[House Report 118-323]
[From the U.S. Government Publishing Office]


118th Congress }                                          { REPORT 
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                          { 118-323

======================================================================
 
                      KEEP YOUR COINS ACT OF 2023

                                _______
                                

 December 19, 2023.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. McHenry, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4841]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4841) to prohibit Federal agencies from 
restricting the use of convertible virtual currency by a person 
to purchase goods or services for the person's own use, and for 
other purposes, having considered the same, reports favorably 
thereon with an amendment and recommends that the bill as 
amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Keep Your Coins Act of 2023''.

SEC. 2. PROHIBITION ON RESTRICTING USE OF CONVERTIBLE VIRTUAL CURRENCY 
                    BY A PERSON TO RETAIN FULL CONTROL OVER CONVERTIBLE 
                    VIRTUAL CURRENCY.

  (a) In General.--The head of a Federal agency may not prohibit, 
restrict, or otherwise impair the ability of a covered user to--
          (1) use convertible virtual currency or its equivalent for 
        such user's own purposes, such as to purchase real or virtual 
        goods and services for the user's own use; or
          (2) self-custody digital assets using a self-hosted wallet or 
        other means to conduct transactions for any lawful purpose.
  (b) Definitions.--In this section:
          (1) Convertible virtual currencies.--The term ``convertible 
        virtual currency'' means a medium of exchange that--
                  (A) has an equivalent value as currency (as defined 
                in section 1010.100 of title 31, Code of Federal 
                Regulations (or successor regulations)); or
                  (B) acts as a substitute for currency but may not 
                possess all the attributes (including legal tender 
                status) specified under such section 1010.100 (or 
                successor regulations).
          (2) Covered user.--The term ``covered user'' means a person 
        that obtains convertible virtual currency to purchase goods or 
        services on that person's own behalf, without regard to the 
        method in which such covered user obtained such convertible 
        virtual currency.
          (3) Self-hosted wallet.--The term ``self-hosted wallet'' 
        means a digital interface--
                  (A) used to secure and transfer convertible virtual 
                currency; and
                  (B) under which the owner of convertible virtual 
                currency retains independent control over such 
                convertible virtual currency that is secured by such 
                digital interface.

                          PURPOSE AND SUMMARY

    Introduced on July 25, 2023, by Representative Warren 
Davidson, H.R. 4841, the Keep Your Coins Act of 2023, would 
prohibit any federal agency from implementing any rule or 
taking any action that would restrict an individual's ability 
to: transact with digital assets for such individual's own 
purposes or to self-custody digital assets using a self-hosted 
wallet to conduct transactions for any lawful purpose. Self-
hosted wallets allow individuals to maintain and transact in 
digital assets in a peer-to-peer manner, without the need for 
an intermediary, and operate similar to cash transactions. 
Self-hosted wallets can be hardware or software and unlike 
custodial wallets, where a third party takes custody of the 
private keys on behalf of customers, self-hosted wallets are 
wallets in which the owner maintains control over their private 
key and handles the transactions themselves.

                  BACKGROUND AND NEED FOR LEGISLATION

    In 2008, an individual, or group of individuals, using the 
pseudonym Satoshi Nakamoto, published ``Bitcoin: A Peer-to-Peer 
Electronic Cash System.'' The paper outlined the principles of 
a cryptographically secured, peer-to-peer electronic payment 
system that is built on blockchain technology. Blockchain 
technology records transactional information in a shared, or 
distributed, digital database, referred to as a ledger. The 
system was designed to be transparent and censorship-resistant 
and give individuals more control over their financial 
transactions. Following publication of the white paper, the 
Bitcoin network was officially launched. Today, the total 
digital asset market capitalization stands at approximately 
$1.03 trillion with thousands of digital assets. Bitcoin and 
Ether make up approximately 67% of the market.
    Distributed ledger technology allows individuals to conduct 
transactions through self-hosted wallets. Individuals use the 
private key controlling the digital asset to transact directly 
on a blockchain. Most individuals use the services of an 
intermediary (or financial institution) to acquire or transact 
in digital asset. Such intermediaries must comply with the Bank 
Secrecy Act (BSA) requirements, including verification of 
customer identities, maintenance of records of currency 
transactions, and reporting of certain transactions, as well as 
comply with Anti-Money Laundering/Combating the Financing of 
Terrorism (AML/CFT) program requirements, including conducting 
customer due diligence with respect to accountholders and 
reporting suspicious activity.
    However, when an individual conducts a transaction on their 
own behalf, they are not considered a money transmitter and are 
not subject to BSA requirements applicable to financial 
institutions if a regulated financial intermediary is not on at 
least one side of the transaction. Since most individuals first 
acquire digital assets through transactions with an 
intermediary (or financial institution), these transactions are 
subject to BSA requirements. Once an intermediary's customer 
provides the necessary information, purchases a digital asset, 
and transfers it to a self-hosted wallet, only then do they 
retain the ability to complete non-intermediated transactions.
    The concept of a non-intermediated payment network has 
raised concerns among domestic and international regulators. 
The primary concern is focused on the potential for money 
laundering and illicit finance since intermediaries may not be 
involved in facilitating transactions. In December 2020, the 
Financial Crimes Enforcement Network (``FinCEN'') published a 
notice of proposed rulemaking that considered imposing 
reporting requirements on banks and money services businesses 
that facilitate transactions to self-hosted wallets. In the 
proposal, FinCEN would require banks and money services 
businesses to report certain information regarding 
counterparties to transactions by their hosted wallet 
customers.
    Critics fear that FinCEN's proposal would create a 
repository of information on individuals who transact through 
their self-hosted wallet and custody their own digital assets. 
Critics fear this may eventually lead to significant 
restrictions or a prohibition on transferring digital assets to 
self-hosted wallets. Without self-hosted wallets, many of the 
inefficiencies and vulnerabilities of the traditional financial 
system that digital assets were created to ameliorate will 
remain. Indeed, one of the primary value propositions of 
digital assets is the speed and security that comes from 
facilitating transactions without using an intermediary. 
Moreover, as the global economy becomes increasingly digitized, 
it is essential that the privacy and autonomy associated with 
cash transactions can be replicated with digital assets. Self-
hosted wallets create a cash parallel in the digital world and 
must be preserved. H.R. 4841 would enable this by preserving 
the right to transact in digital assets without an intermediary 
and prevent federal agencies from promulgating any other 
rulemakings that would impede Americans' ability to transact 
freely and independently in the digital asset ecosystem.

                                HEARING

117th Congress

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to develop H.R. 4841: The Subcommittee on 
Oversight and Investigations held a hearing on June 30, 2021, 
entitled ``Will the Crypto Frenzy Lead to Financial 
Independence and Early Retirement or Financial Ruin?''
    The Committee on Financial Services held a hearing on 
December 8, 2021, titled ``Digital Assets and the Future of 
Finance: Understanding the Challenges and Benefits of Financial 
Innovation in the United States.''
    The Committee on Financial Services held a hearing on 
February 8, 2022, titled ``Digital Assets and the Future of 
Finance: The President's Working Group on Financial Markets' 
Report on Stablecoins.''

118th Congress

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to develop H.R. 4841: The Subcommittee on 
Digital Assets, Financial Technology and Inclusion of the 
Committee on Financial Services held a hearing on March 9, 
2023, titled ``Coincidence or Coordinated? The Administration's 
Attack on the Digital Asset Ecosystem.''
    The Subcommittee on Digital Assets, Financial Technology 
and Inclusion of the Committee on Financial Services held a 
hearing on April 19, 2023, titled ``Understanding Stablecoins'' 
Role in Payments and the Need for Legislation.''
    The Subcommittee on Digital Assets, Financial Technology 
and Inclusion of the Committee on Financial Services held a 
hearing on May 18, 2023, titled ``Putting the `Stable' in 
`Stablecoins:' How Legislation Will Help Stablecoins Achieve 
Their Promise.''
    The Committee on Financial Services held a hearing on June 
13, 2023, titled ``The Future of Digital Assets: Providing 
Clarity for the Digital Asset Ecosystem.''

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
July 27, 2023, and ordered H.R. 4841 to be reported favorably 
to the House as amended by a recorded vote of 29 ayes to 21 
nays (Record vote no. FC-87), a quorum being present. Before 
the question was called to order the bill favorably reported, 
the Committee adopted an amendment in the nature of a 
substitute offered by Mr. Davidson by voice vote.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the order to report legislation and amendments thereto. H.R. 
4841 was ordered reported favorably to the House as amended by 
a recorded vote of 29 ayes to 21 nays (Record vote no. FC-87), 
a quorum being present.


                      COMMITTEE OVERISGHT FINDINGS

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the goal of H.R. 4841 is to prohibit 
any federal agency from implementing any rule or taking any 
action that would restrict an individual's ability to transact 
with digital assets through self-hosted wallets.

                 CONGRESSIONAL BUDGET OFFICE ESTIMATES

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:



   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee adopts as its own the 
estimate of new budget authority, entitlement authority, or tax 
expenditures or revenues contained in the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1973.

                       FEDERAL MANDATES STATEMENT

    Pursuant to section 423 of the Unfunded Mandates Reform 
Act, the Committee adopts as its own the estimate of the 
Federal mandates prepared by the Director of the Congressional 
Budget Office.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    DUPLICATION OF FEDERAL PROGRAMS

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section cites H.R. 4841 as the Keep Your Coins Act of 
2023.

Section 2. Prohibition on restricting use of convertible virtual 
        currency by a person to retain full control over convertible 
        virtual currency

    This section prevents the heads of federal agencies from 
prohibiting, restricting, or otherwise impairing covered users 
from using convertible virtual currencies for their own 
purposes or taking custody of convertible virtual currencies 
using a self-hosted wallet.
    This section defines covered users as persons that obtain 
convertible virtual currency to purchase goods or services on 
their own behalf. This section also defines convertible virtual 
currencies and self-hosted wallet.

                             MINORITY VIEWS

    In the name of promoting privacy, H.R. 4841 would take a 
significant portion of the crypto industry completely outside 
of the purview of federal agencies, putting consumers at risk 
and giving criminals a free pass. Specifically, this bill would 
bar regulators from prohibiting, restricting, or otherwise 
impairing the ability of an individual to use a convertible 
virtual currency (CVC) (or its equivalent) for their own 
purposes, or the ability of an individual to self-custody 
digital assets using a self-hosted wallet or any other means to 
conduct lawful transactions. This would make it difficult, if 
not impossible, for regulators to enforce consumer protection 
laws and for law enforcement to detect criminal abuses of the 
financial system.
    A CVC is defined in the bill as any medium of exchange that 
has an equivalent value as currency or acts as a substitute for 
currency. This overly broad definition would encompass any 
digital asset that is used as payment or has a value that can 
be exchanged for a currency. The definition is not even limited 
to digital assets but can be interpreted broadly to include any 
medium of exchange that otherwise meets these criteria, which 
could include literally any physical or virtual object that is 
used as a payment or has a value that can be exchanged for a 
currency. This creates a massive loophole wherein individuals 
or entities could conduct transactions using CVCs, as defined 
in the bill, to avoid a broad range of regulatory requirements 
and oversight, including compliance with the Electronic Funds 
Transfer Act (EFTA), which ensures that consumers have redress 
when they are faced with fraud or bad acts by financial 
institutions, as well as compliance with anti-money laundering 
requirements. While the bill specifies that it is only creating 
this exemption for lawful transactions, there would be little 
means for regulators to detect which transactions are lawful 
because of the way the bill is structured.
    Self-hosted wallets are software hosted on the consumer's 
own device (like a phone) allowing the owner to store or 
transfer CVC without an intermediary.\1\ Self-hosted wallets 
already lack basic consumer protections. They have no 
centralized institution to `which a consumer would have to 
provide identifying information. The wallet holder receives 
neither the benefits of security offered by a financial 
institution nor the drawbacks of security breaches, such as 
institutional cyber hacks or bank runs. But unlike a 
traditional account holder, if the private key of the non-
custodial wallet is lost or stolen, there is no reset or 
recourse, no service provider to blame or to make the consumer 
whole. There is no institution that controls unhosted wallets 
and provides services or conducts compliance on behalf of the 
self-custody wallet holder. This bill would also pre-empt 
ongoing rulemaking by Financial Crimes Enforcement Network 
(FinCen)\2\ on self-hosted wallets. By effectively taking self-
hosted wallets out of the purview of regulators altogether, 
this bill only exacerbates existing consumer protection and 
anti-money laundering concerns.
---------------------------------------------------------------------------
    \1\The term ``virtual currency'' refers to a medium of exchange 
that can operate like currency but does not have all the attributes of 
``real'' currency, as defined in 31 CFR Sec. 1010.100(m), including 
legal tender status. CVC is a type of virtual currency that either has 
an equivalent value as currency, or acts as a substitute for currency, 
and is therefore a type of ``value that substitutes for currency.'' 
FinCEN, Application of FinCEN's Regulations to Certain Business Models 
Involving Convertible Virtual Currencies (May 9, 2019).
    \2\FinCEN is an agency within the Treasury Department whose mission 
is to safeguard the financial system from illicit use, combat money 
laundering and its related crimes including terrorism, and promote 
national security through the strategic use of financial authorities 
and the collection, analysis, and dissemination of financial 
intelligence.
---------------------------------------------------------------------------
    Finally, the following groups oppose this bill: Americans 
for Financial Reform, Demand Progress, and North American 
Securities Administrators Association.
    For these reasons, we oppose H.R. 4841.
            Sincerely,
                                   Maxine Waters,
                                           Ranking Member, Committee on 
                                               Financial Services.
                                   Nydia M. Velazquez.
                                   Gregory W. Meeks.
                                   Stephen F. Lynch.
                                   Emanuel Cleaver.
                                   Brad Sherman.
                                   David Scott.
                                   Al Green.
                                   Jim Himes.
                                   Bill Foster.
                                   Juan Vargas.
                                   Sean Casten.
                                   Rashida Tlaib.
                                   Nikema Williams.
                                   Joyce Beatty.
                                   Vicente Gonzalez.
                                   Ayanna Pressley.
                                   Sylvia R. Garcia.
                                   Brittany Pettersen.

                                  [all]