
Wexton
Wild
Williams (GA)

NOES--209

Aderholt
Alford
Allen
Amodei
Armstrong
Arrington
Babin
Bacon
Baird
Balderson
Banks
Barr
Bean (FL)
Bentz
Bergman
Bice
Biggs
Bilirakis
Bishop (NC)
Boebert
Bost
Brecheen
Buchanan
Bucshon
Burchett
Burgess
Burlison
Calvert
Cammack
Carey
Carl
Carter (GA)
Carter (TX)
Chavez-DeRemer
Ciscomani
Cline
Cloud
Clyde
Cole
Collins
Comer
Crane
Crawford
Crenshaw
Curtis
D'Esposito
De La Cruz
DesJarlais
Diaz-Balart
Donalds
Duarte
Duncan
Dunn (FL)
Edwards
Ellzey
Emmer
Estes
Ezell
Fallon
Feenstra
Ferguson
Finstad
Fischbach
Fitzgerald
Fitzpatrick
Fleischmann
Flood
Foxx
Franklin, Scott
Fry
Fulcher
Gaetz
Garbarino
Garcia, Mike
Gimenez
Gonzales, Tony
Good (VA)
Gooden (TX)
Gosar
Granger
Graves (LA)
Graves (MO)
Green (TN)
Greene (GA)
Griffith
Grothman
Guest
Guthrie
Hageman
Harris
Harshbarger
Hern
Higgins (LA)
Hill
Hinson
Houchin
Hudson
Huizenga
Issa
Jackson (TX)
James
Johnson (LA)
Johnson (SD)
Jordan
Joyce (OH)
Joyce (PA)
Kean (NJ)
Kelly (MS)
Kelly (PA)
Kiggans (VA)
Kiley
Kim (CA)
Kustoff
LaHood
LaLota
Lamborn
Langworthy
Latta
LaTurner
Lawler
Lee (FL)
Lesko
Letlow
Lucas
Luetkemeyer
Luna
Luttrell
Mace
Malliotakis
Maloy
Mann
Mast
McCaul
McClain
McClintock
McCormick
McHenry
Meuser
Miller (IL)
Miller (OH)
Miller (WV)
Miller-Meeks
Mills
Molinaro
Moolenaar
Mooney
Moore (AL)
Moore (UT)
Moran
Moylan
Nehls
Newhouse
Norman
Obernolte
Ogles
Owens
Palmer
Pence
Perry
Pfluger
Posey
Reschenthaler
Rodgers (WA)
Rogers (AL)
Rogers (KY)
Rose
Rosendale
Rouzer
Roy
Rutherford
Salazar
Schweikert
Scott, Austin
Self
Sessions
Simpson
Smith (MO)
Smith (NE)
Smith (NJ)
Smucker
Stauber
Steel
Stefanik
Steil
Steube
Strong
Tenney
Thompson (PA)
Tiffany
Timmons
Turner
Valadao
Van Drew
Van Duyne
Van Orden
Wagner
Walberg
Waltz
Weber (TX)
Webster (FL)
Wenstrup
Westerman
Williams (NY)
Williams (TX)
Wilson (SC)
Wittman
Womack
Yakym
Zinke

NOT VOTING--23

Blumenauer
Costa
Davidson
Evans
Gonzalez-Colon
Grijalva
Hunt
Jackson Lee
LaMalfa
Landsman
Loudermilk
Magaziner
Massie
Moore (WI)
Murphy
Nunn (IA)
Radewagen
Sablan
Scalise
Spartz
Stansbury
Velazquez
Wilson (FL)

{time} 1721

Messrs. ZINKE, WILLIAMS of Texas, ROGERS of Kentucky, BUCSHON, GRAVES
of Missouri, Ms. VAN DUYNE, Messrs. OBERNOLTE, DUNN of Florida, ROSE,
and Ms. GREENE of Georgia changed their vote from ``aye'' to ``no.''
Mrs. WATSON COLEMAN, Ms. TLAIB, and Mr. CUELLAR changed their vote
from ``no'' to ``aye.''
Ms. GRANGER changed her vote from ``present'' to ``no.''
So the amendment was rejected.
The result of the vote was announced as above recorded.

Amendment No. 3 Offered by Mr. Norman

The Acting CHAIR. The unfinished business is the demand for a
recorded vote on amendment No. 3, printed in part B of House Report
118-516, offered by the gentleman from South Carolina (Mr. Norman), on
which further proceedings were postponed and on which the ayes
prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.

Recorded Vote

The Acting CHAIR. A recorded vote has been demanded.
A recorded vote was ordered.
The Acting CHAIR. This will be a 2-minute vote.
The vote was taken by electronic device, and there were--ayes 411,
noes 0, not voting 25, as follows:

[Roll No. 224]

AYES--411

Adams
Aderholt
Aguilar
Alford
Allen
Allred
Amo
Amodei
Armstrong
Arrington
Auchincloss
Babin
Bacon
Baird
Balderson
Balint
Banks
Barr
Barragan
Bean (FL)
Beatty
Bentz
Bera
Bergman
Beyer
Bice
Biggs
Bilirakis
Bishop (GA)
Bishop (NC)
Blunt Rochester
Boebert
Bonamici
Bost
Bowman
Boyle (PA)
Brecheen
Brown
Brownley
Buchanan
Bucshon
Budzinski
Burchett
Burgess
Burlison
Bush
Cammack
Caraveo
Carbajal
Cardenas
Carey
Carson
Carter (GA)
Carter (LA)
Carter (TX)
Cartwright
Casar
Case
Casten
Castor (FL)
Castro (TX)
Chavez-DeRemer
Cherfilus-McCormick
Chu
Ciscomani
Clark (MA)
Clarke (NY)
Cleaver
Cline
Cloud
Clyburn
Clyde
Cohen
Cole
Collins
Comer
Connolly
Correa
Courtney
Crane
Crawford
Crenshaw
Crockett
Crow
Cuellar
Curtis
D'Esposito
Davids (KS)
Davis (IL)
Davis (NC)
De La Cruz
Dean (PA)
DeGette
DeLauro
DelBene
Deluzio
DeSaulnier
DesJarlais
Diaz-Balart
Dingell
Doggett
Donalds
Duarte
Duncan
Dunn (FL)
Edwards
Ellzey
Emmer
Escobar
Eshoo
Espaillat
Estes
Ezell
Fallon
Feenstra
Ferguson
Finstad
Fischbach
Fitzgerald
Fitzpatrick
Fleischmann
Fletcher
Flood
Foster
Foushee
Foxx
Frankel, Lois
Franklin, Scott
Frost
Fry
Fulcher
Gaetz
Garamendi
Garbarino
Garcia (IL)
Garcia (TX)
Garcia, Mike
Garcia, Robert
Gimenez
Golden (ME)
Goldman (NY)
Gomez
Gonzales, Tony
Gonzalez, Vicente
Good (VA)
Gooden (TX)
Gosar
Gottheimer
Granger
Graves (LA)
Graves (MO)
Green (TN)
Green, Al (TX)
Greene (GA)
Griffith
Grothman
Guest
Guthrie
Hageman
Harder (CA)
Harris
Harshbarger
Hayes
Hern
Higgins (LA)
Hill
Himes
Hinson
Horsford
Houchin
Houlahan
Hoyer
Hoyle (OR)
Hudson
Huffman
Huizenga
Issa
Ivey
Jackson (IL)
Jackson (NC)
Jackson (TX)
Jacobs
James
Jayapal
Jeffries
Johnson (GA)
Johnson (LA)
Johnson (SD)
Jordan
Joyce (OH)
Joyce (PA)
Kamlager-Dove
Kaptur
Kean (NJ)
Keating
Kelly (IL)
Kelly (MS)
Kelly (PA)
Kennedy
Khanna
Kiggans (VA)
Kildee
Kiley
Kilmer
Kim (CA)
Kim (NJ)
Krishnamoorthi
Kuster
Kustoff
LaHood
LaLota
LaMalfa
Lamborn
Langworthy
Larsen (WA)
Larson (CT)
Latta
LaTurner
Lawler
Lee (CA)
Lee (FL)
Lee (NV)
Lee (PA)
Leger Fernandez
Lesko
Letlow
Levin
Lieu
Lofgren
Lucas
Luetkemeyer
Luna
Luttrell
Lynch
Mace
Malliotakis
Maloy
Mann
Manning
Mast
Matsui
McBath
McCaul
McClain
McClellan
McClintock
McCollum
McCormick
McGarvey
McGovern
McHenry
Meeks
Menendez
Meng
Meuser
Mfume
Miller (IL)
Miller (OH)
Miller (WV)
Miller-Meeks
Mills
Molinaro
Moolenaar
Mooney
Moore (AL)
Moore (UT)
Moran
Morelle
Moskowitz
Moulton
Moylan
Mrvan
Mullin
Nadler
Napolitano
Neal
Neguse
Nehls
Newhouse
Nickel
Norcross
Norman
Norton
Obernolte
Ocasio-Cortez
Ogles
Omar
Owens
Pallone
Palmer
Panetta
Pappas
Pascrell
Pelosi
Peltola
Pence
Perez
Perry
Peters
Pettersen
Pfluger
Phillips
Pingree
Plaskett
Pocan
Porter
Posey
Pressley
Quigley
Ramirez
Raskin
Reschenthaler
Rodgers (WA)
Rogers (AL)
Rogers (KY)
Rose
Rosendale
Ross
Rouzer
Roy
Ruiz
Ruppersberger
Rutherford
Ryan
Salazar
Salinas
Sanchez
Sarbanes
Scanlon
Schakowsky
Schiff
Schneider
Scholten
Schrier
Schweikert
Scott (VA)
Scott, Austin
Scott, David
Self
Sessions
Sewell
Sherman
Sherrill
Simpson
Slotkin
Smith (MO)
Smith (NJ)
Smith (WA)
Smucker
Sorensen
Soto
Spanberger

[[Page H3462]]

Spartz
Stanton
Stauber
Steel
Stefanik
Steil
Steube
Stevens
Strickland
Strong
Suozzi
Swalwell
Sykes
Takano
Tenney
Thanedar
Thompson (CA)
Thompson (MS)
Thompson (PA)
Tiffany
Timmons
Titus
Tlaib
Tokuda
Tonko
Torres (CA)
Torres (NY)
Trahan
Trone
Turner
Underwood
Valadao
Van Drew
Van Duyne
Van Orden
Vargas
Vasquez
Veasey
Wagner
Walberg
Waltz
Wasserman Schultz
Waters
Watson Coleman
Weber (TX)
Webster (FL)
Wenstrup
Westerman
Wexton
Wild
Williams (GA)
Williams (NY)
Williams (TX)
Wilson (FL)
Wilson (SC)
Wittman
Womack
Yakym
Zinke

NOT VOTING--25

Blumenauer
Calvert
Carl
Costa
Craig
Davidson
Evans
Gallego
Gonzalez-Colon
Grijalva
Hunt
Jackson Lee
Landsman
Loudermilk
Magaziner
Massie
Moore (WI)
Murphy
Nunn (IA)
Radewagen
Sablan
Scalise
Smith (NE)
Stansbury
Velazquez

Announcement by the Acting Chair

The Acting CHAIR (during the vote). There is 1 minute remaining.

{time} 1726

So the amendment was agreed to.
The result of the vote was announced as above recorded.

Amendment No. 4 Offered by Mr. Perry

The Acting CHAIR. The unfinished business is the demand for a
recorded vote on amendment No. 4, printed in part B of House Report
118-516, offered by the gentleman from Pennsylvania (Mr. Perry), on
which further proceedings were postponed and on which the ayes
prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.

Recorded Vote

The Acting CHAIR. A recorded vote has been demanded.
A recorded vote was ordered.
The Acting CHAIR. This is a 2-minute vote.
The vote was taken by electronic device, and there were--ayes 225,
noes 191, not voting 20, as follows:

[Roll No. 225]

AYES--225

Aderholt
Alford
Allen
Amodei
Armstrong
Arrington
Babin
Bacon
Baird
Balderson
Banks
Barr
Bean (FL)
Bentz
Bergman
Bice
Biggs
Bilirakis
Bishop (NC)
Boebert
Bost
Brecheen
Buchanan
Bucshon
Budzinski
Burchett
Burgess
Burlison
Calvert
Cammack
Caraveo
Carey
Carl
Carter (GA)
Carter (TX)
Chavez-DeRemer
Ciscomani
Cline
Cloud
Clyde
Cole
Collins
Comer
Craig
Crane
Crawford
Crenshaw
Curtis
D'Esposito
Davidson
De La Cruz
DesJarlais
Diaz-Balart
Donalds
Duarte
Duncan
Dunn (FL)
Edwards
Ellzey
Emmer
Estes
Ezell
Fallon
Feenstra
Ferguson
Finstad
Fischbach
Fitzgerald
Fitzpatrick
Fleischmann
Flood
Foxx
Franklin, Scott
Fry
Fulcher
Gaetz
Garbarino
Garcia, Mike
Gimenez
Golden (ME)
Gonzales, Tony
Good (VA)
Gooden (TX)
Gosar
Granger
Graves (LA)
Graves (MO)
Green (TN)
Greene (GA)
Griffith
Grothman
Guest
Guthrie
Hageman
Harder (CA)
Harris
Harshbarger
Hern
Higgins (LA)
Hill
Hinson
Houchin
Hudson
Huizenga
Issa
Jackson (TX)
James
Johnson (LA)
Johnson (SD)
Jordan
Joyce (OH)
Joyce (PA)
Kean (NJ)
Kelly (MS)
Kelly (PA)
Kiggans (VA)
Kiley
Kim (CA)
Kuster
Kustoff
LaHood
LaLota
LaMalfa
Lamborn
Langworthy
Latta
LaTurner
Lawler
Lee (FL)
Lesko
Letlow
Lofgren
Lucas
Luetkemeyer
Luna
Luttrell
Mace
Malliotakis
Maloy
Mann
Mast
McCaul
McClain
McClintock
McCormick
McHenry
Meuser
Miller (IL)
Miller (OH)
Miller (WV)
Miller-Meeks
Mills
Molinaro
Moolenaar
Mooney
Moore (AL)
Moore (UT)
Moran
Moylan
Nehls
Newhouse
Norman
Obernolte
Ogles
Owens
Palmer
Peltola
Pence
Perez
Perry
Pfluger
Posey
Reschenthaler
Rodgers (WA)
Rogers (AL)
Rogers (KY)
Rose
Rosendale
Rouzer
Roy
Rutherford
Salazar
Schweikert
Scott, Austin
Self
Sessions
Sherrill
Simpson
Smith (MO)
Smith (NE)
Smith (NJ)
Smucker
Sorensen
Spartz
Stanton
Stauber
Steel
Stefanik
Steil
Steube
Strong
Tenney
Thompson (PA)
Tiffany
Timmons
Turner
Valadao
Van Drew
Van Duyne
Van Orden
Veasey
Wagner
Walberg
Waltz
Weber (TX)
Webster (FL)
Wenstrup
Westerman
Williams (NY)
Williams (TX)
Wilson (SC)
Wittman
Womack
Yakym
Zinke

NOES--191

Adams
Aguilar
Allred
Amo
Auchincloss
Balint
Barragan
Beatty
Bera
Beyer
Bishop (GA)
Blunt Rochester
Bonamici
Bowman
Boyle (PA)
Brown
Brownley
Bush
Carbajal
Cardenas
Carson
Carter (LA)
Cartwright
Casar
Case
Casten
Castor (FL)
Castro (TX)
Cherfilus-McCormick
Chu
Clark (MA)
Clarke (NY)
Cleaver
Clyburn
Cohen
Connolly
Correa
Courtney
Crockett
Crow
Cuellar
Davids (KS)
Davis (IL)
Davis (NC)
Dean (PA)
DeGette
DeLauro
DelBene
Deluzio
DeSaulnier
Dingell
Doggett
Escobar
Eshoo
Espaillat
Fletcher
Foster
Foushee
Frankel, Lois
Frost
Garamendi
Garcia (IL)
Garcia (TX)
Garcia, Robert
Goldman (NY)
Gomez
Gonzalez, Vicente
Gottheimer
Green, Al (TX)
Hayes
Himes
Horsford
Houlahan
Hoyer
Hoyle (OR)
Huffman
Ivey
Jackson (IL)
Jackson (NC)
Jacobs
Jayapal
Jeffries
Johnson (GA)
Kamlager-Dove
Kaptur
Keating
Kelly (IL)
Kennedy
Khanna
Kildee
Kilmer
Kim (NJ)
Krishnamoorthi
Larsen (WA)
Larson (CT)
Lee (CA)
Lee (NV)
Lee (PA)
Leger Fernandez
Levin
Lieu
Lynch
Manning
Matsui
McBath
McClellan
McCollum
McGarvey
McGovern
Meeks
Menendez
Meng
Mfume
Morelle
Moskowitz
Moulton
Mrvan
Mullin
Nadler
Napolitano
Neal
Neguse
Nickel
Norcross
Norton
Ocasio-Cortez
Omar
Pallone
Panetta
Pappas
Pascrell
Pelosi
Peters
Pettersen
Phillips
Pingree
Plaskett
Pocan
Porter
Pressley
Quigley
Ramirez
Raskin
Ross
Ruiz
Ruppersberger
Ryan
Salinas
Sanchez
Sarbanes
Scanlon
Schakowsky
Schiff
Schneider
Scholten
Schrier
Scott (VA)
Scott, David
Sewell
Sherman
Slotkin
Smith (WA)
Soto
Spanberger
Stevens
Strickland
Suozzi
Swalwell
Sykes
Takano
Thanedar
Thompson (CA)
Thompson (MS)
Titus
Tlaib
Tokuda
Tonko
Torres (CA)
Torres (NY)
Trahan
Trone
Underwood
Vargas
Vasquez
Wasserman Schultz
Waters
Watson Coleman
Wexton
Wild
Williams (GA)
Wilson (FL)

NOT VOTING--20

Blumenauer
Costa
Evans
Gallego
Gonzalez-Colon
Grijalva
Hunt
Jackson Lee
Landsman
Loudermilk
Magaziner
Massie
Moore (WI)
Murphy
Nunn (IA)
Radewagen
Sablan
Scalise
Stansbury
Velazquez

Announcement by the Acting Chair

The Acting CHAIR (during the vote). There is 1 minute remaining.

{time} 1730

So the amendment was agreed to.
The result of the vote was announced as above recorded.
The Acting CHAIR. There being no further amendment, under the rule,
the Committee rises.
Accordingly, the Committee rose; and the Speaker pro tempore (Mrs.
Bice) having assumed the chair, Ms. Malliotakis, Acting Chair of the
Committee of the Whole House on the state of the Union, reported that
that Committee, having had under consideration the bill (H.R. 4763) to
provide for a system of regulation of digital assets by the Commodity
Futures Trading Commission and the Securities and Exchange Commission,
and for other purposes, and, pursuant to House Resolution 1243, she
reported the bill back to the House with sundry further amendments
adopted in the Committee of the Whole.
The SPEAKER pro tempore. Under the rule, the previous question is
ordered.
Is a separate vote demanded on any further amendment reported from
the Committee of the Whole? If not, the Chair will put them en gros.
The amendments were agreed to.
The SPEAKER pro tempore. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.

Recorded Vote

Ms. WATERS. Madam Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. This is a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 279,
noes 136, not voting 15, as follows:

[[Page H3463]]

[Roll No. 226]

AYES--279

Aderholt
Aguilar
Alford
Allen
Allred
Amodei
Armstrong
Arrington
Auchincloss
Babin
Bacon
Baird
Balderson
Banks
Barr
Bean (FL)
Bentz
Bera
Bergman
Beyer
Bice
Bilirakis
Bishop (NC)
Boebert
Bost
Boyle (PA)
Brecheen
Buchanan
Bucshon
Budzinski
Burchett
Burgess
Burlison
Calvert
Cammack
Caraveo
Carey
Carl
Carter (GA)
Carter (TX)
Chavez-DeRemer
Ciscomani
Clark (MA)
Cline
Cloud
Clyde
Cole
Collins
Comer
Costa
Craig
Crane
Crawford
Crenshaw
Crockett
Cuellar
Curtis
D'Esposito
Davidson
Davis (NC)
De La Cruz
DelBene
DesJarlais
Diaz-Balart
Donalds
Duarte
Duncan
Dunn (FL)
Edwards
Ellzey
Emmer
Eshoo
Estes
Ezell
Fallon
Feenstra
Ferguson
Finstad
Fischbach
Fitzgerald
Fitzpatrick
Fleischmann
Flood
Foxx
Franklin, Scott
Fry
Fulcher
Gaetz
Gallego
Garbarino
Garcia, Mike
Garcia, Robert
Gimenez
Goldman (NY)
Gomez
Gonzales, Tony
Gonzalez, Vicente
Good (VA)
Gooden (TX)
Gosar
Gottheimer
Granger
Graves (LA)
Graves (MO)
Green (TN)
Greene (GA)
Griffith
Grothman
Guest
Guthrie
Hageman
Harder (CA)
Harris
Harshbarger
Hern
Higgins (LA)
Hill
Himes
Hinson
Horsford
Houchin
Houlahan
Hudson
Huizenga
Issa
Jackson (IL)
Jackson (NC)
Jackson (TX)
James
Johnson (LA)
Johnson (SD)
Jordan
Joyce (OH)
Joyce (PA)
Kamlager-Dove
Kean (NJ)
Kelly (MS)
Kelly (PA)
Kennedy
Khanna
Kiggans (VA)
Kiley
Kim (CA)
Kim (NJ)
Krishnamoorthi
Kuster
Kustoff
LaHood
LaMalfa
Lamborn
Langworthy
Latta
LaTurner
Lawler
Lee (FL)
Lee (NV)
Lesko
Letlow
Levin
Lieu
Lofgren
Lucas
Luetkemeyer
Luna
Luttrell
Mace
Malliotakis
Maloy
Mann
Mast
McBath
McCaul
McClain
McClintock
McCormick
McHenry
Menendez
Meuser
Miller (IL)
Miller (OH)
Miller (WV)
Miller-Meeks
Mills
Molinaro
Moolenaar
Mooney
Moore (AL)
Moore (UT)
Moran
Moskowitz
Moulton
Mullin
Nehls
Newhouse
Nickel
Norman
Obernolte
Ogles
Owens
Palmer
Panetta
Pelosi
Peltola
Pence
Perry
Peters
Pettersen
Pfluger
Phillips
Posey
Quigley
Reschenthaler
Rodgers (WA)
Rogers (AL)
Rogers (KY)
Rose
Rouzer
Roy
Rutherford
Ryan
Salazar
Schiff
Schneider
Scholten
Schweikert
Scott, Austin
Self
Sessions
Sherrill
Simpson
Slotkin
Smith (MO)
Smith (NE)
Smith (NJ)
Smucker
Sorensen
Soto
Spanberger
Spartz
Stanton
Stauber
Steel
Stefanik
Steil
Steube
Stevens
Strickland
Strong
Suozzi
Swalwell
Tenney
Thanedar
Thompson (CA)
Thompson (PA)
Tiffany
Timmons
Titus
Torres (NY)
Turner
Valadao
Van Drew
Van Duyne
Van Orden
Veasey
Wagner
Walberg
Waltz
Weber (TX)
Webster (FL)
Wenstrup
Westerman
Wild
Williams (NY)
Williams (TX)
Wilson (SC)
Wittman
Womack
Yakym
Zinke

NOES--136

Adams
Amo
Balint
Barragan
Beatty
Biggs
Bishop (GA)
Blunt Rochester
Bonamici
Bowman
Brown
Brownley
Bush
Carbajal
Cardenas
Carson
Carter (LA)
Cartwright
Casar
Case
Casten
Castor (FL)
Castro (TX)
Cherfilus-McCormick
Chu
Clarke (NY)
Cleaver
Clyburn
Cohen
Connolly
Correa
Courtney
Crow
Davids (KS)
Davis (IL)
Dean (PA)
DeGette
DeLauro
Deluzio
DeSaulnier
Dingell
Doggett
Escobar
Espaillat
Fletcher
Foster
Foushee
Frankel, Lois
Frost
Garamendi
Garcia (IL)
Garcia (TX)
Golden (ME)
Green, Al (TX)
Hayes
Hoyer
Hoyle (OR)
Huffman
Ivey
Jacobs
Jayapal
Jeffries
Johnson (GA)
Kaptur
Keating
Kelly (IL)
Kildee
Kilmer
LaLota
Larsen (WA)
Larson (CT)
Lee (CA)
Lee (PA)
Leger Fernandez
Lynch
Manning
Matsui
McClellan
McCollum
McGarvey
McGovern
Meeks
Meng
Mfume
Morelle
Mrvan
Nadler
Napolitano
Neal
Neguse
Norcross
Ocasio-Cortez
Omar
Pallone
Pappas
Pascrell
Perez
Pingree
Pocan
Porter
Pressley
Ramirez
Raskin
Rosendale
Ross
Ruiz
Ruppersberger
Salinas
Sanchez
Sarbanes
Scanlon
Schakowsky
Schrier
Scott (VA)
Scott, David
Sewell
Sherman
Smith (WA)
Sykes
Takano
Thompson (MS)
Tlaib
Tokuda
Tonko
Torres (CA)
Trahan
Trone
Underwood
Vargas
Vasquez
Wasserman Schultz
Waters
Watson Coleman
Wexton
Williams (GA)
Wilson (FL)

NOT VOTING--15

Blumenauer
Evans
Grijalva
Hunt
Jackson Lee
Landsman
Loudermilk
Magaziner
Massie
Moore (WI)
Murphy
Nunn (IA)
Scalise
Stansbury
Velazquez

Announcement by the Speaker Pro Tempore

The SPEAKER pro tempore (during the vote). There are 2 minutes
remaining.

{time} 1738

So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.

personal explanation

Mr. BLUMENAUER. Madam Speaker, had I been present for the vote today
on Roll Call No. 221, Ordering the Previous Question on H. Res. 1243, I
would have voted NAY.
Had I been present for the vote on Roll Call No. 222, H. Res. 1243, I
would have voted ``no.''
Had I been present for the vote on Roll Call No. 223, Casar Amendment
No. 1, I would have voted ``aye.''
Had I been present for the vote on Roll Call No. 224, Norman
Amendment No. 3, I would have voted ``aye.''
Had I been present for the vote on Roll Call No. 225, Perry Amendment
No. 4, I would have voted ``no.''
Had I been present for the vote on Roll Call No. 226, H.R. 4763, I
would have voted ``no.''

personal explanation

Mr. LANDSMAN. Madam Speaker, for personal reasons, I was unable to
make votes. Had I been present, I would have voted NAY on Roll Call No.
221, NAY on Roll Call No. 222, YEA on Roll Call No. 223, YEA on Roll
Call No. 224, NAY on Roll Call No. 225, and YEA on Roll Call No. 226.

personal explanation

Mr. NUNN of Iowa. Madam Speaker, due to a natural disaster event in
my district, I made an emergency trip back to Iowa to provide
assistance to my constituents. Had I been present, I would have voted
NAY on Roll Call No. 223, Casar Amendment No. 1 to H.R. 4763, YEA on
Roll Call No. 224, Norman Amendment No. 3 to H.R. 4763, YEA on Roll
Call No. 225, Perry Amendment No. 4 to H.R. 4763, and YEA on Roll Call
No. 226, H.R. 4763.

____________________