Lummis-Gillibrand Responsible Financial Innovation Act

The term commodity has the meaning given the term in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).

The terms crypto asset, crypto asset intermediary, distributed ledger technology, payment stablecoin and smart contract have the meanings given the terms in section 9801 of title 31, United States Code, as added by section 101 of this Act.

Except as otherwise expressly provided, the term security has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).

Subtitle VI of title 31, United States Code, is amended by adding after chapter 97 the following:

In this chapter:

The term appropriate commission means the Commodity Futures Trading Commission or the Securities and Exchange Commission, or both, if applicable, based on the commission that has statutory jurisdiction over a crypto asset intermediary and acts as the primary registration or licensing authority for that intermediary.

The term crypto asset —

(A) means a natively electronic asset that—

(i) confers economic, proprietary, or access rights or powers;

(ii) is recorded using cryptographically secured distributed ledger technology, or any similar analogue; and

(iii) does not represent, derive value from, or maintain backing by, a financial asset (except other crypto assets); and

(B) does not include—

(i) a payment stablecoin, except as otherwise provided by this chapter; and

(ii) other interests in financial assets (except other crypto assets) represented on a distributed ledger or any similar analogue.

The term crypto asset intermediary —

(A) means—

(i) a person who holds a license, registration, or other similar authorization, as specified by this chapter, the Commodity Exchange Act (7 U.S.C. 1 et seq.), the Securities Act of 1933 (15 U.S.C. 77a et seq.), the Corporation of Foreign Bondholders Act, 1933 (15 U.S.C. 77bb et seq.), the Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), the Investment Advisers Act of 1940 (15 U.S.C. 80b–1), or the Omnibus Small Business Capital Formation Act of 1980 (15 U.S.C. 80c), that conducts market activities relating to crypto assets; or

(ii) a person who is required by law to hold a license, registration, or other similar authorization described in clause (i); and

(B) does not include a depository institution.

The term depository institution has the meaning given the term in section 19(b)(1) of the Federal Reserve Act (12 U.S.C. 461(b)(1)).

The term distributed ledger technology means technology that enables the operation and use of a ledger that—

(A) is shared across a set of distributed nodes that participate in a network and store a complete or partial replica of the ledger;

(B) is synchronized between the nodes;

(C) has data appended to the ledger by following the specified consensus mechanism of the ledger;

(D) may be accessible to anyone or restricted to a subset of participants; and

(E) may require participants to have authorization to perform certain actions or require no authorization.

The term payment stablecoin means a claim represented on a distributed ledger or a similar analogue that is—

(A) redeemable, on demand, on a 1-to-1 basis for instruments denominated in United States dollars;

(B) issued by a business entity;

(C) accompanied by a statement from the issuer that the asset is redeemable, as specified in subparagraph (A), from the issuer or another identified person;

(D) backed by 1 or more financial assets (excluding other crypto assets), consistent with subparagraph (A); and

(E) intended to be used as a medium of exchange.

The term security has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).

The term smart contract —

(A) means—

(i) computer code deployed to a distributed ledger technology network that executes an instruction based on the occurrence or nonoccurrence of specified conditions; or

(ii) any similar analogue; and

(B) includes taking possession or control of a crypto asset and transferring the asset or issuing executable instructions for these actions.

The table of contents for subtitle VI of title 31, United States Code, is amended by adding at the end the following:

(1) Congress finds the following relating to the authority of the Commodity Futures Trading Commission:

(A) The Commodity Futures Trading Commission has enforcement tools to ensure compliance with the commodities laws of the United States, which Congress has designed to promote responsible innovation through a principles-based approach and to police fraud, scams, and wrongdoing.

(B) The authority of the Commodity Futures Trading Commission described in subparagraph (A) includes the following:

(i) Recommending criminal prosecution to the Department of Justice and State prosecutors for fraud and conspiracy.

(ii) Bringing civil actions to enjoin violations of this Act and other commodities laws.

(iii) Seeking civil monetary penalties, disgorgement of benefits, and restitution and freezing assets.

(iv) Revoking exchange trading privileges, registration, licenses, and other authorizations.

(v) Issuing cease and desist orders.

(C) Congress has granted the authorities described in this paragraph to the Commodity Futures Trading Commission to—

(i) ensure fair and transparent commodities markets with accurate price discovery and appropriate risk management; and

(ii) facilitate responsible innovation.

(D) The Commodity Futures Trading Commission has a duty to use the authorities provided to the Commission to protect all market participants, regardless of sophistication level, from fraud, scams, and wrongdoing relating to crypto assets that are not securities, as defined in this Act, the Commodity Exchange Act (7 U.S.C. 1 et seq.), and case law.

(2) Congress finds the following relating to the authority of the Securities and Exchange Commission:

(A) The Securities and Exchange Commission has enforcement tools to—

(i) ensure compliance with the securities laws of the United States, which have made United States markets the envy of the world; and

(ii) police fraud, scams, and wrongdoing.

(B) The authority of the Securities and Exchange Commission described in subparagraph (A) includes the following:

(i) Recommending criminal proceedings to the Department of Justice or State prosecutors for fraud, investment scams, insider trading, conspiracy, and other violations of the securities laws of the United States.

(ii) Bringing civil actions to enjoin violations of this Act and the other securities laws.

(iii) Seeking civil monetary penalties, disgorgement of profits, and restitution.

(iv) Barring individuals from the securities industry and from serving as an officer or director of a particular company.

(v) Revoking registrations, licenses, or other authorizations.

(vi) Issuing cease and desist orders.

(C) Congress has granted the authorities described in this paragraph to the Securities and Exchange Commission to ensure fair, honest, and transparent securities markets that enable robust capital formation and a thriving economy.

(D) The Securities and Exchange Commission has a duty to use the authorities provided to the Commission appropriately and proportionately to protect consumers from fraud, scams, and wrongdoing relating to crypto assets that are securities, as defined in this Act, the Securities Act of 1933 (15 U.S.C. 77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), and case law, while providing clear guidance to innovators and market participants so that those innovators and market participants are able to clearly determine their legal obligations pursuant to the laws enacted by Congress.

Chapter 98 of title 31, United States Code, as added by section 101(a) of this Act, is amended by adding at the end the following:

Except as otherwise provided by this chapter, the standards of this chapter shall be enforced in an appropriate manner, commensurate with other customer protection standards—

(1) in the case of a crypto asset intermediary, if a crypto asset customer protection and market integrity authority has been chartered, by that authority;

(2) in the case of crypto asset intermediary, if a crypto asset customer protection and market integrity authority has not been chartered, by the Federal or State licensing, registration, or chartering authority of the intermediary; and

(3) in the case of a depository institution or other chartered financial institution, by the appropriate State or Federal banking supervisor.

The Federal agencies specified in paragraphs (2) and (3) of subsection (a) shall promulgate final rules to implement this title not later than 2 years after the date of enactment of this section.

The table of sections for chapter 98 of title 31, United States Code, as added by section 101(a) of this Act, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 202 of this Act, is amended by adding at the end the following:

A crypto asset intermediary shall maintain a system, and the requisite policies and procedures, to demonstrate cryptographically verifiable possession or control of all crypto assets under custody or otherwise provided for safekeeping by a customer to the intermediary. A system created under this subsection shall be protected against disclosure of customer data, proprietary intermediary information, and other data which may lead to operational or cybersecurity risk.

An independent public accountant retained by the intermediary shall annual verify possession or control of all crypto assets under custody, or otherwise provided for safekeeping by the intermediary, consistent with subsection (a). This verification shall include an examination of the system and the policies and procedures required by subsection (a) and shall take place pursuant to a written agreement between the intermediary and the accountant, at a time chosen by the accountant without prior notice which is irregular from year to year.

Within 120 days of conducting a verification under subsection (b), the independent public accountant retained under subsection (b) shall file a report with the appropriate commission and the applicable customer protection and market integrity authority, stating that the accountant has verified proof of reserves consistent with this section. If material discrepancies in the verification have been found by the independent public accountant, the accountant shall inform the appropriate commission and the customer protection and market integrity authority within 1 day of the conclusion of the verification.

The Public Company Accounting Oversight Board shall adopt standards to implement subsections (a) and (b), in consultation with the Securities and Exchange Commission and Commodity Futures Trading Commission.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 202, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 203 of this Act, is amended by adding at the end the following:

In consultation with the Securities and Exchange Commission and the Commodity Futures Trading Commission, the Bureau of Consumer Financial Protection shall issue guidance setting forth best practices for crypto asset intermediary standard customer agreements and all disclosures required to be made under title II of the Lummis-Gillibrand Responsible Financial Innovation Act and other applicable law, which shall require the customer agreements and disclosures, in accordance with applicable law, to be written in plain language that is easily comprehensible to customers. Not later than 180 days after the date of enactment of this section, the Bureau shall create a publicly available database for the filing of all required documents under this section.

The Securities and Exchange Commission, in consultation with the Bureau of Consumer Financial Protection, shall issue guidance setting forth best practices for issuers under section 42 of the Securities Exchange Act of 1934 to create plain language summaries of disclosures required to be made to customers under that section.

Each summary described in paragraph (1) shall be—

(A) not more than 2 pages in length; and

(B) filed by the applicable issuer with the Securities and Exchange Commission at the same time as disclosures are filed under section 42 of the Securities Exchange Act of 1934.

Crypto asset intermediaries shall file the following with the Bureau of Consumer Financial Protection:

(1) Not later than 180 days after the date of enactment of this section, the standard customer agreement used by the intermediary on the date of enactment.

(2) Any standard customer agreement used after the date of enactment of this section, but before the database under subsection (a) becomes operational, to be filed not more than 60 days after the date on which the database under subsection (a) becomes operational.

(3) Any standard customer agreement used after the database under subsection (a) becomes operational, not more than 30 days after the date on which the agreement is first used by customers.

(4) For all crypto assets supported by the crypto asset intermediary, all disclosures made under section 42 of the Securities Exchange Act of 1934 and the accompanying summaries.

(5) Any other document that contains required disclosures under title II of the Lummis-Gillibrand Responsible Financial Innovation Act, not more than 30 days after the date on which the document is made available to customers.

When filing a standard customer agreement under subsection (c), a crypto asset intermediary shall include a summary of changes (as compared to the previous filed version) that is in plain language, as determined by the Bureau of Consumer Financial Protection.

A filing under this section may not be construed to permit the Bureau of Consumer Financial Protection to approve the contents of any standard customer agreement.

The Bureau of Consumer Financial Protection shall adopt rules to implement this section, with a comment period of not less than 90 days.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 203 of this Act, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 203 of this Act, is amended by adding at the end the following:

Each crypto asset intermediary shall ensure that the scope of permissible transactions that may be undertaken with crypto assets belonging to a customer is disclosed clearly in a customer agreement.

Each crypto asset intermediary shall provide clear notice to each customer and require acknowledgment of the following:

(1) Whether customer crypto assets are segregated from other customer assets and the manner of segregation.

(2) How the crypto assets of the customer would be treated in a bankruptcy or insolvency scenario and the risk of loss.

(3) The time period and manner in which the intermediary is obligated to return the crypto asset of the customer upon request.

(4) Applicable fees imposed on a customer.

(5) The dispute resolution process of the intermediary.

In this subsection:

The term agreement includes the standard terms of service of a crypto asset intermediary.

The term subsidiary proceeds includes forks, airdrops, staking, and other gains that accrue to a crypto asset through market transactions as a financial asset or as a result of being held in custody or safekeeping by a crypto asset intermediary.

Except as otherwise specified by an agreement with a customer, all subsidiary proceeds relating to crypto asset services provided to a customer shall accrue to the benefit of the customer in accordance with paragraph (3).

A crypto asset intermediary may elect not to collect certain subsidiary proceeds if the election is disclosed in an agreement with the customer.

A customer may request return of a crypto asset from an intermediary in a method that permits the collection of the subsidiary proceeds of the crypto asset.

A crypto asset intermediary shall enter into an agreement with a customer, if desired by the customer, regarding the manner in which to invest subsidiary proceeds or other gains attributable to the crypto assets of the customer.

Each year, the chief executive officer of a crypto asset intermediary shall, under penalty of perjury, certify compliance with the following, to the best of the knowledge and belief of the chief executive officer:

(1) Applicable anti-money laundering, customer identification, prevention of terrorist financing, and sanctions laws.

(2) Applicable custodial and safekeeping laws, including proof of reserve requirements.

(3) The other provisions of this chapter.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 204 of this Act, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 205 of this Act, is amended by adding at the end the following:

A crypto asset intermediary shall ensure that any lending arrangements relating to crypto assets are—

(1) clearly disclosed to customers before any lending services take place, including the potential bankruptcy treatment of customer assets in the event of insolvency;

(2) subject to the affirmative consent of the customer;

(3) fully enforceable as a matter of State commercial law, including the Uniform Commercial Code;

(4) accompanied by full disclosures of applicable terms and risks, yield, and the manner in which the yield is calculated;

(5) accompanied by appropriate disclosures relating to collateral requirements and policies, including—

(A) possible reductions in value and overcollateralization requirements with respect to a crypto asset;

(B) collateral the intermediary accepts when calling for additional collateral from a customer, including collateral substitution;

(C) whether customer collateral is commingled with the collateral of other customers or of the intermediary; and

(D) how customer collateral is invested and whether the yield belongs to the customer or to the intermediary;

(6) accompanied by disclosures of mark-to-market and monitoring arrangements, including—

(A) the frequency of mark-to-market monitoring and how frequently the intermediary will call for additional collateral from a customer;

(B) the time period in which the customer must supply additional collateral to the intermediary after a collateral call is conducted consistent with subparagraph (A);

(C) whether the intermediary permits failures to deliver customer crypto assets or other collateral; and

(D) in the event of a failure to deliver, the period of time in which the failure must be cured; and

(7) compliant with all applicable Federal and State laws.

In this subsection, the term rehypothecation means the pledging of an asset as collateral for a financial transaction multiple times by a person, including the pledging of a customer asset by a crypto asset intermediary as collateral for a subsequent financial transaction after delivery of the crypto asset to the intermediary by a customer.

No rehypothecation of crypto assets by a crypto asset intermediary shall be permitted.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 202, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 206 of this Act, is amended by adding at the end the following:

To promote legal certainty and customer protection, a crypto asset intermediary and a customer shall, upon the opening of an account, agree on the terms of settlement finality for all transactions with respect to crypto assets, including the following:

(1) The conditions under which a crypto asset may be deemed fully transferred, provided that those legal conditions may diverge from operational conditions under which crypto assets are considered transferred, based on the distributed and probabilistic nature of crypto assets.

(2) The exact moment of transfer of a crypto asset.

(3) The discharge of any obligations upon transfer of a crypto asset.

(4) Conformity to applicable provisions of the Uniform Commercial Code.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 206 of this Act, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 207 of this Act, is amended by adding at the end the following:

In this section:

The term Commissions means the Securities and Exchange Commission and the Commodity Futures Trading Commission, acting jointly.

The term covered advertisement —

(A) means a communication that—

(i) relates to—

(I) the desirability of purchasing or entering into a transaction for a crypto asset; or

(II) the availability of crypto asset-related services; and

(ii) is widely available to the general public, as specified by rule of the Commissions; and

(B) includes any script, slide, handout, or other written (including electronic) material used in connection with a public appearance with respect to a crypto asset or the availability of crypto asset-related services.

Before a crypto asset intermediary may make a covered advertisement available to the public, an officer of the crypto asset intermediary shall be required to approve that covered advertisement and certify compliance with the requirements of this section.

Each crypto asset intermediary shall establish written procedures, which are appropriate and reasonable to the business, size, structure, and customers of the crypto asset intermediary, for the approval of covered advertisements, as required under subsection (b), which shall include—

(A) provisions for the education and training of applicable employees of the crypto asset intermediary regarding the procedures of the crypto asset intermediary governing covered advertisements;

(B) documentation of the education and training required under subparagraph (A); and

(C) surveillance and follow-up measures to ensure that the crypto asset intermediary implements and adheres to those procedures.

Each crypto asset intermediary shall maintain the records required under this subsection for not less than 5 years.

The types of records that a crypto asset intermediary is required to maintain under subparagraph (A) include, with respect to each covered advertisement made by the crypto asset intermediary—

(i) a copy of the covered advertisement;

(ii) the dates of the first and, if applicable, last use of the covered advertisement;

(iii) the name of the officer of the crypto asset intermediary who approved the covered advertisement, as required under subsection (b), including the date on which the officer gave that approval;

(iv) information concerning the source of all data, statistical tables, charts, graphs, or other illustrations or outside sources used in the covered advertisement; and

(v) for a covered advertisement that includes or incorporates a performance ranking or comparison with another crypto asset intermediary, a copy of the ranking or performance used.

Each covered advertisement shall adhere to the following standards:

(1) The covered advertisement shall—

(A) be based on principles of fair dealing and good faith; and

(B) provide a sound basis for evaluating the facts with respect to any particular crypto asset or type of crypto asset, industry, or service that is the subject of the covered advertisement.

(2) The covered advertisement does not omit any material fact or qualification if that omission, in light of the context of the material presented, would cause the covered advertisement to be misleading.

(3) The covered advertisement does not make any false, exaggerated, unwarranted, promissory, or misleading statement or claim.

(4) Information may be placed in a legend or footnote within the covered advertisement only if that placement would not inhibit understanding of the covered advertisement.

(5) The covered advertisement shall be consistent with risks that are present with respect to the subject matter of the covered advertisement, including volatility with respect to the value of crypto assets, the amount of potential returns, and operational risks for crypto asset intermediaries.

(6) The covered advertisement shall—

(A) consider the nature of the audience to which the covered advertisement will be directed; and

(B) provide details and explanations that are appropriate for the audience described in subparagraph (A).

(A) The covered advertisement may not predict or project performance, imply that past performance will recur, or make any exaggerated or unwarranted claim, opinion, or forecast.

(B) Nothing in subparagraph (A) may be construed to prohibit the use of—

(i) a hypothetical illustration of mathematical principles, if that illustration does not predict or project the performance of a particular strategy;

(ii) an analysis tool or a written report produced by an analysis tool; or

(iii) a price target contained in a research report, if the target has a reasonable basis, the report discloses the valuation methods used to determine the price target, and the price target is accompanied by a disclosure concerning the risks that may impede achievement of the price target.

(8) Any comparison in the covered advertisement between crypto assets, crypto asset intermediaries, or crypto asset-related services shall disclose key material differences between the applicable items, including, as applicable, differences with respect to return objectives, costs and expenses, liquidity, safety, guarantees or insurance, volatility, and tax features.

(9) The covered advertisement shall prominently disclose the following:

(A) The fact that the covered advertisement is governed by this section and is subject to Federal law.

(B) The name of the applicable crypto asset intermediary.

(C) Any relationship between the applicable crypto asset intermediary and any person that appears in the covered advertisement or any compensation offered by that crypto asset intermediary to such a person.

(D) Registrations, licenses, or other authorizations in good standing that are held by the applicable crypto asset intermediary.

(A) In the covered advertisement, any reference to tax-free or tax-exempt income shall indicate which taxes apply, or which do not, unless income is free from all applicable taxes.

(B) For the purposes of subparagraph (A), the covered advertisement may not characterize income or returns as tax-free or exempt from income tax if tax liability is merely postponed or deferred, such as when taxes are payable upon redemption.

(C) The Commissions may, by rule, adopt further standards regarding tax considerations that appear in covered advertisements.

(11) The covered advertisement shall disclose the amounts of the following fees with respect to the crypto asset or crypto asset-related services that are the subject of the covered advertisement, which shall be set forth prominently and, in any print advertisement, in a prominent text box that contains only such information:

(A) Custody fees.

(B) Account fees.

(C) Applicable bank fees.

(12) If any testimonial in the covered advertisement concerns a technical aspect of purchasing or otherwise entering into a transaction for crypto assets—

(A) the person making the testimonial shall have the knowledge and experience to form a valid opinion regarding the issue; and

(B) the testimonial, if the testimonial concerns the advisability of purchasing crypto assets or the performance of a crypto asset, shall prominently disclose—

(i) the fact that the testimonial may not be representative of the experience of other customers;

(ii) the fact that the testimonial is no guarantee of future performance or success; and

(iii) if more than $1,000 in value is paid for the testimonial—

(I) the fact that the testimonial is a paid testimonial; and

(II) the amount and type of compensation paid, which shall include, if compensation was paid in crypto assets, an identification of each specific crypto asset.

(13) If the covered advertisement includes a recommendation to purchase, or otherwise transact in, a crypto asset, the covered advertisement shall—

(A) have a reasonable basis for the recommendation; and

(B) if applicable, disclose—

(i) that, at the time the covered advertisement was published or distributed, the applicable crypto asset intermediary was conducting trading activities in the crypto asset;

(ii) that the applicable crypto asset intermediary—

(I) is directly and materially involved in the preparation of the content of the covered advertisement; and

(II) has a financial interest the crypto assets being recommended; and

(iii) the nature of any financial interest disclosed under clause (ii), including whether that financial interest consists of any option, right, warrant, future, or long or short position, unless the extent of that financial interest is nominal.

(A) Except as otherwise provided by subparagraph (B), the covered advertisement may not refer, directly or indirectly, to past specific recommendations made by the applicable crypto asset intermediary that were or would have been profitable to any person.

(B) The covered advertisement may set out or offer to furnish a list of all recommendations as to the same type of crypto assets made by the applicable crypto asset intermediary during the 1-year period preceding the date on which the covered advertisement is released, if the communication or list—

(i) states the name of each crypto asset recommended, the date and nature of each such recommendation (such as whether to buy, sell, or hold the crypto asset), the market price (as of the date of the recommendation), the price at which a person was meant to act upon the recommendation, and the market price of each such crypto asset, as of the most recent practicable date; and

(ii) contains the following warning, which shall appear prominently within the communication or list: It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the crypto assets in this list..

A crypto asset intermediary shall provide, or offer to provide upon request, available information or sources supporting any recommendation described in subsection (d)(13).

When a crypto asset intermediary recommends a crypto asset in a covered advertisement, as described in subsection (d)(13), the crypto asset intermediary shall provide the price of the crypto asset, as of the date on which the recommendation is made.

When an officer or employee of a crypto asset intermediary is sponsoring or participating in a seminar, forum, or broadcast, or when such an individual is otherwise engaged in a public appearance or speaking activity, paragraphs (1), (2), and (3) of subsection (d), shall apply to that appearance to the same extent as those provisions apply to a covered advertisement.

If an officer or employee of a crypto asset intermediary recommends a crypto asset in a public appearance, that individual shall—

(A) have a reasonable basis for the recommendation; and

(B) disclose, as applicable—

(i) whether the individual has a financial interest in the crypto asset recommended;

(ii) the nature of the financial interest disclosed under clause (i), including whether that financial interest consists of any option, right, warrant, future, or long- or short- position, unless the extent of that financial interest is nominal; and

(iii) any other actual, material conflict of interest of which the individual knows or has reason to know at the time of the public appearance.

Each crypto asset intermediary shall establish written procedures that are appropriate and reasonable to the business, size, structure, and customers of the crypto asset intermediary in order to supervise the public appearances of the officers and employees of the crypto asset intermediary, which shall include—

(1) provisions for the education and training of employees of the crypto asset intermediary regarding those procedures;

(2) documentation of the education and training required under paragraph (1); and

(3) surveillance and follow-up measures to ensure that the crypto asset intermediary implements and adheres to those procedures.

The Securities and Exchange Commission, the Commodity Futures Trading Commission, or a customer protection and market integrity authority operating under delegated authority by the appropriate commission, as applicable to a crypto asset intermediary, shall regularly ascertain the compliance with this section by the crypto asset intermediary (and applicable individuals) at the time of each regular examination of the intermediary by the applicable entity.

The appropriate commission or customer protection and market integrity authority, as applicable, may conduct an investigation into a suspected violation of this section and take enforcement action outside of a regular examination of a crypto asset intermediary, which shall be comprised of the following:

(A) With respect to such a violation by that crypto asset intermediary, the following:

(i) For an initial violation of this section, the imposition of a civil monetary penalty in an amount that is not more than $100,000.

(ii) For any subsequent violation of this section, the imposition of a civil monetary penalty in an amount that is not more than $1,000,000.

(iii) The enjoinment of future violations of this section by the crypto asset intermediary and the requirement that the crypto asset intermediary submit to the enforcing entity appropriate remediation plans.

(B) For repeated, knowing violations of this section by an individual, the imposition of a temporary or permanent bar from the crypto asset industry with respect to that individual.

A document filed with the Securities and Exchange Commission, as otherwise required by law or regulation, is not subject to the requirements of this section.

The Commissions, after not less than a 120-day comment period, shall adopt rules to implement this section.

The table of section for chapter 98 of title 31, United States Code, as amended by section 206, is amended by adding at the end the following:

Section 2240 of the Homeland Security Act of 2002 (6 U.S.C. 681) is amended by striking paragraph (4) and inserting the following:

The term covered entity —

(A) means an entity in a critical infrastructure sector, as defined in Presidential Policy Directive 21, that satisfies the definition established by the Director in the final rule issued pursuant to section 2242(b); and

(B) includes a crypto asset intermediary, as defined in section 9801 of title 31, United States Code.

If a crypto asset intermediary makes a required report under section 2242 of the Homeland Security Act of 2002 (6 U.S.C. 681b), the crypto asset intermediary shall make a copy of that report available to the Federal or State financial regulator responsible for licensing or supervising the crypto asset intermediary.

Not later than 18 months after the date of enactment of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission, in consultation with the Secretary of the Treasury and the Director of the Cybersecurity and Infrastructure Security Agency, shall develop comprehensive, principles-based guidance relating to cybersecurity for crypto asset intermediaries that account for, with respect to such a crypto asset intermediary—

(1) the internal governance, and organizational culture, of the cybersecurity program of the crypto asset intermediary;

(2) security operations of the crypto asset intermediary, including threat identification, incident response, and mitigation;

(3) risk identification and measurement by the crypto asset intermediary;

(4) the mitigation of risk by the crypto asset intermediary, including policies of the crypto asset intermediary, controls implemented by the crypto asset intermediary, change management with respect to the crypto asset intermediary, and the supply chain integrity of the crypto asset intermediary;

(5) assurance provided by, and testing conducted by, the crypto asset intermediary, including penetration testing and independent audits so conducted; and

(6) the potential for crypto asset intermediaries to be used to facilitate illicit activities, including sanctions avoidance.

Not later than 18 months after the date of enactment of this Act, the Securities and Exchange Commission and the Commodity Futures Trading Commission, in consultation with industry and the Director of the Cybersecurity and Infrastructure Security Agency, shall adopt plain-language cybersecurity guidance for customers to safely transact in crypto assets.

Section 127 of Public Law 91–508 (12 U.S.C. 1957) is amended by inserting in relation to a transaction principally composed of crypto assets or after committed.

Not later than 2 years after the date of enactment of this Act, the Secretary of the Treasury, in consultation with the Conference of State Bank Supervisors and the Federal Financial Institutions Examination Council, shall establish a risk-focused examination and review process for money service businesses, as defined in section 1010.100 of title 31, Code of Federal Regulations, to assess—

(1) the adequacy of reporting obligations and anti-money laundering programs under subsections (g) and (h) of section 5318 of title 31, United States Code, respectively as applied to those businesses; and

(2) compliance of those businesses with anti-money laundering and countering the financing of terrorism requirements under subchapter II of chapter 53 of title 31, United States Code.

Not later than 2 years after the date of enactment of this Act, the Securities and Exchange Commission shall establish a dedicated risk-focused examination and review process for entities regulated by the Commission to assess—

(1) the adequacy of reporting obligations and anti-money laundering programs under subsections (g) and (h) of section 5318 of title 31, United States Code, respectively as applied to those entities; and

(2) compliance of those entities with anti-money laundering and countering the financing of terrorism requirements under subchapter II of chapter 53 of title 31, United States Code.

Not later than 2 years after the date of enactment of this Act, the Commodity Futures Trading Commission shall establish a dedicated risk-focused examination and review process for entities regulated by the Commodity Futures Trading Commission to assess—

(1) the adequacy of reporting obligations and anti-money laundering programs under subsections (g) and (h) of section 5318 of title 31, United States Code, respectively, as applied to those entities; and

(2) compliance of those entities with anti-money laundering and countering the financing of terrorism requirements under subchapter II of chapter 53 of title 31, United States Code.

In this section, the term crypto asset kiosk means a stand-alone machine, including a crypto asset automated teller machine, which facilitates the buying, selling, or exchange of crypto assets.

Beginning not later than 2 years after the date of enactment of this Act, the Director of the Financial Crimes Enforcement Network of the Department of the Treasury shall require crypto asset kiosk owners and administrators to submit and update the physical addresses of the kiosks owned or operated by the owner or administrator, as applicable, once every 120 days.

Not later than 2 years after the date of enactment of this Act, the Director of the Financial Crimes Enforcement Network of the Department of the Treasury shall issue rules requiring crypto asset kiosk owners and administrators to verify the identity of each customer using a valid form of government-issued identification or other documentary method, as determined by the Secretary of the Treasury.

Not later than 180 days after the date of enactment of this Act, the Director of the Financial Crimes Enforcement Network of the Department of the Treasury shall issue a public report identifying unlicensed kiosk operators and administrators, including identification of known unlicensed operators and estimates of the number and locations of suspected unlicensed operators, as applicable.

Not later than 1 year after the date of enactment of this Act, the Drug Enforcement Administration shall issue a report to Congress identifying recommendations to reduce drug trafficking with crypto asset kiosks.

In this section:

The term appropriate congressional committees means—

(A) the Committee on Banking, Housing, and Urban Affairs, the Committee on Homeland Security and Governmental Affairs, the Committee on the Judiciary, the Select Committee on Intelligence, and the Committee on Foreign Relations of the Senate; and

(B) the Committee on Financial Services, the Committee on Homeland Security, the Committee on the Judiciary, the Permanent Select Committee on Intelligence, and the Committee on Foreign Affairs of the House of Representatives.

The term distributed ledger intelligence companies means any business providing software, research, or other services such as but not limited to distributed ledger tracing tools, geofencing, transaction screening, the collection of business data, and sanctions screening, which supports private and public sector investigations and risk management activities involving cryptographically secured distributed ledgers or any similar analogue.

The term foreign terrorist organization means an organization that is designated as a foreign terrorist organization under section 219 of the Immigration and Nationality Act (8 U.S.C. 1189).

The term illicit use includes fraud, darknet marketplace transactions, money laundering, the purchase and sale of illicit goods, sanctions evasion, theft of funds, funding of illegal activities, transactions related to child sexual abuse material, and any other financial transaction involving the proceeds of specified unlawful activity (as defined in section 1956(c) of title 18, United States Code).

The term terrorist includes a person carrying out domestic terrorism or international terrorism (as those terms are defined in section 2331 of title 18, United States Code).

The term Working Group means the Independent Financial Technology Working Group to Combat Terrorism and Illicit Financing established under subsection (b).

There is established the Independent Financial Technology Working Group to Combat Terrorism and Illicit Financing, which shall consist of the following:

(1) The Secretary of the Treasury, acting through the Under Secretary for Terrorism and Financial Intelligence, who shall serve as the chair of the Working Group.

(2) A senior-level representative from each of the following:

(A) Each of the following components of the Department of the Treasury:

(i) The Financial Crimes Enforcement Network.

(ii) The Internal Revenue Service.

(iii) The Office of Foreign Assets Control.

(B) The Department of Justice and each of the following components of the Department:

(i) The Federal Bureau of Investigation.

(ii) The Drug Enforcement Administration.

(C) The Department of Homeland Security and the United States Secret Service.

(D) The Department of State.

(3) Five individuals appointed by the Under Secretary for Terrorism and Financial Intelligence to represent the following:

(A) Financial technology companies.

(B) Distributed ledger intelligence companies.

(C) Financial institutions.

(D) Institutions or organizations engaged in research.

The Working Group shall—

(1) conduct independent research on terrorist and illicit use of new financial technologies, including crypto assets;

(2) analyze how crypto assets and emerging technologies may bolster the national security and economic competitiveness of the United States in financial innovation; and

(3) develop legislative and regulatory proposals to improve anti-money laundering, counter-terrorist, and other counter-illicit financing efforts in the United States.

Not later than 1 year after the date of enactment of this Act, and annually for the 2 years thereafter, the Working Group shall submit to the Secretary of the Treasury, the heads of each agency represented in the Working Group pursuant to subsection (b)(2), and the appropriate congressional committees a report containing the findings and determinations made by the Working Group in the previous year and any legislative and regulatory proposals developed by the Working Group.

Before the date on which the Working Group terminates under subsection (f)(1), the Working Group shall submit to the appropriate congressional committees a final report detailing the findings, recommendations, and activities of the Working Group.

Members of the Working Group shall serve without pay, but shall receive travel expenses in accordance with sections 5702 and 5703 of title 5, United States Code.

The Working Group shall, subject to paragraph (3), terminate on the date that is 4 years after the date of the enactment of this Act.

On the date on which the Working Group terminates under paragraph (1)—

(A) all authorities granted to the Working Group under this section shall expire, subject to paragraph (3); and

(B) any funds appropriated for the Working Group that are available for obligation as of that date shall be returned to the Treasury.

The termination of the Working Group under paragraph (1) and the expiration of authorities under paragraph (2) shall not affect any investigations, research, or other activities of the Working Group ongoing as of the date on which the Working Group terminates under paragraph (1). Such investigations, research, and activities may continue until their completion.

Not later than 180 days after the date of the enactment of this section, the President, acting through the Secretary of the Treasury, and in consultation with the head of each agency represented on the Working Group under subsection (b), shall submit to the appropriate congressional committees a report that describes—

(A) to the extent not currently disclosed in other reports, the potential uses of crypto assets and other related emerging technologies by states, non-state actors, and foreign terrorist organizations to evade sanctions, finance terrorism, or launder monetary instruments, and threaten United States national security; and

(B) a strategy how the United States will mitigate and prevent the illicit use of crypto assets and other related emerging technologies.

The report required by paragraph (1) shall be submitted in unclassified form, but may include a classified annex.

The unclassified portion of the report required by paragraph (1) shall be made available to the public and posted on a publicly accessible website of the Department of the Treasury—

(i) in precompressed, easily downloadable versions, in all appropriate formats; and

(ii) in machine-readable format, if applicable.

In preparing the report required by paragraph (1), the President may utilize any credible publication, database, or web-based resource, and any credible information compiled by any government agency, nongovernmental organization, or other entity that is made available to the President.

Not later than 2 years after the date of the enactment of this Act, the Secretary of the Treasury shall brief the appropriate congressional committees on the implementation of the strategy required by subsection (g)(1).

Not later than 120 days after the date of the enactment of this Act, the Secretary of the Treasury shall adopt guidance clarifying the sanctions compliance responsibilities and liability of an issuer of a payment stablecoin with respect to downstream transactions relating to the stablecoin that take place after the stablecoin is first provided to a customer of the issuer.

Not later than 1 year after the date of enactment of this Act, the Director of the Financial Crimes Enforcement Network of the Department of the Treasury 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 that analyzes the following issues:

(1) Current (as of the date on which the report is submitted) typologies of crypto asset mixers and tumblers and historical transaction volume.

(2) Estimates of the percentage of transactions relating to mixers and tumblers which are used by actors engaged in illicit finance.

(3) An assessment of potential non-illicit uses of mixers and tumblers described in paragraph (1).

(4) Analysis of regulatory approaches employed by other jurisdictions relating to mixers and tumblers.

(5) Recommendations for legislation or regulation relating to mixers and tumblers.

Section 310 of title 31, United States Code, is amended—

(1) by redesignating subsections (k) and (l) as subsections (l) and (m), respectively; and

(2) by inserting after subsection (j) the following:

There is established within the Financial Crimes Enforcement Network an Innovation Laboratory to promote regulatory dialogue, data sharing between the Financial Crimes Enforcement Network and financial companies, and an assessment of potential changes in law, rules, or policies to facilitate the appropriate supervision of financial technology and the laws under the jurisdiction of the bureau.

The Innovation Officer appointed within the Financial Crimes Enforcement Network under section 6208 of the Anti-Money Laundering Act of 2020 (31 U.S.C. 5311 note) shall manage the Innovation Laboratory established under paragraph (1).

The Innovation Laboratory established under paragraph (1) shall, as appropriate, conduct pilot projects with financial companies to more effectively facilitate the supervision of financial technology, consistent with applicable law.

Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended—

(1) in paragraph (9), by striking and frozen concentrated orange juice and inserting frozen concentrated orange juice, and a crypto asset (consistent with section 2(c)(2)(F));

(2) by redesignating paragraphs (15) through (37), (38), (39), and (40) through (51) as paragraphs (18) through (40), (42), (43), and (45) through (56), respectively;

(3) by inserting after paragraph (14) the following:

Except as provided in subparagraph (B), the term crypto asset has the meaning given the term in section 9801 of title 31, United States Code.

The term crypto asset does not include an asset that provides the holder of the asset with any of the following rights in a business entity:

(i) A debt or equity interest in that entity.

(ii) Liquidation rights with respect to that entity.

(iii) An entitlement to an interest or dividend payment from that entity.

(iv) Any other financial interest in that entity.

The term crypto asset exchange means a trading facility that lists for trading at least 1 crypto asset.

The term decentralized crypto asset exchange means software that—

(i) comprises predetermined and publicly disclosed code deployed to a public distributed ledger;

(ii) permits a user or group of users to create a pool or group of pools for crypto assets;

(iii) enables a user or group of users to conduct crypto asset transactions from a pool or group of pools, with such transactions occurring pursuant to the code described in clause (i); and

(iv) no person, or group of persons, known to one another who have entered into an agreement (implied or otherwise) to act in concert, can unilaterally control or cause to control the software protocol through altering transactions, functions, or actions on the protocol, or blocking or approving transactions on the protocol.

For the purposes of subparagraph (A)(iv), the term control shall not include mining, validation, or the communication of transactions to a distributed ledger.;

(4) in paragraph (31)(A)(i) (as so redesignated)—

(A) in subclause (I)—

(i) in item (aa)—

(I) in subitem (EE), by striking or at the end; and

(II) by adding at the end the following:

(GG) the purchase or sale of a crypto asset that is traded on or subject to the rules of a registered entity;

(ii) in item (bb), by striking and at the end and inserting or; and

(iii) by adding at the end the following:

(cc) acting as a counterparty (not on a principal basis) to any cash or spot agreement, contract, or transaction involving a crypto asset, which may include a payment stablecoin, with a person who is not an eligible contract participant, unless the activity is—

(AA) conducted in compliance with the laws of the State in which the activity occurs;

(BB) subject to regulation by another Federal authority; or

(CC) separately regulated under this Act; and; and

(B) in subclause (II), by striking items (aa) or (bb) and inserting item (aa), (bb), or (cc);

(5) by inserting after paragraph (40) (as so redesignated) the following:

The term payment stablecoin has the meaning given the term in section 9801 of title 31, United States Code.;

(6) by inserting after paragraph (43) (as so redesignated) the following:

The term registered crypto asset exchange means a crypto asset exchange registered under section 5i.;

(7) in paragraph (45) (as so redesignated)—

(A) in subparagraph (E), by striking and at the end;

(B) by redesignating subparagraph (F) as subparagraph (G); and

(C) by inserting after subparagraph (E) the following:

(F) a registered crypto asset exchange; and; and

(8) in paragraph (56)(B)(i) (as so redesignated), by inserting or a decentralized crypto asset exchange after execution algorithm.

Section 4g of the Commodity Exchange Act (7 U.S.C. 6g) is amended—

(1) in subsection (a), by inserting crypto assets or before commodities; and

(2) in subsection (d), in the second sentence, by striking commodity futures and inserting commodities.

Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) is amended—

(A) in subparagraph (D)(ii)—

(i) in subclause (III), in the matter preceding item (aa), by inserting of a commodity, other than a crypto asset, after sale;

(ii) by redesignating subclauses (IV) and (V) as subclauses (V) and (VI), respectively; and

(iii) by inserting after subclause (III) the following:

(IV) a contract of sale of a crypto asset that—

(aa) results in actual delivery within 2 days or such other period as the Commission may determine by rule based upon the typical commercial practice in cash or spot markets for the crypto asset involved; or

(bb) is executed on or subject to the rules of a registered crypto asset exchange or with a registered futures commission merchant;; and

(B) by adding at the end the following:

Subject to sections 6d and 12(e) and section 403 of the Commodity Futures Modernization Act of 2000 (7 U.S.C. 27a) and except as provided in subclauses (II) and (III), the Commission shall have exclusive jurisdiction over any agreement, contract, or transaction involving a contract of sale of a crypto asset in or affecting interstate commerce, including—

(aa) ancillary assets that are in compliance with the requirements of section 42 of the Securities Exchange Act of 1934; and

(bb) all activities relating to a payment stablecoin conducted by an entity registered under this Act, including brokering, trading, and custodial activities relating to payment stablecoins.

Subclause (I) shall not apply to specified periodic reporting requirements made by an issuer that provided the holder of a security with an ancillary asset under section 42(b)(4) of the Securities Exchange Act of 1934 and the security that constitutes an investment contract (within the meaning of section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1))) with respect to that ancillary asset.

The Commission shall only exercise jurisdiction over an agreement, contract, or transaction involving a contract of sale of a crypto asset that is commercially fungible, which shall not include digital collectibles and other unique crypto assets.

Nothing in this subparagraph authorizes the Commission to issue any rule regarding any agreement, contract, or transaction that is not offered, solicited, traded, facilitated, executed, cleared, reported, or otherwise dealt in—

(I) on or subject to the rules of a registered entity (with the exception of entities required to register under this Act); or

(II) by any other entity registered by the Commission.

Clause (i) shall not apply to custodial activities with respect to a crypto asset of an entity supervised or regulated by a State or other Federal regulatory agency.

Section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)) is amended, in the first sentence, by striking section 19 of this Act and inserting subsection (c)(2)(F) or section 19.

Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended by adding at the end the following:

Each futures commission merchant shall hold customer money, assets, and property in a manner to minimize the customer’s risk of loss of, or unreasonable delay in the access to, the money, assets, and property.

A futures commission merchant shall hold the property of a customer of the futures commission merchant with a separate licensed, chartered, or registered entity subject to regulation or supervision by 1 of the following agencies:

(i) The Commission.

(ii) The Securities and Exchange Commission.

(iii) An appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)).

(iv) A State bank supervisor (as defined in that section).

(v) An appropriate foreign governmental authority in the home country of the custodian.

In this paragraph, the term crypto asset customer means a customer involved in a cash or spot, leveraged, margined, or financed crypto asset transaction, which may include a payment stablecoin, in which the futures commission merchant is acting as the counterparty.

A futures commission merchant shall treat and deal with all money, assets, and property of any crypto asset customer received as belonging to the customer.

Money, assets, and property of a crypto asset customer described in clause (i)—

(I) shall be separately accounted for; and

(II) shall not be—

(aa) commingled with the funds of the futures commission merchant; or

(bb) used to margin, secure, or guarantee any trades or accounts of any customer or person other than the person for whom the money, assets, or property are held.

Notwithstanding subparagraph (B), money, assets, and property of a crypto asset customer may, for the purposes described in subclause (II), be commingled and deposited in the same account or accounts with an entity described in paragraph (1)(B).

Notwithstanding subparagraph (B), the share of the money, assets, and property described in subclause (I) as in the normal course of business is necessary to margin, guarantee, secure, transfer, adjust, or settle a crypto asset transaction with a registered entity may be withdrawn and applied to those purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the crypto asset transaction.

Notwithstanding subparagraph (B), in accordance with such terms and conditions as the Commission may prescribe by rule or order, any money, assets, or property of a crypto asset customer may be commingled and deposited in customer accounts with any other money, assets, or property received by the futures commission merchant and required by the Commission to be separately accounted for and treated and dealt with as belonging to the crypto asset customer.

Money of a crypto asset customer may be invested—

(i) in—

(I) obligations of the United States;

(II) general obligations of any State or of any political subdivision of a State that are investment-grade;

(III) obligations fully guaranteed as to principal and interest by the United States; or

(IV) any other investment that the Commission may by rule prescribe; and

(ii) in accordance with such rules and subject to such conditions as the Commission may prescribe.

It shall be unlawful for any person, including any derivatives clearing organization or depository institution, that has received any money, assets, or property for deposit in a separate account or accounts as required by subparagraph (B) to hold, dispose of, or use any of the money, assets, or property that belongs to the depositing futures commission merchant or any person other than the crypto asset customer of the futures commission merchant.

A customer shall have the right to waive any requirement under this subsection by affirmatively electing, in writing to the futures commission merchant, to waive the requirement.

The Commission may, by rule, establish notice and disclosure requirements, segregation requirements, investment limitations, and other rules relating to the waiving of any requirement under this subsection that are reasonably necessary to protect customers, including eligible contract participants, non-eligible contract participants, and any other class of customers.

Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) (as amended by subsection (b)) is amended by adding at the end the following:

Prior to conducting trading activity (including routing orders and directed trading) through a decentralized crypto asset exchange, or otherwise providing customer access to a decentralized crypto asset exchange, a futures commission merchant shall implement risk management standards with respect to trading activity through that decentralized crypto asset exchange.

A futures commission merchant shall—

(A) implement an effective risk-based procedure for determining whether to execute, reject, or suspend an incoming or outgoing transaction relating to a decentralized crypto asset exchange, including a determination based on suspected money laundering, sanctions evasion, fraud, or market manipulation;

(B) conduct an effective risk-based analysis of the code of the decentralized crypto asset exchange to determine whether crypto asset transactions can occur on the exchange securely, consistently, and immutably;

(C) verify that the code for the decentralized crypto asset exchange is widely available to the public;

(D) verify that there are appropriate developer documents relating to the decentralized crypto asset exchange that appropriately disclose all risks of the software;

(E) conduct an effective risk analysis with respect to the decentralized crypto asset exchange, including—

(i) money laundering and sanctions evasion;

(ii) settlement;

(iii) fraud and market manipulation; and

(iv) operational and cybersecurity risk, including—

(I) the use of multi-signature wallets;

(II) integration with third-party software or vendors;

(III) any material efforts to alter the functionality of the protocol; and

(IV) all other material risks;

(F) implement robust policies and procedures to mitigate the risks identified in subparagraph (E);

(G) disclose the risks identified in subparagraph (E) using plain language to customers;

(H) maintain robust capability to detect market manipulation, fraud, money laundering, and sanctions evasion occurring on the decentralized crypto asset exchange, including through the use of tools that will properly target those risks, including through distributed ledger intelligence companies;

(I) ensure that the merchant is not trading with a decentralized crypto asset exchange on a principal basis, but solely on an agency basis at the request of a customer; and

(J) consistent with this subsection, implement other standards the Commission may require by rule.

The Commission shall adopt risk management standards relating to money laundering, customer identification and sanctions for self-hosted wallets that conduct transactions with a futures commission merchant.

In this subsection, the term self-hosted wallet means a digital interface used to secure and transfer crypto assets, in which the owner of the assets retains independent control in a manner that is secured by that interface.

A registered futures commission merchant shall not act as a counterparty in any agreement, contract, or transaction involving a crypto asset that has not been listed for trading on a registered crypto asset exchange.

The Commission may require a registered futures commission merchant to comply with other standards of section 5i, including the core principles described in that section, if appropriate based on the activities and risk profile of the merchant.

Section 5c of the Commodity Exchange Act (7 U.S.C. 7a–2) is amended—

(1) in subsection (a)(1), by striking 5(d) and 5b(c)(2) and inserting 5(d), 5b(c)(2), and 5i(c);

(2) in subsection (b), by inserting registered crypto asset exchange, before derivatives each place it appears; and

(3) in subsection (c)—

(A) in paragraph (2), by inserting or participants before (in a;

(B) in paragraph (4)(B), by striking 1a(10) and inserting 1a(9); and

(C) in paragraph (5), by adding at the end the following:

In the case of a listing for trading a crypto asset that has not previously been listed for trading on another registered entity—

(I) paragraphs (2) and (3) shall apply as if the listing were a rule; and

(II) paragraph (2) shall be applied by substituting 20 business days for 10 business days.

During the 18-month period beginning on the date of the registration of the first crypto asset exchange, the Commission shall have an additional 20 business days to review any certification under clause (i).

In conducting a review under clause (i), the Commission shall consider any comments provided by the Securities and Exchange Commission with respect to the legal classification of a crypto asset.

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

In this section, the term customer means any person that maintains an account for the trading of crypto assets or payment stablecoins directly with a registered crypto asset exchange (other than a person that is owned or controlled, directly or indirectly, by the registered crypto asset exchange).

Any trading facility that offers or seeks to offer a market in crypto assets or payment stablecoins shall register with the Commission as a crypto asset exchange by submitting to the Commission an application in such form and containing such information as the Commission may require for the purpose of making the determinations required for approval under subsections (d) and (f).

A registered designated contract market or registered swap execution facility that fulfills the requirements of this section may elect to be considered a registered crypto asset exchange, in such form and manner as the Commission shall prescribe.

A registered crypto asset exchange shall be registered with the Secretary of the Treasury as a money services business and with a customer protection and market integrity authority registered under section 9809 of title 31, United States Code.

A registered crypto asset exchange may make available for trading any crypto asset or payment stablecoin, that is not readily susceptible to manipulation, subject to this subsection.

An ancillary asset shall not be made available for trading on a registered crypto asset exchange unless the asset is in compliance with section 42 of the Securities Exchange Act of 1934.

A registered crypto asset exchange shall have a duty to confirm an ancillary asset is in compliance before making the asset available for trading.

The Commission may make, promulgate, and enforce such additional rules governing margined, leveraged, or financed transactions as are reasonably necessary to protect market participants and promote the orderly settlement of transactions with respect to—

(A) disclosure;

(B) recordkeeping;

(C) capital, margin, and other financial resources;

(D) reporting;

(E) business conduct;

(F) documentation; and

(G) such other matters as the Commission determines to be necessary.

Registration as a crypto asset exchange shall not permit a trading facility to offer any contract of sale of a commodity for future delivery, option, or swap for trading without also being registered as a designated contract market or swap execution facility.

A registered crypto asset exchange shall not conduct proprietary trading, but may conduct market making under standards established by the Commission by rule.

To be registered, and maintain registration, as a crypto asset exchange, the registered crypto asset exchange shall comply with—

(i) the core principles described in this subsection, and annually certify such compliance; and

(ii) any requirement that the Commission may impose by rule pursuant to section 8a(5).

Unless otherwise determined by the Commission by rule, a registered crypto asset exchange described in subparagraph (A) shall have reasonable discretion in establishing the manner in which the registered crypto asset exchange complies with the core principles described in this subsection.

A registered crypto asset exchange shall—

(A) establish and enforce compliance with 1 or more rules of the registered crypto asset exchange, including—

(i) the terms and conditions of the trades traded or processed on or through the registered crypto asset exchange; and

(ii) any limitation on access to the registered crypto asset exchange;

(B) establish and enforce compliance with trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce violations of those rules, including means—

(i) to provide market participants with impartial access to the market; and

(ii) to capture information that may be used in establishing whether rule violations have occurred; and

(C) establish rules governing the operation of the registered crypto asset exchange, including rules specifying trading procedures to be used in entering and executing orders traded or posted on the registered crypto asset exchange.

A registered crypto asset exchange shall permit trading only in assets that are not readily susceptible to manipulation.

A registered crypto asset exchange shall not permit trading in a crypto asset or payment stablecoin if it is reasonably likely that—

(i) the transaction history of the asset can be fraudulently altered by any person or group of persons acting collectively; or

(ii) the functionality or operation of the asset can be materially altered by any person or group of persons under common control.

In assessing a crypto asset or payment stablecoin under this paragraph, a registered crypto asset exchange shall consider—

(i) the purpose and use of the asset;

(ii) the creation or release process of the asset;

(iii) the consensus mechanism of the asset;

(iv) the governance structure of the asset;

(v) the participation and distribution of the asset;

(vi) the current and proposed functionality of the asset;

(vii) the legal classification of the asset; and

(viii) any other factor required by the Commission.

A registered crypto asset exchange shall establish standards and procedures that are designed to protect and ensure the safety of customer money, assets, and property.

A registered crypto asset exchange shall hold customer money, assets, and property in a manner to minimize the customer’s risk of loss of, or unreasonable delay in the access to, the money, assets, and property.

A registered crypto asset exchange shall treat and deal with all money, assets, and property of any customer received as belonging to the customer.

Money, assets, and property of a customer described in subclause (I)—

(aa) shall be separately accounted for; and

(bb) shall not be—

(AA) commingled with the funds of the registered crypto asset exchange; or

(BB) used to margin, secure, or guarantee any trades or accounts of any customer or person other than the person for whom the money, assets, or property are held.

Notwithstanding clause (ii), money, assets, and property of customers of a registered crypto asset exchange may, for the purposes described in item (bb), be commingled and deposited with an entity described in section 4d(i)(1)(B).

Notwithstanding clause (ii), the share of the money, assets, and property described in item (aa) as in the normal course of business is necessary to margin, guarantee, secure, transfer, adjust, or settle a crypto asset transaction with a registered entity may be withdrawn and applied to those purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the crypto asset transaction.

Notwithstanding clause (ii), in accordance with such terms and conditions as the Commission may prescribe by rule or order, any money, assets, or property of the customers of a registered crypto asset exchange may be commingled and deposited in customer accounts with any other money, assets, or property received by the registered crypto asset exchange and required by the Commission to be separately accounted for and treated and dealt with as belonging to the customer of the registered crypto asset exchange.

Money referred to in subparagraph (B)(ii)(I) may be invested—

(i) in—

(I) obligations of the United States;

(II) general obligations of any State or of any political subdivision of a State that are investment-grade;

(III) obligations fully guaranteed as to principal and interest by the United States; or

(IV) any other investment that the Commission may by rule prescribe; and

(ii) in accordance with such rules and subject to such conditions as the Commission may prescribe.

It shall be unlawful—

(i) for any registered crypto asset exchange that has received any customer money, assets, or property for custody to dispose of, or use any of the money, assets, or property as belonging to the registered crypto asset exchange; or

(ii) for any other person, including any other registered crypto asset exchange or custodian that has received any customer money, assets, or property for deposit, to hold, dispose of, or use any of the money, assets, or property as belonging to—

(I) the registered crypto asset exchange that deposited the money, assets, or property; or

(II) any person other than the customers of the registered crypto asset exchange.

A customer shall have the right to waive any requirement under subparagraph (B) by affirmatively electing, in writing to the registered crypto asset exchange, to waive the requirement.

The Commission may, by rule, establish notice and disclosure requirements, segregation requirements, investment limitations, and other rules relating to the waiving of any requirement under this paragraph that is reasonably necessary to protect customers, including eligible contract participants, non-eligible contract participants, or any other class of customers.

A registered crypto asset exchange shall provide a competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process of trading on the registered crypto asset exchange.

A registered crypto asset exchange shall establish and enforce compliance with rules—

(i) to protect markets and market participants from abusive practices committed by any party, including abusive practices committed by a party acting as an agent for a participant; and

(ii) to promote fair and equitable trading on the registered crypto asset exchange.

A registered crypto asset exchange shall—

(i) establish and enforce compliance with rules or terms and conditions defining, or specifications detailing—

(I) trading procedures to be used in entering and executing orders traded on or through the facilities of the registered crypto asset exchange; and

(II) procedures for trade processing of crypto assets on or through the facilities of the registered crypto asset exchange; and

(ii) monitor trading in crypto assets to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, and compliance, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.

A registered crypto asset exchange shall—

(A) establish and enforce rules that will allow the registered crypto asset exchange to obtain any necessary information to perform any of the functions described in this section;

(B) provide the information to the Commission on request; and

(C) have the capacity to carry out such international information-sharing agreements as the Commission may require.

A registered crypto asset exchange shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission or a registered entity, as is necessary and appropriate, including the authority to facilitate the liquidation or transfer of open positions in any crypto asset or to suspend or curtail trading in a crypto asset.

A registered crypto asset exchange shall provide to the Commission information that is determined by the Commission to be necessary to perform any responsibility of the Commission under this Act.

A registered crypto asset exchange shall make public timely information on price, trading volume, and other trading data on crypto assets to the extent prescribed by the Commission.

A registered crypto asset exchange may make trading data freely accessible to the public under rules established by the Commission.

A registered crypto asset exchange shall be required to have the capacity to electronically capture and transmit trade information with respect to transactions executed on the registered crypto asset exchange.

A registered crypto asset exchange shall—

(i) maintain records of all activities relating to the business of the registered crypto asset exchange, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years;

(ii) report to the Commission, in a form and manner acceptable to the Commission, such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under this Act; and

(iii) keep any records relating to ancillary assets open to inspection and examination by the Securities and Exchange Commission.

Subject to section 8, and on request, the Commission shall share information collected under subparagraph (A) with—

(i) a customer protection and market integrity authority or other entity delegated regulatory and disciplinary authority by a governmental agency;

(ii) the Securities and Exchange Commission;

(iii) an appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813));

(iv) a State bank supervisor (as defined in that section);

(v) a State securities or commodities regulator;

(vi) the Financial Stability Oversight Council;

(vii) the Department of Justice; and

(viii) any other person that the Commission determines to be appropriate, including—

(I) foreign financial supervisors (including foreign futures authorities);

(II) foreign central banks; and

(III) foreign ministries.

Before the Commission may share information with any entity described in subparagraph (B), the Commission shall enter into a written agreement with each entity stating that the entity shall abide by the confidentiality requirements described in section 8 relating to the information on crypto asset transactions that is provided.

Each registered crypto asset exchange shall provide to the Commission (including any designee of the Commission) information under subparagraph (A) in such form and at such frequency as is required by the Commission.

Unless necessary or appropriate to achieve the purposes of this Act, a registered crypto asset exchange shall not—

(A) adopt any rules or take any actions that result in any unreasonable restraint of trade; or

(B) impose any material anticompetitive burden on trading.

A registered crypto asset exchange shall—

(A) establish and enforce rules to minimize conflicts of interest in the decisionmaking process of the registered crypto asset exchange;

(B) establish a process for resolving conflicts of interest described in subparagraph (A); and

(C) disclose fee arrangements from affiliates and third-party service providers, and crypto assets traded on the exchange in which the exchange may have a financial interest.

A registered crypto asset exchange shall have adequate financial, operational, and managerial resources, as determined by the Commission, to discharge each responsibility of the registered crypto asset exchange.

A registered crypto asset exchange shall possess financial resources that, at a minimum, exceed the total amount that would enable the registered crypto asset exchange to conduct an orderly wind-down of the activities of the registered crypto asset exchange.

The Commission may require such additional financial resources as are necessary to enable a registered crypto asset exchange that offers margined, leveraged, or financed transactions to fulfill the customer obligations of the registered crypto asset exchange.

A registered crypto asset exchange shall—

(i) establish governance arrangements that are transparent to fulfill public interest requirements; and

(ii) at all times, maintain a chief compliance officer and an appropriate compliance and risk management function.

A registered crypto asset exchange shall establish and enforce appropriate fitness standards for—

(i) directors;

(ii) any individual or entity with legal or technological authority to execute the settlement activities of the registered crypto asset exchange;

(iii) any individual or entity with direct access to any custodian affiliated with the registered crypto asset exchange;

(iv) any entity offering affiliated services for the registered crypto asset exchange; and

(v) any party affiliated with any individual or entity described in clauses (i) through (iv).

A registered crypto asset exchange shall—

(A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational and security risks, through the development of appropriate controls and procedures and automated systems that—

(i) are reliable and secure; and

(ii) have adequate scalable capacity;

(B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for—

(i) the timely recovery and resumption of operations; and

(ii) the fulfillment of the responsibilities and obligations of the registered crypto asset exchange; and

(C) periodically conduct tests to verify that the backup resources of the registered crypto asset exchange are sufficient to ensure continued—

(i) order processing and trade matching;

(ii) price reporting;

(iii) market surveillance; and

(iv) maintenance of a comprehensive and accurate audit trail.

Prior to conducting trading activity (including routing orders and directed trading) through a decentralized crypto asset exchange, or otherwise providing customer access to a decentralized crypto asset exchange, a crypto asset exchange shall implement risk management standards with respect to its trading activity using that decentralized crypto asset exchange.

A crypto asset exchange shall—

(i) implement an effective risk-based procedure for determining whether to execute, reject, or suspend an incoming or outgoing transaction relating to a decentralized crypto asset exchange, including a determination based on suspected money laundering, sanctions evasion, fraud, or market manipulation;

(ii) conduct an effective risk-based analysis of the code of the decentralized crypto asset exchange to determine whether crypto asset transactions can occur on the exchange securely, consistently, and immutably;

(iii) verify that the code for the decentralized crypto asset exchange is widely available to the public;

(iv) verify that there are appropriate developer documents relating to the decentralized crypto asset exchange that appropriately disclose all risks of the software;

(v) conduct an effective risk analysis with respect to the decentralized crypto asset exchange, including—

(I) money laundering and sanctions evasion;

(II) settlement;

(III) fraud and market manipulation; and

(IV) operational and cybersecurity risk, including—

(aa) the use of multi-signature wallets;

(bb) integration with third-party software or vendors;

(cc) any material efforts to alter the functionality of the protocol; and

(dd) all other material risks;

(vi) implement robust policies and procedures to mitigate the risks identified under clause (v);

(vii) disclose the risks identified under clause (v) using plain language to customers;

(viii) maintain robust capability to detect market manipulation, fraud, money laundering, and sanctions evasion occurring on the decentralized crypto asset exchange, including through the use of alternative tools that will properly target those risks, including through distributed ledger intelligence companies;

(ix) ensure that the merchant is not trading with a decentralized crypto asset exchange on a principal basis, but solely on an agency basis at the request of a customer; and

(x) consistent with this subsection, implement other standards which may be required by the Commission by rule.

The Commission shall adopt risk management standards relating to money laundering, customer identification, and sanctions for self-hosted wallets that conduct transactions with a registered crypto asset exchange, which shall be consistent with standards under section 4d(k).

In this subsection, the term self-hosted wallet means a digital interface used to secure and transfer crypto assets, in which the owner of the assets retains independent control in a manner that is secured by that interface.

If a proceeding under section 5e results in the suspension or revocation of the registration of a crypto asset exchange, or if a crypto asset exchange withdraws from registration, the Commission, after providing notice to the crypto asset exchange, may apply to the district court of the United States for the judicial district in which the crypto asset exchange is located for the appointment of a trustee.

If the Commission applies to a court for appointment of a trustee under paragraph (1)—

(A) the court may take exclusive jurisdiction over—

(i) the crypto asset exchange; and

(ii) the records and assets of the crypto asset exchange, wherever those records and assets are located; and

(B) if the court takes jurisdiction under subparagraph (A), the court shall appoint the Commission, or a person designated by the Commission, as trustee with power to take possession and continue to operate or terminate the operations of the crypto asset exchange in an orderly manner for the protection of customers, subject to such terms and conditions as the court may prescribe.

A registered crypto asset exchange shall deposit with an entity described in section 4d(i)(1)(B) each crypto asset that is—

(1) the property of a customer of the registered crypto asset exchange;

(2) required to be held by the registered crypto asset exchange under subsection (c)(3) or (d)(12); or

(3) otherwise required by the Commission to be so held to reasonably protect customers or promote the public interest.

No person, acting directly or indirectly, or through or in concert with 1 or more persons, shall acquire control of a crypto asset exchange unless—

(A) the person has provided to the Commission prior notice of the proposed acquisition; and

(B) the Commission has not disapproved the acquisition during the 60-day period beginning on the date of the notice under subparagraph (A).

No person who has been approved to acquire control of a crypto asset exchange and who has maintained that control shall acquire, directly or indirectly, or through or in concert with 1 or more persons, voting securities of the exchange if the ownership, control, or power to vote of that person will increase from less than 25 percent to 25 percent or more of any class of voting securities of the exchange unless—

(A) the person has provided to the Commission prior notice of the proposed acquisition; and

(B) the Commission has not disapproved the acquisition during the 60-day period beginning on the date of the notice under subparagraph (A).

The Commission may, by rule, specify information relating to a proposed acquisition described in paragraph (1) or (2), which shall be submitted with an application.

As specified by the Commission, public notice of a proposed acquisition described in paragraph (1) or (2) shall be given at the time an application is filed.

The Commission shall approve a proposed acquisition described in paragraph (1) or (2) unless, by order, it finds either of the following:

(A) The proposed acquisition would pose an unacceptable risk to customers or to the operation of the exchange.

(B) The proposed acquisition would otherwise violate Federal law.

In this subsection, the term control means the power, directly or indirectly, to direct the management or policies of a crypto asset exchange, to vote 25 percent or more of any class of voting securities of the exchange or control in any manner the election of a majority of the directors of the exchange, as may be provided by rule.

Except as otherwise provided by Federal law, the Commission shall have exclusive jurisdiction over the regulation, supervision, and all other activities of a registered crypto asset exchange.

The Commission shall prescribe rules to implement this section.

Section 4f(c) of the Commodity Exchange Act (7 U.S.C. 6f(c)) is amended by adding at the end the following:

A registered crypto asset exchange shall not be required to register as a futures commission merchant for any activity for which the registered crypto asset exchange is regulated under section 5i.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) (as amended by section 404(a)) is amended by inserting after section 5i the following:

In this section, covered affiliate means, based on the totality of the facts and circumstances as determined by the Commission, a person with a substantial legal or financial relationship to an entity registered under this Act that is primarily engaged in crypto asset activities, based on the following factors:

(1) The degree to which conflicts of interest may be present, or the financial interests of the entity may come into conflict with the fiduciary duty of the entity to customers or the prudent operation of the entity.

(2) The legal relationship between the entity and the affiliate.

(3) The overall financing requirements of the entity and the affiliate, and the degree, if any, to which the entity and the affiliate are financially dependent on each other.

(4) The degree, if any, to which the entity or its customers rely on the affiliate for operational support or services in connection with the business of the entity.

(5) The level of market, credit, or other risk present in the activities of the affiliate.

(6) The extent to which the affiliate has the authority or the ability to cause a withdrawal of capital from the entity.

(7) Any other factor determined by the Commission by rule to be material.

In consultation with an entity registered under this Act, not later than 1 year after the date of enactment of this section, and not less frequently than 90 days before the examination of an entity by the Commission or a customer protection and market integrity authority registered under section 9809 of title 31, United States Code, the Commission shall designate the covered affiliates of the entity.

Each covered affiliate of the entity shall be required to provide to the Commission, by not later than the date on which an examination of the entity by the Commission or a customer protection and market integrity authority registered under section 9809 of title 31, United States Code, begins, the following:

(A) A description of all activities the affiliate is engaged with relating to the entity.

(B) The most recent audited financial statements of the affiliate.

(C) All legal agreements entered into between the affiliate and the entity.

(D) A description of all transactions between the affiliate and the entity since the last examination.

(E) Any other information that may be determined to be material by the Commission.

If the Commission finds that it is in the public interest and has good cause to believe it is necessary to protect the customers of an entity registered under this Act that is primarily engaged in crypto asset activities, the Commission may, by order—

(1) conduct an examination of a covered affiliate;

(2) require a person with control of an entity to divest or sever their relationship with the entity; or

(3) limit covered affiliates from providing services to an entity or entering into legal relationships or specified transactions with an entity.

Not later than 18 months after the date of enactment of this section, the Commission shall issue rules to implement this section.

Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended—

(1) in subsection (a)(2), by striking subsection 4c and inserting section 4c; and

(2) in subsection (e)—

(A) in paragraph (1), by inserting contracts for the sale of crypto assets, after options thereon,; and

(B) in paragraph (2), by inserting or contracts for the sale of crypto assets after options thereon.

Section 16(a) of the Commodity Exchange Act (7 U.S.C. 20(a)) is amended—

(1) in the first sentence, by striking which are the subject of futures contracts, and inserting under the jurisdiction of the Commission,; and

(2) in the second sentence, by striking futures markets. and inserting markets under the jurisdiction of the Commission..

Section 20(a) of the Commodity Exchange Act (7 U.S.C. 24(a)) is amended in paragraphs (1) and (2) by inserting crypto assets, payment stablecoins, after securities, each place it appears.

Section 101(6) of title 11, United States Code, is amended by inserting registered crypto asset exchange, as defined in section 1a of the Commodity Exchange Act, before foreign.

Section 556 of title 11, United States Code, is amended by inserting a registered crypto asset exchange, as defined in section 1a of the Commodity Exchange Act, before a contract.

Section 561 of title 11, United States Code, is amended by inserting, a registered crypto asset exchange, as defined in section 1a of the Commodity Exchange Act, after designated under the Commodity Exchange Act each place it appears.

Section 761 of title 11, United States Code, is amended—

(1) in paragraph (4)—

(A) in subparagraph (A), by inserting crypto asset, payment stablecoin, or a before commodity;

(B) in subparagraph (I), by striking or at the end;

(C) in subparagraph (J), by adding or at the end; and

(D) by adding at the end the following:

(K) a contract for the sale of a crypto asset or payment stablecoin by a registered crypto asset exchange;; and

(2) in paragraph (10)—

(A) in the matter preceding subparagraph (A)—

(i) by inserting a crypto asset, payment stablecoin, after a security,; and

(ii) by inserting crypto asset, payment stablecoin, after cash, security,;

(B) in subparagraph (A)—

(i) in clause (vi), by inserting a crypto asset, payment stablecoin after a security,; and

(ii) in clause (vii)—

(I) by inserting payment stablecoin or a crypto asset before held as property;

(II) by inserting payment stablecoin or crypto asset after such security; and

(III) by inserting payment stablecoin or crypto asset after based on a security; and

(C) in subparagraph (B)—

(i) by striking not including property and inserting “not including—

(i) property;

(ii) in clause (i), as so designated, by adding and at the end; and

(iii) by adding at the end the following:

(ii) money, assets, or property with respect to which any requirement under subsection (i) of section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is waived pursuant to paragraph (3) of that subsection, or any requirement under subparagraph (B) of paragraph (4) of section 5i(d) of that Act is waived pursuant to subparagraph (E) of that paragraph;.

Section 764(b)(1) of title 11, United States Code, is amended by inserting, crypto assets before, or other property.

Section 766 of title 11, United States Code, is amended—

(1) in subsection (b)(1), by striking physical commodity underlying and inserting commodity underlying;

(2) in subsection (c), by inserting crypto asset, payment stablecoin before or commodity contract each place the term appears;

(3) in subsection (d), by inserting crypto asset, payment stablecoin before or commodity contract each place the term appears;

(4) in subsection (f)—

(A) in striking and other property and inserting crypto assets, payment stablecoins and other property; and

(B) by striking or property and inserting, crypto assets, payment stablecoins or property;

(5) in subsection (g), by striking security or property and inserting security, crypto asset, payment stablecoin or property; and

(6) in subsection (h)(2), by inserting crypto assets, payment stablecoins, after customer securities,.

Section 206(a) of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is amended—

(1) in paragraph (5)(B)(ii), by striking or at the end;

(2) in paragraph (6), by striking the period at the end and inserting; or; and

(3) by adding at the end the following:

(7) a payment stablecoin issued by a depository institution under section 722A, except as provided under section 2(c)(2)(F) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(F)).

Section 5312(c)(1) of title 31, United States Code, is amended by adding at the end the following:

(B) A registered crypto asset exchange, as defined in section 1a of the Commodity Exchange Act.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding at the end the following:

Effective beginning October 1, 2024, the Commission may, by rule, collect fees—

(A) to fund expenses relating to regulation of crypto asset cash and spot markets; and

(B) that are designed to recover the costs to the Federal Government of the annual appropriation to the Commission by Congress.

Fees under paragraph (1) shall only be imposed—

(A) on registered entities engaged in cash or spot crypto asset activities; and

(B) in relation to the regulation of those activities under this Act.

Fees under paragraph (1) shall—

(A) be strictly related to the cost to the Commission of the regulation of crypto asset cash and spot markets;

(B) be reduced for newly registered entities with less than $100,000,000 in daily trading volume; and

(i) minimize negative impacts on market liquidity; and

(ii) maintain the efficiency, competitiveness, and financial integrity of crypto asset markets.

The Commission shall collect fees under this subsection in such manner and within such time as may be specified by the Commission by rule.

Not later than 60 days after the date on which a law providing a regular appropriation to the Commission for a fiscal year is enacted, the Commission shall adopt an order setting rates for fees to be collected under subsection (a) for that fiscal year.

The Commission shall publish in the Federal Register the order adopted under paragraph (1), including—

(A) projections on which the fees are based; and

(B) an explanation of the method used for calculating applicable fee rates.

Fees collected under subsection (a) for any fiscal year—

(A) shall be deposited and credited as offsetting collections to the account providing appropriations to the Commission; and

(B) shall not be collected or available for obligation for any fiscal year except to the extent provided in advance in appropriation Acts.

No fees collected under subsection (a) shall be deposited and credited as general revenue of the Treasury.

If a regular appropriation to the Commission has not been enacted on the first day of a fiscal year, the Commission shall continue to collect fees under this section at the rates in effect on September 30 of the preceding fiscal year.

Nothing in this section authorizes the imposition of fees on a registered entity relating to leveraged, margined, or financed transactions under this Act, including those activities relating to crypto assets.

Notwithstanding any other provision of law, the Commission may use appropriations otherwise made available by law to fund expenses relating to the regulation of crypto asset cash and spot markets.

Unless otherwise provided by law, fees collected under this section shall not exceed $30,000,000.

The authority under this section to impose and collect fees shall only be in effect during a period that a legislative authorization of the Commission is in effect, as otherwise provided by law.

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

In this section:

The term ancillary asset means an intangible, fungible asset that is offered, sold, or otherwise provided to a person in connection with the purchase and sale of a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)).

The term ancillary asset does not include an asset that provides the holder of the asset with any of the following rights in a business entity:

(i) A debt or equity interest in that entity.

(ii) Liquidation rights with respect to that entity.

(iii) An entitlement to an interest or dividend payment from that entity.

(iv) Any other financial interest in that entity.

The term business entity means—

(A) a corporation, limited liability company, or other entity that is created by filing a document with the Secretary of State of a State (or a similar office); or

(B) a foreign entity that is eligible for registration, or that is registered to do business, under the laws of a State or Indian Tribe.

The term foreign private issuer means a foreign issuer, other than a foreign government, except that the term does not include a foreign issuer that, as of the last business day of the most recently completed fiscal quarter of the issuer, satisfies the following conditions:

(A) More than 50 percent of the outstanding voting securities of the issuer are directly or indirectly owned by residents of the United States.

(B) Any of the following:

(i) The majority of the executive officers or directors of the issuer are citizens or residents of the United States.

(ii) More than 50 percent of the assets of the issuer are located in the United States.

(iii) The business of the issuer is principally administered in the United States.

Subject to paragraphs (4) and (5), an issuer engaged in business in or affecting interstate commerce, or that is organized outside of the United States and is not a foreign private issuer, that offers, sells, or otherwise provides a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)), and that provides or proposes to provide any holder of the security with an ancillary asset, shall be subject to the periodic disclosure requirements under subsection (c) for the 1-year period beginning on the date that is 180 days after the first date on which the security is offered, sold, or otherwise provided by the issuer, if—

(A) the average daily aggregate value of all ancillary assets offered, sold, or otherwise provided by the issuer in relation to the offer, sale, or provision of the security in all spot markets open to the public in the United States (based on the knowledge of the issuer after due inquiry) is greater than $5,000,000 for the 180-day period immediately succeeding the date of that first offer, sale, or provision; and

(B) during the 180-day period described in subparagraph (A), the issuer, or any person owning not less than 10 percent of any class of equity securities of the issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset.

Subject to paragraphs (4) and (5), an issuer that is engaged in business in or affecting interstate commerce, or that is organized outside of the United States and is not a foreign private issuer, that offers, sells, or otherwise provides a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)), and that provides the holder of the security with an ancillary asset in connection with the acquisition of the security, shall be subject to the periodic disclosure requirements under subsection (c) for a given fiscal year of that issuer, if, in the immediately preceding fiscal year of the issuer (or any portion thereof)—

(A) the average daily aggregate value of all trading in the ancillary asset in all spot markets open to the public in the United States was greater than $5,000,000, based on the knowledge of the issuer after due inquiry; and

(B) the issuer, or any person owning not less than 10 percent of any class of equity securities of the issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset.

Subject to paragraphs (4) and (5), an issuer that is engaged in business in or affecting interstate commerce, or that is organized outside of the United States and is not a foreign private issuer, that offers, sells, or otherwise provides a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)), and that provides the holder of the security with an ancillary asset before January 1, 2025, in connection with the acquisition of the security shall be subject to the periodic disclosure requirements under subsection (c) beginning in the first fiscal year of the issuer that begins on or after that date, if, in the immediately preceding fiscal year of the issuer—

(A) the average daily aggregate value of trading in the ancillary asset in all spot markets open to the public for which trading volume is generally available was greater than $5,000,000, based on the knowledge of the issuer after due inquiry; and

(B) the issuer, or any person owning not less than 10 percent of any class of equity securities of the issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset.

Notwithstanding any other provision of law, if an issuer issues a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)), is subject to paragraph (1), (2), or (3), and has complied with the periodic disclosure requirements under subsection (c), to the extent applicable, an ancillary asset owned by the issuer, or any person affiliated with the issuer, shall be presumed—

(i) to be a commodity, consistent with section 2(c)(2)(F) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(F)); and

(ii) not to be a security under—

(I) section 3(a);

(II) such section 2(a)(1);

(III) section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a));

(IV) section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)); or

(V) any applicable provision of State law.

A person who is not an issuer, an entity controlled by an issuer (including a person that acquires an ancillary asset from such an issuer for the purpose of resale or distribution of the ancillary asset), or a person acting at the direction or on the behalf of an issuer shall be not required to treat an ancillary asset provided by, or on behalf of, an issuer as a security under this Act or any provision of law described in subparagraph (A)(ii).

Subparagraph (A) shall not apply to an ancillary asset if the United States Court of Appeals for the District of Columbia Circuit, after an appropriate proceeding, issues an order finding by clear and convincing evidence that the ancillary asset meets not less than 1 of the bases for exclusion under subsection (a)(1)(B).

Nothing in this subparagraph shall be construed to preclude the Commission from entering into a settlement agreement relating to violations or alleged violations of this section. Compliance under this section shall not be used in any administrative or judicial proceeding as evidence that an ancillary asset is a security.

For the purposes of paragraphs (1), (2), and (3), the calculation of daily aggregate value shall be based on data disclosed by spot markets or otherwise available to the public for inspection.

If an issuer is subject to paragraph (1), (2), or (3) of subsection (b), the issuer shall file, or cause the relevant affiliate to file, with the Commission, on a semi-annual basis, information that the Commission may, by rule, require relating to the issuer and any relevant ancillary asset, as necessary or appropriate in the public interest or for the protection of investors, which shall be exclusively comprised of the following:

(1) Basic corporate information regarding the issuer, including the following:

(A) The experience of the issuer in developing assets similar to the ancillary asset.

(B) If the issuer has previously provided ancillary assets to purchasers of securities, information on the subsequent history of those previously provided ancillary assets, including price history, if the information is publicly available.

(C) The activities that the issuer has taken in the relevant disclosure period, and is projecting to take in the 1-year period following the submission of the disclosure, with respect to promoting the use, value, or resale of the ancillary asset (including any activity to facilitate the creation or maintenance of a trading market for the ancillary asset and any network or system that utilizes the ancillary asset).

(D) The anticipated cost of the activities of the issuer in subparagraph (C) and whether the issuer has unencumbered, liquid funds equal to that amount.

(E) To the extent the ancillary asset involves the use of a particular technology, the experience of the issuer with the use of that technology.

(F) The backgrounds of the board of directors (or equivalent body), senior management, and key employees of the issuer, the experience or functions of whom are material to the value of the ancillary asset, as well as any personnel changes relating to the issuer during the period covered by the disclosure.

(G) A description of the assets and liabilities of the issuer, to the extent material to the value of the ancillary asset.

(H) A description of any legal proceedings in which the issuer is engaged (including inquiries by governmental agencies into the activities of the issuer), to the extent material to the value of the ancillary asset.

(I) Risk factors relating to the impact of the issuer on, or unique knowledge relating to, the value of the ancillary asset.

(J) Information relating to ownership of the ancillary asset by—

(i) persons owning not less than 10 percent of any class of equity security of the issuer; and

(ii) the management of the issuer.

(K) Information relating to transactions involving the ancillary asset by the issuer with related persons, promoters, and control persons.

(L) Recent sales or similar dispositions of ancillary assets by the issuer and affiliates of the issuer.

(M) Purchases or similar dispositions of ancillary assets by the issuer and affiliates of the issuer.

(N) A going concern statement from the chief financial officer of the issuer or equivalent official, signed under penalty of perjury, stating whether the issuer maintains the financial resources to continue business as a going concern for the 1-year period following the submission of the disclosure, absent a material change in circumstances.

(2) Information relating to the ancillary asset, including the following:

(A) A general description of the ancillary asset, including the standard unit of measure with respect to the ancillary asset, the intended or known functionality and uses of the ancillary asset, the market for the ancillary asset, other assets or services that may compete with the ancillary asset, and the total supply of the ancillary asset or the manner and rate of the ongoing production or creation of the ancillary asset.

(B) If ancillary assets have been offered, sold, or otherwise provided by the issuer to investors, intermediaries, or resellers, a description of the amount of assets offered, sold, or provided, the terms of each such transaction, and any contractual or other restrictions on the resale of the assets by intermediaries.

(C) If ancillary assets were distributed without charge, a description of each distribution, including the identity of any recipient that received more than 5 percent of the total amount of the ancillary assets in any such distribution.

(D) The amount of ancillary assets owned by the issuer.

(E) For the 1-year period following the submission of the disclosure, a description of the plans of the issuer to support (or to cease supporting) the use or development of the ancillary asset, including markets for the ancillary asset and each platform or system that uses the ancillary asset.

(F) Each third party not affiliated with the issuer, the activities of which may have a material impact on the value of the ancillary asset.

(G) Risk factors known to the issuer that may limit demand for, or interest in, the ancillary asset.

(H) The names and locations of the markets in which the ancillary asset is known by the issuer to be available for sale or purchase.

(I) To the extent available to the issuer, the average daily price for a constant unit of value of the ancillary asset during the relevant reporting period, as well as the 12-month high and low prices for the ancillary asset.

(J) If applicable, information relating to any external audit of the code and functionality of the ancillary asset, including the entity performing the audit and the experience of the entity in conducting similar audits.

(K) If applicable, any valuation report or economic analysis commissioned by the issuer regarding the ancillary asset or the projected market of the ancillary asset.

(L) If the ancillary asset is intangible, information relating to custody by the owner of the ancillary asset or a third party.

(M) Information on intellectual property rights claimed or disputed relating to the ancillary asset.

(N) A description of the technology underlying the issuance and trading of the ancillary asset.

(O) Any material tax considerations applicable to owning, storing, using, or trading the ancillary asset.

(P) Any material legal or regulatory considerations applicable to owning, storing, using, or trading the ancillary asset, including any legal proceeding that may impact the value of the ancillary asset.

(Q) Any other material factor or information that may impact the value of the ancillary asset and about which the issuer is reasonably aware.

If an issuer would otherwise be subject to specified periodic disclosure requirements under subsection (c) and is no longer in operation, any successor entity that directly or indirectly received not less than 50 percent of the remaining proceeds raised by the sale of the related securities of that issuer shall file, or cause to be filed, with the Commission the information required under that subsection.

If an entity controlled by an issuer is subject to specified periodic disclosure requirements under subsection (c) and is engaged in entrepreneurial or managerial efforts that primarily determine the value of an ancillary asset, the entity may file with the Commission the information required under that subsection.

An issuer that is not subject to the specified periodic disclosure requirements under subsection (c) and that offers or sells a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)), and that provides the holder of that security with an ancillary asset in connection with the acquisition of the security may voluntarily file with the Commission the information required under that subsection if the issuer believes that it is reasonably likely that the issuer will become subject to those requirements in the future.

The Commission may, by order, exempt an ancillary asset from the specified periodic disclosure requirements under subsection (c) if the Commission determines that the public policy goals of disclosure and consumer protection are not satisfied by requiring disclosures relating to an ancillary asset.

If an issuer fails to comply with a provision of this section, an ancillary asset provided by the issuer shall not be presumed to be a security under a provision of law described in subsection (b)(4)(A)(ii), solely because of such failure.

Any statement made in a disclosure, application, or other document filed under this section shall be subject to section 18.

The obligation of an issuer to file the information required under subsection (c) shall terminate on the date that is 90 days, or such shorter period as the Commission may determine, after the date on which the issuer files a certification described in paragraph (2).

A certification described in this paragraph shall be supported by reasonable evidence, based on the knowledge of the issuer filing the certification, after due inquiry, that—

(i) the average daily aggregate value of all trading in the applicable ancillary asset in all spot markets open to the public in the United States in the 12-month period preceding the date on which the certification is filed was not greater than $5,000,000; or

(ii) during the 12-month period preceding the date on which the certification is filed, neither the applicable issuer, nor any entity controlled by the applicable issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset.

Subject to subparagraph (C)(ii), the Commission may, by majority vote and after notice and opportunity for hearing, deny a certification filed under paragraph (1) if the Commission finds that the certification is not supported by substantial evidence.

The denial, under clause (i), of a certification filed under paragraph (1)—

(I) shall terminate the certification so filed; and

(II) shall not prevent the applicable issuer from filing another certification under paragraph (1), if the re-filed certification is filed not earlier than 180 days after the date on which the original certification is denied.

Termination of the disclosure requirements described in paragraph (1) applicable to an issuer that has filed a certification under that paragraph shall be deferred pending review by the Commission of the evidence supporting the certification.

If, as of the date that is 90 days after receiving a certification filed under paragraph (1), the Commission has not requested additional evidence with respect to the certification from the applicable issuer, the disclosure obligations that are the subject of the certification shall terminate.

The Commission may adopt rules and guidance to implement this section, consistent with the statutory intent of this section.

Not later than 180 days after the date of the enactment of this Act, the Securities and Exchange Commission shall issue guidance relating to section 240.15c3–3 of title 17, Code of Federal Regulations, or any successor regulation, providing that the requirement to designate a satisfactory control location for a crypto asset that is, or may represent ownership of, a security may be satisfied by protecting the crypto asset through commercially reasonable cybersecurity practices to maintain control of sufficient private key material to transfer control of the crypto asset to another person, or to cause another person to obtain control of the crypto asset, including by means of a smart contract that generates private key material without the involvement of a natural person.

Chapter 98 of title 31, United States Code, as amended by section 208, is amended by adding at the end the following:

In this section:

The term nonmember professional means any person that—

(A) is a crypto asset intermediary; and

(B) is a not a member of a customer protection and market integrity authority or affiliated organization.

The term registration information means the information reported in connection with the licensing, registration, or other authorization of crypto asset intermediaries and their associated persons, including—

(A) disciplinary actions, regulatory, judicial, and arbitration proceedings, and other information required by law or authority rule; and

(B) the source and status of the information described in subparagraph (A).

An association of crypto asset intermediaries may be registered as a customer protection and market integrity authority, under the terms and conditions provided in this section, and in accordance with the provisions of this section and section 9810, by jointly filing with the Securities and Exchange Commission and the Commodity Futures Trading Commission an application for registration, in such form as the commissions may require, containing the rules of the authority and such other information and documents that may be prescribed as necessary or appropriate in the public interest or for customer protection.

An association of crypto asset intermediaries may not be registered as a customer protection and market integrity authority under subsection (b) unless a majority of the members of each of the Securities and Exchange Commission and the Commodity Futures Trading Commission, voting separately, determine that each of the following is satisfied:

(1) By reason of the number and the scope of the transactions of the authority, the authority will be able to carry out the purposes of this section.

(2) The authority is so organized, and has the capacity, to—

(A) be able to carry out the purposes of this section and other applicable State and Federal laws; and

(B) subject to any rule or order of the appropriate commission, enforce compliance by members of the authority (and persons associated with those members) with the provisions of applicable law, the rules under those provisions, and the rules of the authority.

(3) The rules of the authority provide that any crypto asset intermediary may become a member of the authority and any person may become associated with a member of the authority.

(4) The rules of the authority provide for the following allocation of a 13-member board of directors:

(A) 3 governmental directors, as follows:

(i) The Director of the Office of Financial Innovation of the Commodity Futures Trading Commission, or the designee of the Director.

(ii) The Director of the Office of Financial Innovation of the Securities and Exchange Commission, or the designee of the Director.

(iii) The Director of the Financial Crimes Enforcement Network, or the designee of the Director.

(B) 4 independent directors—

(i) who are appointed by the President, with specializations in financial technology, consumer protection, and financial markets, except that those 4 directors shall not be affiliated, through a close relative or a financial interest with any member of the authority; and

(ii) 1 of whom is designated by the President as chair of the authority.

(C) 6 directors appointed by the members of the prospective authority.

(5) The rules of the authority provide for the equitable allocation of reasonable dues, fees, and other charges among members of the authority and other persons using any facility or system that the authority operates or controls.

(6) The rules of the authority—

(A) are designed to—

(i) prevent fraudulent and manipulative acts and practices in order to promote just and equitable principles of trade;

(ii) foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in crypto assets;

(iii) remove impediments to, and perfect the mechanism of, a free and open market; and

(iv) protect customers and the public interest; and

(B) are not designed to—

(i) permit unfair discrimination between customers and crypto asset intermediaries;

(ii) fix minimum profits;

(iii) impose any schedule or fix rates of commissions, allowances, discounts, or other fees to be charged by the members of the authority; or

(iv) regulate by virtue of any authority conferred by law matters not related to the purposes of this section or the administration of the authority.

(7) The rules of the authority provide that, subject to any rule or order of the appropriate commission, the members of the authority (and persons associated with those members) shall be appropriately disciplined for a violation of any provision of applicable law, the rules under such a provision, or the rules of the authority by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, a suspension or bar from being associated with a member, or any other fitting sanction.

(8) The rules of the authority are consistent with the provisions of subsection (h) and, in general, provide a fair procedure for—

(A) the disciplining of members and persons associated with members;

(B) the denial of membership to any person seeking membership in the authority;

(C) the barring of any person from becoming associated with a member of the authority; and

(D) the prohibition or limitation by the authority of any person with respect to access to services offered by the authority or a member of the authority.

(9) The rules of the authority do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this section.

(10) The requirements of subsection (d), as applicable, are satisfied.

(11) The rules of the authority include provisions governing the form and content of quotations relating to crypto assets, which shall be designed to—

(A) produce fair and informative quotations;

(B) prevent fictitious or misleading quotations; and

(C) promote orderly procedures for collecting, distributing, and publishing quotations.

The Securities and Exchange Commission and the Commodity Futures Trading Commission may permit or require the rules of an authority applying for registration under subsection (b) to provide for the admission of an organization registered as an affiliated organization pursuant to subsection (e), to participate in the applicant authority as an affiliate of the applicant authority, under terms permitting powers and responsibilities to the affiliate, and under such other appropriate terms and conditions, as may be provided by the rules of the applicant authority, if those rules appear to the commissions jointly to be necessary or appropriate in the public interest or for customer protection and to carry out the purposes of this section.

The duties and powers of the Securities and Exchange Commission and the Commodity Futures Trading Commission with respect to any authority or affiliate organization shall in no way be limited by reason of any such affiliation.

An applicant organization shall not be registered as an affiliated organization, unless—

(A) the organization, notwithstanding that the organization does not satisfy the requirements under subsection (c)(1), will, upon the registration of the organization under this subsection, be admitted to affiliation with an organization registered as an authority pursuant to subsection (c), in the manner and under the terms and conditions provided by the rules of the customer protection and market integrity authority in accordance with subsection (d); and

(B) the organization and the rules of the organization satisfy the requirements under paragraphs (2) through (11) of subsection (c).

Any restrictions upon membership of an applicant organization shall not be less stringent than in the case of the customer protection and market integrity authority with which the organization is to be affiliated.

The rules of a customer protection and market integrity authority may provide that no member of the authority may deal with any nonmember professional except at the same prices, for the same commissions or fees, and on the same terms and conditions the member accords to the general public.

Nothing in this subsection may be construed to prevent any member of a customer protection and market integrity authority from granting to any other member of any other such authority any discount, allowance, commission, or special terms in connection with a crypto asset transaction.

Membership in a customer protection and market integrity authority under this section shall be limited to crypto asset intermediaries.

A customer protection and market integrity authority may, and the appropriate commission, by order, may direct such an authority to, as necessary or appropriate in the public interest or for customer protection, deny membership to any person, and bar from becoming associated with a member any person, that is subject to a statutory disqualification within the laws under the jurisdiction of that commission.

A customer protection and market integrity authority shall file notice with the appropriate commission, in such form and containing such information as the appropriate commission shall require, not less than 30 days before admitting any person to membership or permitting any person to become associated with a member, if the authority knew, or in the exercise of reasonable care should have known, that such person was subject to a statutory disqualification.

A customer protection and market integrity authority may—

(i) deny membership to, or condition the membership of, a crypto asset intermediary, if—

(I) the intermediary does not meet such standards of financial responsibility or operational capability, or such intermediary or any individual associated with the intermediary does not meet such standards of training, experience, and competence, as are prescribed by the rules of the authority; or

(II) the intermediary or person associated with the intermediary has engaged, and there is a reasonable likelihood the intermediary or person will again engage, in acts or practices inconsistent with just and equitable principles of trade; and

(ii) examine and verify the qualifications of an applicant to become a member and the individuals associated with the applicant in accordance with procedures established by the rules of the authority.

A customer protection and market integrity authority may—

(i) bar an individual from becoming associated with a member, or condition the association of an individual with a member, if that individual—

(I) does not meet such standards of training, experience, and competence as are prescribed by the rules of the authority; or

(II) has engaged, and there is a reasonable likelihood the individual will again engage, in acts or practices inconsistent with just and equitable principles of trade;

(ii) examine and verify the qualifications of an applicant to become a person associated with a member in accordance with procedures established by the rules of the authority; and

(iii) require an individual associated with a member, or any class of such individuals, to be registered with the authority in accordance with procedures so established.

A customer protection and market integrity authority may bar any person from becoming associated with a member if that person does not agree—

(i) to supply the authority with such information with respect to the relationship and dealings of the person with the member as may be specified in the rules of the authority; and

(ii) to permit examination of the records of the person to verify the accuracy of any information supplied by the person under clause (i).

Subject to subparagraph (B), a customer protection and market integrity authority may deny membership to a crypto asset intermediary not engaged in a type of business in which the rules of the authority require members to be engaged.

No customer protection and market integrity authority may deny membership to a crypto asset intermediary by reason of the amount of such type of business done by such intermediary or the other types of business in which the intermediary is engaged.

In any proceeding by a customer protection and market integrity authority to determine whether a member, or a person associated with a member, should be disciplined (other than a summary proceeding pursuant to paragraph (3)), the authority shall bring specific charges, notify such member or person of (and give the person an opportunity to defend against) those charges, and keep a record.

A determination by a customer protection and market integrity authority to impose discipline in a proceeding under subparagraph (A) shall be supported by a statement setting forth—

(i) any act or practice in which the member, or person associated with a member, has been found to have engaged, or that such member or person has been found to have omitted;

(ii) the specific provision of law, the rules under such a provision, or the rules of the authority that an act or practice described in clause (i), or omission to act, is charged with violating; and

(iii) the sanction imposed and a justification for the sanction.

In any proceeding by a customer protection and market integrity authority to determine whether a person shall be denied membership, barred from becoming associated with a member, or prohibited or limited with respect to access to services offered by the authority or a member of the authority (other than a summary proceeding pursuant to paragraph (3)), the authority shall—

(i) notify that person and give the person an opportunity to be heard;

(ii) provide the person the specific grounds for denial, bar, or prohibition or limitation under consideration; and

(iii) maintain a record.

A determination by a customer protection and market integrity authority to deny membership, bar a person from becoming associated with a member, or prohibit or limit a person with respect to access to services offered by the authority or a member under subparagraph (A) shall be supported by a statement setting forth the specific grounds on which the denial, bar, or prohibition or limitation is based.

A customer protection and market integrity authority may summarily—

(i) suspend a member of the authority, or a person associated with such a member, that is—

(I) expelled or suspended from any other authority or entity delegated regulatory and disciplinary authority by a governmental agency; or

(II) barred or suspended from being associated with a member of another authority;

(ii) suspend a member of the authority that is in such financial or operating difficulty that the authority determines (and so notifies the appropriate commission) that the member cannot be permitted to continue to do business as a member, in order to protect customers, creditors, other members, or the authority; or

(iii) limit or prohibit any person from accessing services offered by the authority if clause (i) or (ii) is applicable to that person, or, in the case of a person that is not a member of the authority, if the authority determines that the person—

(I) does not meet the qualification requirements or other prerequisites for that access; and

(II) cannot be permitted to continue to have such access with safety, in order to protect customers, creditors, members, or the authority.

Any person aggrieved by a summary action under subparagraph (A) shall be promptly afforded an opportunity for a hearing by the applicable authority in accordance with the provisions of paragraph (1) or (2).

The appropriate commission, by order, may stay a summary action described in subparagraph (A) on the motion of the commission or upon application by any person aggrieved by the summary action, if the commission determines summarily or after notice and opportunity for hearing (which may consist solely of the submission of affidavits or presentation of oral arguments) that the stay is consistent with the public interest and customer protection.

A customer protection and market integrity authority shall establish and maintain—

(A) a system for collecting and retaining registration information; and

(B) a website, including an application programming interface, to receive and promptly respond to inquiries regarding registration information on the members of the authority and associated persons with respect to those members.

A customer protection and market integrity authority may charge persons making inquiries described in paragraph (1)(B), other than individual customers of crypto asset intermediaries, reasonable fees for responses.

Each customer protection and market integrity authority shall adopt rules establishing a process for disputing the accuracy of information provided in response to inquiries under this subsection.

A customer protection and market integrity authority, or any crypto asset intermediary reporting information to such an authority, shall not have any liability to any person for any actions taken or omitted in good faith under this subsection.

Each customer protection and market integrity authority registered under subsection (b) shall issue rules as necessary to avoid duplicative or conflicting rules applicable to any crypto asset intermediary that is a member of a national securities exchange, board of trade, contract market, registered securities association, registered futures association, or similar entity.

A crypto asset intermediary shall not be required to become a member of another entity delegated regulatory and disciplinary authority by a governmental agency unless the intermediary performs activities with financial assets other than crypto assets.

The Securities and Exchange Commission and the Commodity Futures Trading Commission shall jointly prescribe rules under which a crypto asset intermediary that is a member or affiliate of a customer protection and market integrity authority registered under this section may perform activities with financial assets other than crypto assets, if those activities are not a majority of the business of an intermediary and are conducted in a responsible manner, without membership in another entity delegated regulatory and disciplinary authority by a governmental agency.

A customer protection and market integrity authority under this section shall adopt rules governing activities with financial assets other than crypto assets, which shall be consistent with existing law, rule, guidance or industry best practices or the rules of other entities delegated regulatory and disciplinary authority by a governmental agency.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 208, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 601, is amended by adding at the end the following:

The Securities and Exchange Commission and Commodity Futures Trading Commission shall, upon the filing of an application for registration as a customer protection and market integrity authority under section 9809, publish notice of that filing and afford interested persons an opportunity to submit written data, views, and arguments concerning the application.

Not later than 90 days after the date on which notice is published under subparagraph (A), or within a longer period to which the applicable applicant consents, the Securities and Exchange Commission and Commodity Futures Trading Commission shall—

(i) by joint order, grant registration of the customer protection and market integrity authority; or

(ii) institute proceedings to determine whether registration should be denied.

Proceedings instituted under subparagraph (B)(ii) shall include notice of the grounds for denial under consideration and opportunity for hearing before the joint commissions.

A hearing described in clause (i) shall be concluded not later than 180 days after the date on which notice of the filing of the application for registration is published under subparagraph (A).

At the conclusion of a hearing conducted under this subparagraph, and not later than the end of the 180-day period described in clause (ii), the Securities and Exchange Commission and Commodity Futures Trading Commission, voting separately, shall act to grant or deny the applicable registration.

The failure of the Securities and Exchange Commission and Commodity Futures Trading Commission to issue a joint order during the period described in subclause (I) shall be deemed to be a denial of the applicable registration.

With respect to an application for registration described in this paragraph, the Securities and Exchange Commission and Commodity Futures Trading Commission shall—

(i) grant registration if all statutory requirements have been met and the rules under those statutory provisions with respect to the applicant are satisfied; and

(ii) deny such registration if the commissions do not make the findings described in clause (i).

A customer protection and market integrity authority may, upon such terms and conditions as the Securities and Exchange Commission and Commodity Futures Trading Commission, by rule, determine necessary or appropriate in the public interest or for the protection of customers, withdraw from registration described in paragraph (1) by filing a written notice of withdrawal with the commissions.

If the Securities and Exchange Commission and Commodity Futures Trading Commission, voting separately, each finds that a customer protection and market integrity authority is no longer in existence or has ceased to do business in the capacity specified in the application for registration submitted by the authority, the commissions may cancel the registration of the authority.

Upon withdrawal by registration or the cancellation, suspension, or revocation of the registration of a customer protection and market integrity authority, the registration of any affiliate shall automatically terminate.

Except as otherwise provided in paragraph (2)—

(A) a customer protection and market integrity authority shall file with the appropriate commission, in accordance with the rules of that commission, copies of any proposed rule or any proposed change in, addition to, or deletion from the rules of such customer protection and market integrity authority accompanied by a concise general statement of the basis and purpose of such proposed rule change;

(B) the appropriate commission shall—

(i) as soon as practicable after the date on which a proposed rule change is filed under subparagraph (A), publish notice of that filing together with the terms of substance of the proposed rule change or a description of the subjects and issues involved; and

(ii) give interested persons an opportunity to submit written data, views, and arguments concerning that proposed rule change;

(C) no proposed rule change described in subparagraph (A) shall take effect unless approved by the appropriate commission or otherwise permitted in accordance with the provisions of this subsection; and

(D) no proposed rule change described in subparagraph (A) relating to a matter under the jurisdiction of more than 1 commission may be filed.

Except as provided in clause (ii), not later than 30 days after the date on which notice of a proposed rule change is published under paragraph (1), the appropriate commission shall—

(I) by order, approve or disapprove the proposed rule change; or

(II) institute proceedings under subparagraph (B) to determine whether the proposed rule change should be disapproved.

The appropriate commission may extend the period established under clause (i) by not more than an additional 30 days, if—

(I) the commission determines that a longer period is appropriate and publishes the reasons for that determination; or

(II) the customer protection and market integrity authority that filed the proposed rule change consents to a longer period.

If the appropriate commission does not approve or disapprove a proposed rule change under subparagraph (A), the commission shall provide to the customer protection and market integrity authority that filed the proposed rule change—

(I) notice of the grounds for disapproval under consideration; and

(II) opportunity for hearing, to be concluded not later than 180 days after the date of publication of notice of the filing of the proposed rule change.

Except as provided in subclause (II), not later than 180 days after the date on which notice is published under paragraph (1), the appropriate commission shall issue an order approving or disapproving the proposed rule change that is the subject of the notice.

The appropriate commission may extend the period for issuance under clause (I) by not more than 60 days, if—

(aa) the commission determines that a longer period is appropriate and publishes the reasons for such determination; or

(bb) the customer protection and market integrity authority that filed the proposed rule change consents to the longer period.

The appropriate commission shall approve a proposed rule change of a customer protection and market integrity authority if the commission finds that the proposed rule change is consistent with law.

The appropriate commission may not approve a proposed rule change earlier than 30 days after the date of publication of notice with respect to the proposed rule change under paragraph (1), unless the commission finds good cause for so doing and publishes the reason for the finding.

A proposed rule change shall be deemed to have been approved by the appropriate commission, if—

(i) the commission does not approve or disapprove the proposed rule change, or begin proceedings under subparagraph (B), within the period described in subparagraph (A); or

(ii) the commission does not issue an order approving or disapproving the proposed rule change under subparagraph (B) within the period described in subparagraph (B)(ii).

For purposes of this paragraph, if, after filing a proposed rule change with the appropriate commission under paragraph (1), a customer protection and market integrity authority publishes a notice of the filing of that proposed rule change, together with the substantive terms of that proposed rule change, on a publicly accessible website, the commission shall send the notice to the Federal Register for publication of the proposed rule change under paragraph (1) not later than 5 days after the date on which that website publication is made.

If the appropriate commission fails to send notice under clause (i) during the 5-day period described in that clause, the date of publication shall be deemed to be the date on which the applicable website publication is made.

With respect to a proposed rule relating to the internal operation, governance, and procedures of a customer protection and market integrity authority, or a proposed rule relating to the determination of the legal character of a crypto asset—

(A) the proposed rule shall be—

(i) subject to approval by the Securities and Exchange Commission and the Commodity Futures Trading Commission; and

(ii) deemed to be approved on the date that is 5 days after the date on which the proposed rule is submitted, unless either commission objects to the proposed rule change; and

(B) if a commission objects to the proposed rule change under subparagraph (A)(ii)—

(i) the commission shall, in a public format, provide to the authority and the non-objecting commission the reasons for the objection;

(ii) the authority, and interested members of the public, may provide written comments to the commissions during the 20-day period beginning on the date on which the objection is noted; and

(iii) the Securities and Exchange Commission and the Commodity Futures Trading Commission, voting separately, shall jointly issue an order approving or disapproving the proposed rule, with the failure to issue such a joint order being deemed to be approval of the proposed rule.

Notwithstanding paragraphs (2) and (3), a proposed rule change shall take effect upon filing if self-certified by an authority as—

(i) constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the authority;

(ii) establishing or changing a due, fee, or other charge imposed by the authority on any person, whether or not the person is a member of the authority; or

(iii) notwithstanding any other provision of this subsection, necessary for customer protection, the maintenance of fair and orderly markets, or the safeguarding of crypto assets, customer funds, or other property, in which case the proposed rule change under shall be filed promptly thereafter in accordance with paragraph (1).

Any proposed rule change of an authority that has taken effect under subparagraph (A) may be enforced by the authority to the extent the rule change is not inconsistent with applicable law.

At any time during the 60-day period beginning on the date on which a proposed rule change is filed under paragraph (1), the appropriate commission may temporarily and summarily suspend the change in the rules of the authority on a temporary basis, if the commission determines that such action is necessary or appropriate in the public interest, for customer protection, or to otherwise comply with applicable law.

If a commission takes action under subclause (I), the commission shall institute proceedings under paragraph (2)(B) to determine whether the applicable proposed rule should be approved or disapproved.

Action under this subparagraph shall not affect the validity or force of a proposed rule change during the period the rule change was in effect and shall not be reviewable in a judicial proceeding, nor deemed to be final agency action for purposes of section 704 of title 5.

For purposes of this subsection, the date of filing of a proposed rule change shall be deemed to be the date on which the applicable commission receives the proposed rule change.

Subject to clause (ii), a proposed rule has not been received by the applicable commission for purposes of subparagraph (A), if, not later than 7 business days after the date on which the commission receives the rule, the commission notifies the authority that the proposed rule change does not comply with the rules of the commission relating to the required form of a proposed rule change.

If the applicable commission determines that a proposed rule change is unusually lengthy, and is complex or raises novel regulatory issues, the commission shall inform the authority of that determination not later than 7 business days after the date on which the commission receives the rule.

For the purposes of subparagraph (A), a proposed rule change described in subclause (I) has not been received by the applicable commission, if, not later than 21 days after the date on which the commission receives the rule, the commission notifies the applicable authority that the proposed rule change does not comply with the rules of the commission relating to the required form of a proposed rule change.

This paragraph shall not apply to a rule relating to the internal operations, governance, and procedure of an authority.

The appropriate commission may, by rule, abrogate, add to, and delete from the rules of an authority as the commission determines necessary or appropriate to ensure the fair administration of the authority or to conform the rules of the authority to law or applicable rule, in the following manner:

(A) The appropriate commission shall notify the authority and publish notice of the proposed rulemaking in the Federal Register, which shall include the text of the proposed amendment to the rules of the authority and a statement of the reasons of the commission, including any pertinent facts, for commencing the proposed rulemaking.

(i) The appropriate commission shall give interested persons an opportunity for the oral presentation of data, views, and arguments, in addition to an opportunity to make written submissions.

(ii) A transcript shall be kept of any oral presentation under clause (i).

(C) A rule adopted pursuant to this paragraph shall incorporate the text of the amendment to the rules of the authority and a statement of the appropriate commission regarding the basis for amendment of the rule, which shall include an identification of any facts on which the determination of the commission to amend the rules of the authority is based, including the reasons for the conclusions of the commission relating to any facts that were disputed in the rulemaking.

Nothing in this subsection may be construed to impair or limit the authority of the appropriate commission to make, or to modify or alter the procedures the commission may follow in making, rules pursuant to any other authority granted by law that is consistent with this subsection.

Any amendment to the rules of an authority made by the appropriate commission under this subsection shall be considered for all purposes to be part of the rules of that authority and shall not be considered to be a rule of that commission.

With respect to rules described in subsection (b)(4)(A)(iii), the appropriate commission shall consult with and consider the views of the other commission and the Secretary of the Treasury before abrogating, adding to, and deleting from those rules, except where the commission determines that an emergency exists requiring expeditious or summary action and publishes the reasons of the commission for taking that action.

If an authority imposes any final disciplinary sanction on any member of the authority, or any participant with respect to the authority, denies membership or participation to any applicant, prohibits or limits any person from accessing services offered by the authority or a member of the authority, imposes any final disciplinary sanction on any person associated with a member, or bars any person from becoming associated with a member, the authority shall promptly file notice of that action with the appropriate commission.

Any action with respect to which an authority is required to file notice under paragraph (1) shall be subject to review by the appropriate commission for the applicable member, participant, applicant, or other person, on its own motion, or upon application by any person aggrieved by that action if filed not later than 30 days after the date on which the notice was filed with the appropriate commission and received by the aggrieved person, or within such longer period as the appropriate commission may determine.

Application to the appropriate commission for review, or the institution of review by the commission on its own motion, shall not operate as a stay of an action described in subparagraph (A) unless the appropriate commission otherwise orders, summarily or after notice and opportunity for hearing on the question of a stay, which may consist solely of the submission of affidavits or presentation of oral arguments.

For the purposes of this paragraph, each of the appropriate commissions shall establish for appropriate cases an expedited procedure for consideration and determination of the question of a stay.

This subsection shall apply only to the extent that an authority imposes any final disciplinary sanction for—

(A) a violation of Federal law or the rules issued under Federal law; or

(B) a violation of a rule of the authority, as to which a proposed change would be required to be filed under this section.

In any proceeding to review a final disciplinary sanction imposed by an authority on a member, a participant with respect to the authority, or a person associated with such a member, after notice and opportunity for hearing, which may consist solely of consideration of the record before the authority and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the sanction—

(A) if the appropriate commission finds that such member, participant, or person associated with a member has engaged in such acts or practices, or has omitted such acts, as the authority has found that person to have engaged in or omitted, that such acts or practices, or omissions to act, are in violation of law, the rules thereunder, or the rules of the authority, and that such provisions are, and were applied in a manner, consistent with law, the commission, by order, shall—

(i) make a declaration regarding that finding; and

(ii) as appropriate—

(I) affirm the sanction imposed by the authority;

(II) modify the sanction in accordance with paragraph (2); or

(III) remand to the authority for further proceedings; or

(B) if the appropriate commission does not make a finding described in subparagraph (A), the commission shall, by order—

(i) set aside the sanction imposed by the authority; and

(ii) if appropriate, remand to the authority for further proceedings.

If the appropriate commission for a member, participant, or person associated with a member, having due regard for the public interest and customer protection, finds, after a proceeding under paragraph (1), that a sanction imposed by a authority upon that member, participant, or person associated with a member imposes any burden on competition not necessary or appropriate or is excessive or oppressive, the commission may cancel, reduce, or require the remission of that sanction.

In any proceeding to review the denial of membership or participation in an authority to any applicant, the barring of any person from becoming associated with a member of an authority, or the prohibition or limitation by an authority of any person from accessing services offered by the authority or any member, if the appropriate commission, after notice and opportunity for hearing, which may consist solely of consideration of the record before the authority and opportunity for the presentation of supporting reasons to dismiss the proceeding or set aside the action of the authority, finds that the specific grounds on which that denial, bar, or prohibition or limitation is based exist in fact, that such denial, bar, or prohibition or limitation is in accordance with the rules of the authority, and that such rules are, and were applied in a manner, consistent with law, the appropriate commission, by order, shall dismiss the proceeding.

If the appropriate commission does not make a finding described in paragraph (1), or if the commission finds that the applicable denial, bar, prohibition, or limitation imposes any burden on competition not necessary or appropriate, the commission, by order, shall set aside the action of the authority and require the authority to admit the applicable applicant to membership or participation, permit that person to become associated with a member, or grant that person access to services offered by the authority or a member.

If necessary or appropriate in the public interest, for customer protection, or otherwise in furtherance of the purposes of this section, the appropriate commissions, voting separately, may issue a joint order suspending for a period not exceeding 1 year or revoking the registration of an authority, or censuring or imposing limitations upon the activities, functions, and operations of an authority, if, the commissions find, on the record after notice and opportunity for hearing, that the authority—

(A) has violated or is unable to comply with any provision of law, rule, or the rules of the authority without reasonable justification or excuse; or

(B) has failed to enforce compliance with any provision by a member of the authority or a person associated with a member of the authority.

The appropriate commission may, by order, if necessary or appropriate in the public interest, for customer protection, or otherwise in furtherance of the purposes of this section, to suspend for a period not exceeding 1 year or expel from an authority, any member of an authority, or participant with respect to an authority, if such member or participant is subject to an order of the commission or if the commission, on the record after notice and opportunity for hearing, determines that the member or participant has willfully violated, or has effected any transaction for any other person who the member or participant had reason to believe was violating, with respect to such transaction any applicable provision of law under the jurisdiction of the commission.

The applicable commission may, by order, if necessary or appropriate in the public interest, for customer protection, or otherwise in furtherance of the purposes of this section, to suspend for a period not exceeding 1 year or to bar any person from being associated with a member of such authority, if the person is subject to an order of the appropriate commission or if the appropriate commission finds, on the record after notice and opportunity for hearing, that the person has willfully violated, or has effected any transaction for any other person who the person associated with a member had reason to believe was violating, with respect to the transaction any applicable provision of law under the jurisdiction of the commission.

If necessary or appropriate in the public interest, for customer protection, or otherwise in furtherance of the purposes of this section, the Securities and Exchange Commission and the Commodity Futures Trading Commission, voting separately, may, by joint order, remove from office or censure any person who is, or at the time of the alleged misconduct was, an officer or director of an authority, if the commissions find, on the record after notice and opportunity for a hearing before an impartial hearing officer, that such person has willfully violated any provision of law, the rules thereunder, or the rules of such authority, willfully abused the authority of the person, or without reasonable justification or excuse has failed to enforce compliance with any provision of law by any member or person associated with a member.

The Securities and Exchange Commission and the Commodity Futures Trading Commission shall each appoint an equal number of employees, under the supervision of the Chairman of the respective commissions, to an interagency working group, which shall coordinate and facilitate the responsibilities and powers of the respective commissions under this chapter.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 601, is amended by adding at the end the following:

Chapter 98 of title 31, United States Code, as amended by section 602, is amended by adding at the end the following:

Each customer protection and market integrity authority shall—

(1) with respect to the members of the authority, ascertain and enforce compliance with the rules of the authority, Federal and State law to which those members are subject, and any rules issued by any such member, including any rule issued under section 5i of the Commodity Exchange Act (5 U.S.C. 7i);

(2) discipline members of the authority and other persons subject to the jurisdiction of the authority under this chapter; and

(3) make, and keep for prescribed periods, such electronic records and disseminate reports as the customer protection and market integrity authority, by rule, prescribes as necessary or appropriate in the public interest.

All records of a member described in subsection (a) are subject at any time, or from time to time, to reasonable periodic, special, or other examinations by the customer protection and market integrity authority of the member.

Before conducting an examination under subparagraph (A), the examining authority shall—

(i) inform all other relevant regulatory agencies and entities with jurisdiction over the member regarding the proposed examination; and

(ii) consult concerning the feasibility and desirability of coordinating such examination with examinations conducted by other entities with a view to avoiding unnecessary duplication and undue regulatory burden.

Upon a showing of good cause, the Securities and Exchange Commission or the Commodity Futures Trading Commission, as applicable, may conduct a special examination of a customer protection and market integrity authority or a member of such an authority.

With respect to an examination under this paragraph, the examining authority shall share such information, including reports of the examination, customer complaint information, and other nonpublic regulatory information, as may be appropriate to foster a coordinated approach to regulatory oversight for members that are subject to examination by more than 1 examining authority.

A customer protection and market integrity authority, at all times when an examination under this paragraph is not in progress, shall conduct ongoing supervision of members of the authority, as may be provided by the rules of the authority.

A customer protection and market integrity authority shall—

(A) adopt tailored supervision and examination standards commensurate with the size and complexity of the authority and risks faced by members of the authority; and

(B) develop standard form customer agreements for the execution of crypto asset transactions.

The Securities and Exchange Commission and Commodity Futures Trading Commission, shall, by rule or order, in order to foster cooperation and coordination—

(A) with respect to any person that is a member of or participant in more than 1 customer protection and market integrity authority or other entity delegated regulatory and disciplinary authority by a governmental agency or, relieve the authority or entity of any responsibility—

(i) to receive regulatory reports from the person;

(ii) to examine the person for compliance; or

(iii) to carry out other specified regulatory functions with respect to the person; and

(B) allocate among entities the authority to adopt rules with respect to matters as to which, in the absence of the allocation, such entities share authority.

In making a rule, or entering an order, under paragraph (1), the appropriate commission shall take into consideration the regulatory capabilities and procedures of the entities, availability of staff, convenience of location, unnecessary regulatory duplication, and all other factors applicable to customer protection, cooperation and coordination, and the development of a healthy crypto asset market, which may include providing for the acceptance of examination reports prepared by a customer protection and market integrity authority under this chapter with respect to a crypto asset intermediary for which crypto asset activities constitute a majority of business, in lieu of examinations conducted by other entities.

The Securities and Exchange Commission or Commodity Futures Trading Commission, by rule or order, may require that an authority relieved of any responsibility under this paragraph, and any person with respect to which that responsibility relates, take such steps as are specified in any rule or order to notify customers of, and persons doing business with, the person of the limited nature of the responsibility of that registered authority for the acts, practices, and course of business of the person.

Each member of a customer protection and market integrity authority or other financial institution conducting crypto asset transactions shall report to the Financial Crimes Enforcement Network of the Department of the Treasury such information as may be required by rule relating to crypto asset theft or missing private keys for the possession or control of crypto assets.

Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x) shall apply to the sharing of information by the Securities and Exchange Commission and Commodity Futures Trading Commission in accordance with this subsection.

The commissions and a customer protection and market integrity authority shall ensure that all confidential information is not inappropriately disclosed pursuant to subparagraph (A).

Nothing in this subsection may be construed to authorize the Securities and Exchange Commission and Commodity Futures Trading Commission or a customer protection and market integrity authority to—

(A) withhold information from Congress; or

(B) prevent the commissions, an authority or other entity delegated regulatory and disciplinary authority by a governmental agency from complying with—

(i) a request for information from any Federal or State department or agency requesting the information for purposes within the scope of the jurisdiction of that department or agency; or

(ii) an order of a court of the United States in an action brought by the United States or the commissions.

A customer protection and market integrity authority, in consultation with members of the authority, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, shall develop rules governing the best execution of crypto asset transactions.

A customer protection and market integrity authority may make an initial determination of the legal character of a crypto asset as a security, an ancillary asset, a commodity (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)), or as otherwise provided by law, upon the written request of a member of the authority.

Upon receipt of a request under subparagraph (A), a customer protection and market integrity authority—

(i) shall consult with the commissions and make an initial determination regarding the request, after public notice and comment, not later than 45 days after the date on which the authority receives the request; and

(ii) may hold a public hearing with respect to an initial determination described in clause (i), if—

(I) the matter is of significant precedential value or complex; or

(II) holding such a hearing is otherwise in the public interest.

A customer protection and market integrity authority shall publish all determinations made under paragraph (1) on the website of the authority.

Not later than 30 days after the date on which an initial determination is made under subsection (g), the Securities and Exchange Commission or Commodity Futures Trading Commission may object to the initial determination of the customer protection and market integrity authority by issuing an order, after public notice, comment, and a hearing.

Upon an objection under subparagraph (A), the initial determination to which the objection applies shall be held in abeyance.

Not later than 30 days after the date on which an initial determination is made under subsection (g), the Securities and Exchange Commission or the Commodity Futures Trading Commission may object to the initial determination by issuing an order, after public notice, comment, and a hearing.

Upon an objection under subparagraph (A), the initial determination to which the objection applies shall be held in abeyance, pending resolution under section 42(b)(4)(C) of the Securities Exchange Act of 1934.

The table of sections for chapter 98 of title 31, United States Code, as amended by section 602, is amended by adding at the end the following:

Subtitle C of title VII of the Gramm-Leach-Bliley Act (Public Law 106–102; 113 Stat. 1470) is amended by adding at the end the following:

It shall be unlawful for any person other than a depository institution in accordance with this section, or subsidiary thereof, to issue a payment stablecoin.

Whoever knowingly participates in a violation of this section shall be fined not more than $1,000,000, imprisoned for not more than 5 years, or both.

It shall be unlawful for any person to offer or sell a payment stablecoin through the use of any medium or by any means of access in interstate commerce in the United States or to offer or sell a payment stablecoin to a United States person unless such payment stablecoin is issued by a depository institution under this section, except as otherwise provided by the Board of Governors of the Federal Reserve System.

This subsection is intended to have extraterritorial effect.

The Board of Governors of the Federal Reserve System may bring an action in the appropriate district court of the United States or the court of any territory of the United States for the enforcement of this section and such courts shall have jurisdiction and power to order and require compliance herewith, including through injunctive relief.

A depository institution may issue, redeem, and conduct all incidental activities relating to payment stablecoins in accordance with this section.

A depository institution, or a subsidiary thereof, shall maintain high-quality liquid assets under this section equal to not less than 100 percent of the face amount of the liabilities of the institution on payment stablecoins issued by the institution. In the case of a depository institution described in subsection (n)(1)(A) that engages in the business of banking other than the issuance of a payment stablecoin and related activities under this section, issuance of the payment stablecoin and all related activities shall take place within a wholly owned subsidiary of the depository institution, within the same holding company structure. Payment stablecoin assets may not be pledged, rehypothecated, or reused, except for the purpose of creating liquidity to meet reasonable expectations of requests to redeem payment stablecoins. The provisions of section 24(j) of the Federal Deposit Insurance Act (12 U.S.C. 18131a(j)) shall apply to a subsidiary in the same manner as the depository institution. High-quality liquid assets that a bank is permitted to maintain under this section shall include the following:

(1) United States coins and currency and any other instrument that is legal tender, as defined in section 5103 of title 31, United States Code.

(2) Demand deposits at a depository institution, except that deposits in an insured depository institution shall not exceed the limit of deposit or share insurance available for that account, or shall be maintained in a special, custodial, or trust account or other off-balance sheet account held by the insured depository institution.

(3) Balances held at a Federal Reserve bank, which may be held in a master account or segregated balance account.

(4) Foreign withdrawable reserves, as defined in section 249.3 of title 12, Code of Federal Regulations, consistent with any foreign unit of account in which the payment stablecoin is denominated or pegged.

(5) A security that is issued by, or unconditionally guaranteed as to the timely payment of principal and interest by, the Department of the Treasury, with an original maturity of 1 year or less.

(6) A reserve repurchase agreement relating to a security described in paragraph (5).

(7) Any other high-quality, liquid asset determined to be consistent with safe and sound banking practices, as determined by the appropriate Federal banking agency or State bank supervisor.

Not later than 10 business days after the end of each month, a depository institution shall disclose, in a publicly accessible manner, a summary description of the assets backing the payment stablecoin, the value of the assets, and the number of outstanding payment stablecoins, as of the last day of the month. Such explanation shall be filed with the Secretary of the Treasury under penalty of perjury by the chief financial officer of the institution, and made available on a website of the Department of the Treasury, not less than 10 business days after filing. The depository institution shall also report on the summary description any instances in which the institution failed to comply with any requirement of subsection (b). As applicable, the appropriate Federal banking agency or State bank supervisor shall, as part of a regular examination of the depository institution, at the frequency otherwise required by law, verify the composition of the assets and the accuracy of the summary descriptions made under this subsection and reports under subsection (d). Depository institutions shall clearly disclose to customers that a payment stablecoin is not guaranteed by the United States Government or subject to deposit insurance by the Federal Deposit Insurance Corporation or by share insurance of the National Credit Union Administration. Misrepresentation that a payment stablecoin is guaranteed by the United States Government or subject to deposit or share insurance shall be a violation of section 18(a)(4) of the Federal Deposit Insurance Act (12 U.S.C. 1828(a)(4)) or section 709 of title 18, United States Code, as applicable.

As applicable, the appropriate Federal banking agency or State bank supervisor shall require a depository institution that issues a payment stablecoin to report, in detail, on the composition of the assets and liabilities in each periodic report of condition, or in an alternative format approved by the Federal Financial Institutions Examination Council, at the frequency otherwise required by law.

A depository institution shall, as applicable, obtain permission from the appropriate Federal banking agency and State bank supervisor, with an application submitted not less than 6 months before intended issuance of the payment stablecoin, but which may be submitted as part of a charter application. A depository institution under subsection (n)(1)(B) chartered by the Office of the Comptroller of the Currency or a State bank supervisor, consistent with the standards of this section, shall, upon approval by the chartering authority, become a member bank of the Federal Reserve System, and be subject to supervision by the appropriate Federal Reserve bank. As part of an application under this section, a depository institution shall develop a tailored recovery and resolution plan, consistent with the standards adopted under subsection (k)(1)(F), that would permit the orderly resumption of a safe and sound operation or the orderly wind-down of operations in the event of distress, including the redemption of all outstanding payment stablecoins. The application shall also contain a draft customer agreement, flow of funds explanation, a robust information technology plan and operational design of the payment stablecoin. As applicable, the appropriate Federal banking agency or State bank supervisor shall render a written decision, with appropriate findings, on the application within 4 months of the date of filing, and shall approve the application unless—

(1) the payment stablecoin activities are not likely to be able to operate in a safe and sound manner;

(2) the depository institution does not have the required resources and expertise to manage the operation of the payment stablecoin, commensurate with the size and scale of projected operations; or

(3) the depository institution does not have required policies and procedures relating to material areas of the operation of the payment stablecoin activities.

Upon the demand of a customer, a depository institution shall redeem an outstanding payment stablecoin at par in the coins, currency, or other instruments that are legal tender, as defined in section 5103 of title 31, United States Code, or the similar laws of the jurisdiction of the unit of account in which the payment stablecoin is denominated or to which the value of the payment stablecoin is pegged. A depository institution may redeem a payment stablecoin issued by another depository institution at par, upon demand. The Board of Governors of the Federal Reserve System, through the Federal Reserve banks, shall provide for the clearing and settlement of payment stablecoin liabilities among depository institutions under this section and shall ensure competitive equality in all clearing, settlement and related services.

The appropriate Federal banking agencies, in consultation with State bank supervisors, the Securities and Exchange Commission, and Commodity Futures Trading Commission, shall monitor use of the high-quality liquid assets authorized under subsection (b) and the impact on collateral availability and the efficient functioning of the capital markets.

In the event of the receivership of a depository institution that has issued a payment stablecoin under this section, a person that has a valid claim on a payment stablecoin issued by that institution shall have priority over all other claims on the institution with respect to any required payment stablecoin assets, including claims with respect to insured deposits, other than administrative costs incurred by the appropriate Federal banking agency and State bank supervisor, as applicable, relating to the receivership of the institution, if applicable. Consistent with subsection (f), a depository institution that redeems a payment stablecoin issued by a depository institution in receivership shall be considered to have a valid claim, with corresponding priority under this subsection, on a payment stablecoin issued by the institution in receivership.

A depository institution may conduct all incidental activities relating to the issuance and redemption of payment stablecoins, which shall include the following:

(1) Management of required payment stablecoin assets in accordance with subsection (b).

(2) Custodial services.

(3) Settlement and clearing.

(4) Post-trade services.

(5) All other activities consistent with a safe and sound operation, as determined by the appropriate Federal banking agency or State bank supervisor.

Title V of this Act shall apply to the payment stablecoin activities of a depository institution under this section.

The appropriate Federal banking agencies, in consultation with State bank supervisors, shall adopt rules to implement this section, including—

(A) capital treatment for depository institutions described in subsection (n)(1) in accordance with paragraph (2);

(B) liquidity, leverage, and interest rate risk;

(C) third-party service provider activities—

(i) including custodial wallet providers; and

(ii) not including licensing or capital requirements for third-party service providers;

(D) management practices with respect to required payment stablecoin assets;

(E) appropriate operational, compliance, and information technology risk management;

(F) tailored recovery and resolution standards relating to payment stablecoins; and

(G) any other material topic.

In accordance with section 5169(c)(3)(A) of the Revised Statutes, in determining capital and leverage requirements applicable to a depository institution that has no material assets other than required payment stablecoin assets under this section—

(A) the depository institution shall not be subject to section 171 of the Financial Stability Act of 2010 (12 U.S.C. 5371); and

(B) the appropriate Federal banking agencies shall take into account the significant differences between the risks of the assets of the institution and those of depository institutions with assets that consist primarily of commercial or consumer loans.

Nothing in this section may be construed as—

(1) preventing a State bank supervisor from imposing additional or more strict regulatory standards on a bank permitted to issue payment stablecoins;

(2) superseding any requirement of State law relating to money transmitting businesses operating in that State, other than for payment stablecoin issuers under this section; or

(3) limiting the authority of an insured depository institution to engage in activities permissible pursuant to applicable State and Federal law, including accepting or receiving deposits represented on a distributed ledger or any similar analogue.

In this section:

The term depository institution has the meaning given the term in section 19(b)(1) of the Federal Reserve Act (12 U.S.C. 461(b)(1)) and includes—

(A) an insured depository institution; or

(B) a depository institution operating under subsection (c) of section 5169 of the Revised Statutes (12 U.S.C. 27), or a substantially similar State law, which is exclusively engaged in issuing payment stablecoins, providing safekeeping, trust or custodial services, or activities incidental to the foregoing.

The term payment stablecoin has the meaning given the term in section 9801 of title 31, United States Code.

The term segregated balance account includes an account of a depository institution with a Federal Reserve bank or a foreign central bank to which only required payment stablecoin assets are credited.

As used in this section, endogenously referenced crypto asset means a crypto asset that—

(1) its originator has represented will be converted, redeemed, or repurchased for a fixed amount of monetary value, or a mechanism exists or is provided to achieve any of the preceding; and

(2) one of the following:

(A) The crypto asset relies solely on the value of another crypto asset to maintain the fixed amount of monetary value.

(B) The crypto asset relies on algorithmic means to maintain the fixed amount of monetary value.

(C) A combination of subparagraphs (A) and (B).

Endogenously referenced crypto assets are hybrid instruments, as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).

Endogenously referenced crypto assets shall not use the term payment stablecoin or stablecoin in advertising or marketing materials.

Section 5169 of the Revised Statutes (12 U.S.C. 27) is amended—

(1) in subsection (a), in the third sentence, by striking to those of a trust company and activities related thereto. and inserting the following: to—

(1) those of a trust company and fiduciary activities related thereto; or

(2) those of a depository institution required to maintain assets valued at not less than 100 percent of the deposits of the institution, for the purposes of issuing a payment stablecoin (as defined in section 9801 of title 31, United States Code) and activities related thereto consistent with subsection (c) of this section and without the requirement to maintain deposit insurance under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.).; and

(2) by adding at the end the following:

(1) Notwithstanding any other provision of law, a National Bank Association described in subsection (a) may not engage in maturity transformation or facilitate consumer lending through third parties.

(2) Restrictions on affiliate transactions applicable for insured depository institutions shall apply to such depository institutions.

(3) The Comptroller of the Currency, in close consultation with the Board of Governors of the Federal Reserve System and State bank supervisors, shall develop the following:

(A) A simplified capital framework based on the following:

(i) Payment system risk.

(ii) The greater of—

(I) all projected costs of receivership; or

(II) 3 years of projected operating expenses.

(B) Appropriate standards for the depository institution to develop a community contribution plan, which may include consumer education, financial literacy, charitable donations, volunteerism, job training and internships or similar involvement.

(C) A tailored recovery and resolution plan that would permit the orderly resumption of a safe and sound operation or the orderly wind-down of operations relating to a payment stablecoin in the event of distress.

(D) Tailored holding company supervision, as specified by section 15 of the Bank Holding Company Act of 1956.

(4) In designing the simplified capital framework required by paragraph (3)(A), the Comptroller of the Currency—

(A) shall not subject depository institutions to the standards of section 171 of the Financial Stability Act of 2010 (12 U.S.C. 5371); and

(B) shall take into account the significant differences between the risks of the assets of the institution and those of depository institutions with assets that consist primarily of commercial or consumer loans.

(d) The Comptroller of the Currency may promulgate rules to carry out this section.

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended—

(1) in section 2(c) (12 U.S.C. 1841(c)), by striking paragraph (2) and by inserting the following:

The term bank does not include a covered depository institution subject to tailored holding company supervision under section 15.; and

(2) by adding at the end the following:

In this section:

The term appropriate banking supervisor means the Comptroller of the Currency, a State bank supervisor, in the case of a State member bank, the Board, or in the case of an insured bank, the Federal Deposit Insurance Corporation, as applicable.

The term controlling interest means a circumstance when a person, directly or indirectly, or acting through or in concert with 1 or more persons—

(A) owns, controls, or has the power to vote 25 percent or more of any class of voting securities of a covered depository institution;

(B) controls in any manner the election of a majority of the directors of the covered depository institution; or

(C) has the power to exercise a controlling influence over the management or policies of the covered depository institution.

The term covered depository institution means a depository institution operating under subsection (c) of section 5169 of the Revised Statutes (12 U.S.C. 27), or a substantially similar State law, other than a bank, as defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), or an insured depository institution, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813), which is exclusively engaged in issuing payment stablecoins, providing safekeeping, trust or custodial services, or activities incidental to the foregoing.

A person with a controlling interest in a covered depository institution shall—

(1) submit annual audited financial statements and other information as otherwise reasonably required by the appropriate banking supervisor; and

(2) provide a description of all affiliated or parent entities and their relationships with the institution, including annual updates.

The appropriate banking supervisor may require a legal entity with a controlling interest in a covered depository institution to execute a tax allocation agreement with the institution that—

(1) expressly states that an agency relationship exists between the person and the institution with respect to tax assets generated by the institution, and that the assets are held in trust by the person for the benefit of the institution and will be promptly remitted to the institution; and

(2) may provide that the amount and timing of any payments or refunds to the institution by the person should be no less favorable than if the institution were a separate taxpayer.

A person that is a commercial firm, as defined in section 602 of the Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010 (12 U.S.C. 1815 note), shall not obtain a controlling interest in a covered depository institution.

If the appropriate banking supervisor finds that it is in the public interest and has reasonable cause to believe it is necessary to protect the customers of a covered depository institution, the supervisor may—

(1) conduct an examination of a legal entity with a controlling interest in a covered depository institution or otherwise require information from the person; and

(2) require a person with a controlling interest in a covered depository institution to divest or sever their relationship with the institution, if necessary to maintain safety and soundness.

Congress finds the following:

(1) The laws surrounding custody of financial assets is largely customary, uncodified, and poorly understood.

(2) Lack of uniformity amongst various jurisdictions’ laws relating to custody has largely not been addressed by regulators, can contribute to risk, and is producing uncertainty for innovators.

(3) Codifying basic principles around custody of financial assets will reduce systemic risk, clearly define the rights and duties of both custodian and customer, and contribute to a more uniform and effective banking system.

In this section, the term custody means the safekeeping, servicing and management of customer financial assets, including currency, securities and commodities, on an off-balance sheet basis.

Except as provided in paragraph (2), custody of financial assets is accomplished by a bailment and established by a written customer agreement. Custody shall not be a fiduciary or trust activity unless the custodian is providing substantial discretionary services with respect to an account, including through investment advice or investment discretion, and the custodian owes a customer a higher standard of care or duty with respect to the customer of that account.

A custodian and customer may establish a legal relationship other than a bailment pursuant to a written customer agreement.

A custodial account shall be properly documented in a customer agreement, with a clearly defined legal relationship between the custodian and customer. Custodial assets shall be properly identified and segregated from the assets of the custodian, with proper documentation of asset segregation.

Assets properly held in a custodial account under this section are not assets or liabilities of the custodian and shall be maintained on an off-balance sheet basis, including for the purpose of accounting treatment for the custodian, notwithstanding the form in which the assets are maintained.

This section shall apply to all depository institutions, as defined in section 19(b)(1) of the Federal Reserve Act (12 U.S.C. 461(b)(1)), and non-depository trust companies chartered under section 5169 of the Revised Statutes (12 U.S.C. 27).

The application of a non-depository trust company or the holder of a State license that only persons engaged in crypto asset activities may obtain, which was chartered or issued under the laws of a State or the National Bank Act before the date of enactment of this Act, to receive a charter as a depository institution and to operate under subsection (c) of section 5169 of the Revised Statutes (12 U.S.C. 27), as added by section 703 of this Act, shall be decided upon by the Comptroller of the Currency before an application for a charter to operate under that section from another entity that is filed on or after the date of enactment of this Act.

The application of a covered depository institution, as defined in section 15(a) of the Bank Holding Company Act of 1956 (12 U.S.C. 1853(a)), chartered before the date of enactment of this Act to become a State member bank in the Federal Reserve System or for access to Federal Reserve services under section 11A of the Federal Reserve Act (12 U.S.C. 248a) shall be decided upon by the Board of Governors of the Federal Reserve System, or a Federal Reserve bank, as applicable, before any application to become a State member bank or for Federal Reserve services from any other entity which seeks to operate as a covered depository institution and which is filed on or after the date of enactment of this Act.

The applications described in subsections (a) and (b) of this section shall be decided upon by the appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) or Federal Reserve bank, as applicable, before an insured depository institution in operation before the enactment date of this Act may issue a payment stablecoin in accordance with section 722A of the Gramm-Leach-Bliley Act, as added by section 601 of this Act.

Not later than 180 days after the date of enactment of this Act, the Board of Governors of the Federal Reserve System shall complete a study and submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report regarding the manner in which distributed ledger technology may reduce risk for depository institutions, as defined in section 19(b)(1) of the Federal Reserve Act (12 U.S.C. 461(b)(1)), including settlement risk, operational risk and capital requirements.

Section 343 of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4807) is amended by striking subsections (a) and (b) and inserting the following:

In this subsection, the term completed application —

(A) means the information requested by the Federal banking agency at the outset of an application through application forms or similar means; and

(B) does not include supplemental information requested by the agency after filing of an application.

Each Federal banking agency, including Federal Reserve banks, shall take final action on any application to the agency before the end of the 1-year period beginning on the date on which a completed application is received by the agency.

Each Federal banking agency, including the Federal Reserve banks, shall annually report to Congress a list of the applications that have been pending for 12 months or longer since the date of the initial application filed by an applicant, and the date on which a completed application was received. Such list—

(1) shall disclose the reason why the application has not yet been approved or denied by the Federal banking agency; and

(2) shall not contain confidential supervisory information.

Any person submitting an application to a Federal banking agency may waive the applicability of subsection (a) with respect to such application at any time.

Section 12 of the Federal Deposit Insurance Act (12 U.S.C. 1822) is amended by adding at the end the following:

In this subsection, the term covered depository institution has the meaning given the term in section 15(a) of the Bank Holding Company Act of 1956.

The Corporation may be appointed as receiver of a covered depository institution, as defined in section 15(a) of the Bank Holding Company Act of 1956.

A covered depository institution may not be charged deposit insurance premiums for the purpose of this subsection, but the Corporation may use the capital of the covered depository institution to fund the costs of the receivership.

The Corporation may promulgate rules to carry out this subsection, which shall—

(A) be substantially consistent with the rules for receivership of an insured depository institution; and

(B) account for the limited activities, capital, and the required tailored recovery and resolution plan of the covered depository institution.

The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended—

(1) in section 19(b)(1)(A) (12 U.S.C. 461(b)(1)(A))—

(A) in clause (vi), by striking and at the end;

(B) in clause (vii), by striking the period at the end and inserting; and; and

(C) by adding at the end the following:

(viii) a covered depository institution, as defined in section 15(a) of the Bank Holding Company Act of 1956.; and

(2) in the first undesignated paragraph of section 9 (12 U.S.C. 321), in the first sentence, by inserting, covered depository institutions, as defined in section 15(a) of the Bank Holding Company Act of 1956 (12 U.S.C. 1853(a)), after Plan banks.

Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 139I the following new section:

Subject to subsection (b), gross income shall not include gain from the sale or exchange of any crypto asset (as defined in section 9801 of title 31, United States Code), unless the sale or exchange is for—

(1) cash or cash equivalents,

(2) any property used by the taxpayer in the active conduct of a trade or business, or

(3) any property held by the taxpayer for the production of income (as described in section 212(2)).

Subsection (a) shall not apply in the case of any sale or exchange for which—

(A) the total value of such sale or exchange exceeds $200, or

(B) the total gain which would otherwise be recognized with respect to such sale or exchange exceeds $200.

For purposes of this subsection, all sales or exchanges which are part of the same transaction (or a series of related transactions) shall be treated as one sale or exchange.

In the case of any taxable year beginning in a calendar year after 2024, each dollar amount in subsection (b)(1) shall be increased by an amount equal to— Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $10.

(1) such dollar amount, multiplied by

(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2023 for calendar year 2016 in subparagraph (A)(ii) thereof.

The table of sections for part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 139I the following new item:

The amendments made by this section shall apply to taxable years beginning after December 31, 2024.

Section 6045(c)(1)(D) of the Internal Revenue Code of 1986 is amended to read as follows:

(D) any person who (for consideration) stands ready in the ordinary course of a trade or business to effect sales of crypto assets at the direction of their customers.

The amendment made by this subsection shall apply to returns required to be filed and statements required to be furnished after December 31, 2025.

Section 6045(g)(3) of the Internal Revenue Code of 1986 is amended—

(A) in subparagraph (B)(iv), by striking digital asset and inserting crypto asset,

(B) in subparagraph (C), by striking clause (iii) and inserting the following:

(iii) January 1, 2025, in the case of any specified security which is a crypto asset, and, and

(C) by striking subparagraph (D) and inserting the following:

The term crypto asset has the meaning given such term in section 9801 of title 31, United States Code.

Section 6045A(d) of such Code is amended to read as follows:

Any broker, with respect to any transfer (which is not part of a sale or exchange executed by such broker) during a calendar year of a covered security which is a crypto asset (as defined in section 9801 of title 31, United States Code) from an account wholly controlled and maintained by such broker to an account which is not maintained by, or an address not associated with, a person that such broker knows or has reason to know is also a broker, shall make a return for such calendar year, in such form as determined by the Secretary, showing the information otherwise required to be furnished with respect to transfers subject to subsection (a). Information reported by brokers under this section shall be limited to customer information that is voluntarily provided by the customer and held by the broker for a legitimate business purpose.

Section 6050I(d) of such Code is amended—

(i) in paragraph (1), by adding and at the end,

(ii) in paragraph (2), by striking, and and inserting a period, and

(iii) by striking paragraph (3).

Section 80603(c) of the Infrastructure Investment and Jobs Act is amended by striking December 31, 2023 and inserting December 31, 2025.

(A) The amendments made by paragraphs (1) and (2) shall apply to returns required to be filed and statements required to be furnished after December 31, 2025.

(B) The amendments made by paragraph (3) shall take effect as if included in the enactment of section 80603 of the Infrastructure Investment and Jobs Act.

Paragraph (2) of section 864(b) of the Internal Revenue Code of 1986 is amended by redesignating subparagraph (C) as subparagraph (D) and by inserting after subparagraph (B) the following new subparagraph:

Trading in crypto assets through a resident broker, commission agent, custodian, crypto asset exchange, or other independent agent.

Trading in crypto assets for the taxpayer’s own account, whether by the taxpayer or the taxpayer’s employees or through a resident broker, commission agent, custodian, crypto asset exchange, or other agent, and whether or not any such employee or agent has discretionary authority to make decisions in effecting the transactions. This clause shall not apply in the case of a dealer in crypto assets.

For purposes of this subparagraph—

The term crypto asset exchange means a centralized or decentralized platform which facilitates the transfer of crypto assets.

The term crypto asset has the meaning given such term in section 9801 of title 31, United States Code.

This subparagraph shall apply only if the crypto assets are of a kind customarily dealt in on a crypto asset exchange and if the transaction is of a kind customarily consummated at such exchange.

Subparagraph (D) of section 864(b)(2) of the Internal Revenue Code of 1986, as redesignated by subsection (a), is amended by striking (A)(i) and (B)(i) and inserting (A)(i), (B)(i), and (C)(i).

The amendments made by this section shall apply to taxable years beginning after the date of enactment of this Act.

Subsection (a) of section 1058 of the Internal Revenue Code of 1986 is amended by striking (as defined in section 1236(c)).

Paragraph (1) of subsection (b) of section 1058 of the Internal Revenue Code of 1986 is amended by inserting, including a fixed-term transfer that occurs in the ordinary course of a securities lending or investment management business after transferred.

Subsection (c) of section 1058 of the Internal Revenue Code of 1986 is amended by adding at the end the following: All appropriate basis adjustments to an agreement under subsection (b) shall be made, as determined by the Secretary, including upon the return of the lent securities to the taxpayer..

Section 1058 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:

For purposes of this section, the term securities has the meaning given such term by section 1236(c), except that such term includes any crypto asset (as defined in section 9801 of title 31, United States Code) and, with respect to a crypto asset, does not require a call option.

An amount equal to the income which would otherwise accrue to the lender but for a lending transaction under this section shall be included in the gross income of the lender.

Nothing in this section, or any amendments made by this section, shall be construed to create any inference with respect to the classification of any crypto asset as a security under the Securities Act of 1933 (15 U.S.C. 77a et seq.) or the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).

The Secretary of the Treasury (or the Secretary’s delegate) may adopt rules to implement the amendments made by this section, including the application of the amendments made by this section to forks, airdrops, and similar subsidiary value.

The amendments made by this section shall apply to sales and exchanges in taxable years beginning after the date of enactment of this Act.

Section 1091 of the Internal Revenue Code of 1986 is amended to read as follows:

No deduction shall be allowed with respect to any loss claimed to have been sustained from any sale or other disposition (including any termination) of specified assets where it appears that, within a period beginning 30 days before the date of such sale or other disposition and ending 30 days after such date, the taxpayer has—

(A) acquired (by purchase, by an exchange on which the entire amount of gain or loss was recognized by law, or by entering into) substantially identical specified assets, or

(B) entered into a contract or option to acquire, or long notional principal contract in respect of, substantially identical specified assets.

Paragraph (1) shall not apply if—

(A) the taxpayer is a dealer in specified assets,

(B) the loss is sustained in a transaction made in the ordinary course of its business as a dealer, and

(C) the acquisition (or the entering into of the contract or option to acquire or long notional principal contract) which (without regard to this paragraph) would have resulted in the non-deductibility of the loss was similarly made in the ordinary course of such business.

If the amount of specified assets acquired (or covered by the contract or option to acquire or long notional principal contract) is less than the amount of specified assets sold or otherwise disposed of, then the particular specified assets the loss from the sale or other disposition of which is not deductible shall be determined under regulations prescribed by the Secretary.

If the amount of specified assets acquired (or covered by the contract or option to acquire or long notional principal contract) is not less than the amount of specified assets sold or otherwise disposed of, then the particular specified assets the acquisition of which (or the entering into of the contract or option to acquire or long notional principal contract of which) resulted in the non-deductibility of the loss shall be determined under regulations prescribed by the Secretary.

The basis of the specified asset acquired (or the contract, option, or long notional principal contract entered into) shall be increased by the amount of the deduction disallowed under subsection (a) (reduced by any amount of such deduction taken into account under this subsection to increase the basis of any specified asset previously acquired or any contract, option, or long notional principal contract previously entered into).

In any case in which— then, subject to such exceptions as the Secretary may prescribe, paragraph (1) shall apply to the substantially identical specified assets described in clause (ii) and not to the contract, option, or long term principal contract described in clause (i).

(i) the taxpayer enters into a contract or option to acquire, or long notional principal contract in respect of, substantially identical specified assets (within the period specified in subsection (a)), and

(ii) the taxpayer also acquires (within the period specified in subsection (a)) substantially identical specified assets and such acquisition would, but for the entering into of the contract, option, or long notional principal contract described in clause (i), have triggered a disallowance under subsection (a),

Subject to such exceptions as the Secretary may prescribe, if the acquisition of any substantially identical specified asset is pursuant to a contract or option described in subparagraph (A)(i), then, notwithstanding whether such asset was acquired within the period specified in subsection (a), paragraph (1) shall apply to the substantially identical specified asset acquired pursuant to the contract or option and not to the contract or option.

Rules similar to the rules of subsection (a) shall apply to any loss realized on the closing of a short sale of (or the sale, disposition, or termination of a contract or option to sell or a short notional principal contract in respect of) specified assets if, within a period beginning 30 days before the date of such closing and ending 30 days after such date, another such short sale of (or contract or option to sell or short notional principal contract in respect of) substantially identical specified assets was entered into by the taxpayer.

This section shall not fail to apply to a contract or option to acquire or sell specified assets solely by reason of the fact that the contract or option settles in (or could be settled in) cash or property other than such specified assets.

For purposes of this section, the term specified asset means any of the following: Such term shall, except as provided in regulations, include contracts or options to acquire or sell, or notional principal contracts in respect of, any specified assets.

(1) Any security (as defined in section 475(c)(2)).

(2) Except as otherwise provided by the Secretary—

(A) any crypto asset (as defined in section 9801 of title 31, United States Code) which is actively traded (within the meaning of section 1092(d)(1)),

(B) any notional principal contract with respect to any crypto asset described in subparagraph (A), and

(C) any evidence of an interest in, or a derivative instrument in, any crypto asset described in subparagraph (A) or (B), including any option, forward contract, futures contract, short position, and any similar instrument in such a crypto asset.

Except as provided in regulations prescribed by the Secretary, in the case of a specified asset to which this subsection applies, subsection (a) shall not apply to the extent that both the sale or other disposition of such asset and the acquisition of (or the entering into of the contract or option to acquire or long notional principal contract in respect of) are—

(A) directly related to the business needs of a trade or business of the taxpayer (other than the trade or business of trading specified assets described in subsection (g)(2)), or

(B) part of a hedging transaction (as defined in section 1221(b)(2) or 988(d)(2)).

To the extent provided by the Secretary, this subsection applies to assets described in subsection (g)(2).

The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including regulations or other guidance for determining whether specified assets are substantially identical.

(1) Section 1223(3) of the Internal Revenue Code of 1986 is amended—

(A) by striking stock or securities the first place it appears and inserting specified assets (as defined in section 1091(g)),

(B) by striking stock or securities the second and third place it appears and inserting specified assets (as so defined), and

(C) by striking (or the contract or option to acquire which) and inserting (or the entering into of a contract or option to acquire or long notional principal contract in respect of which).

(2) Section 6045(g)(2)(B) of such Code is amended—

(A) in clause (i)(I)—

(i) by striking security (other than stock and inserting covered security (other than stock, and

(ii) by striking stock sold or transferred and inserting covered security sold or transferred, and

(B) in clause (ii)—

(i) by striking stock or securities and inserting specified assets, and

(ii) by striking identical securities and inserting identical specified assets (as defined in section 1091(g)).

(3) The table of sections for part VII of subchapter O of chapter 1 of such Code is amended by striking the item relating to section 1091 and inserting the following new item:

The amendments made by this section shall apply to sales, dispositions, and terminations in taxable years beginning after the date of enactment of this Act.

Section 475(e)(2)(A) of the Internal Revenue Code of 1986 is amended by inserting (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)) after commodity.

The amendment made by this section shall apply to taxable years beginning after the date of enactment of this Act.

Part II of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting before section 72 the following new section:

In the case of any applicable asset received by a taxpayer for which the taxpayer has taken affirmative steps relating to control of such asset, the value of such asset shall be included in gross income for the taxable year in which such asset is sold or otherwise disposed of by the taxpayer.