[House Report 118-323]
[From the U.S. Government Publishing Office]
118th Congress } { REPORT
HOUSE OF REPRESENTATIVES
1st Session } { 118-323
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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.
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\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.
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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]