H.R. 3633, Reported in Senate with an amendment in the nature of a substitute (Calendar No. 423) (Part 4 of 5)
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
involving a security that is issued, recorded, or
transferred using distributed ledger technology, to the extent
that the provision is outdated, unnecessary, or unduly
burdensome in light of the unique technological characteristics
of digital assets or substantially similar technology, which
may include regulatory provisions governing--
(A) customer protection, including custody of
digital assets or substantially similar technology;
(B) transfer agent rules;
(C) books and records, or recordkeeping
requirements;
(D) clearance and settlement rules;
(E) broker-dealer, alternative trading system, and
exchange rules;
(F) issuer disclosure and ongoing reporting
requirements tailored to digital asset securities or
substantially similar technology involving securities;
and
(G) the use of vaults, digital asset receipts, or
receipts involving substantially similar technology,
vault tokens, or liquidity provider tokens; and
(2) in imposing future obligations as those obligations
relate to digital assets or substantially similar technology,
do so in a manner consistent with the requirements described in
paragraph (1).
(b) Rule of Construction.--Nothing in this section may be construed
to limit the authority of the Commission to pursue fraud, manipulation,
or deceptive practices involving digital assets or substantially
similar technology.
(c) Use of Existing Authority.--When considering, proposing,
adopting, or engaging in any rule or program or developing new rules or
programs, including those mandated or authorized under this Act, or any
amendment made by this Act, the activities of the Commission (which may
include the solicitation of data and other input from investors,
regulated entities, and market participants or the representatives of
any of those persons) shall be considered actions taken under
subsection (e) of section 19 of the Securities Act of 1933 (15 U.S.C.
77s) and shall be subject to subsection (f) of that section.
(d) Continued Applicability of State Consumer Protection Laws.--
Except as expressly provided by this Act, or an amendment made by this
Act, nothing in this Act (or in any such amendment) shall preempt any
State consumer protection law, including common law, or a remedy
available under any such law.
(e) Preemption for Exemptions and Digital Asset Activities Under
the Securities Act.--Section 18 of the Securities Act of 1933 (15
U.S.C. 77r) is amended--
(1) in subsection (b)--
(A) in paragraph (3)--
(i) in the paragraph heading, by inserting
``in qualified transactions or'' after
``sales'';
(ii) in the first sentence, by inserting
``in a qualified transaction or'' after ``the
security''; and
(iii) in the second sentence--
(I) by striking ``term `qualified
purchaser''' and inserting ``terms
`qualified transaction' and `qualified
purchaser''';
(II) by inserting ``and categories
of transactions, including secondary
transactions,'' after ``securities'';
and
(III) by inserting ``and with due
regard to the facilitation of capital
formation and the promotion of
innovation'' before the period at the
end; and
(B) in paragraph (4)--
(i) in subparagraph (A), by inserting ``or,
if the issuer is not required to file such
reports, where the Commission otherwise
determines, consistent with the public interest
and the protection of investors and with due
regard to the facilitation of capital formation
and the promotion of innovation'' before the
semicolon at the end;
(ii) in subparagraph (D)(ii), by inserting
``in a qualified transaction or'' after
``offered or sold'';
(iii) in subparagraph (F), by striking
``or'' at the end;
(iv) in subparagraph (G), by striking the
period at the end and inserting ``; or''; and
(v) by adding at the end the following:
``(H) Commission rules or regulations issued under
section 28, except that this subparagraph does not
apply to rules or regulations adopted before the date
of enactment of this subparagraph.''.
(f) Exempting Network Tokens From State Securities Laws.--
(1) In general.--Section 18(b) of the Securities Act of
1933 (15 U.S.C. 77r(b)) is amended by adding at the end the
following:
``(5) Exemption in connection with network tokens.--A
network token, as defined in section 4B(a), shall be treated as
a covered security.''.
(2) Rule of construction.--Nothing in this section, section
4B of the Securities Act of 1933 (as added by this Act), or the
amendments made by this section may be construed to limit the
authority (as of the day before the date of enactment of this
Act) described in section 18(c)(1) of the Securities Act of
1933 (15 U.S.C. 77r(c)(1)) of a securities commission (or any
agency or office performing like functions) of any State with
respect to a covered security or any security.
(g) Preemption for Ancillary Asset Activities Under the Securities
Act of 1933.--Section 18(b) of the Securities Act of 1933 (15 U.S.C.
77r(b)), as amended by subsection (f) is amended by adding at the end
the following:
``(6) Limitations on state law regarding ancillary
assets.--
``(A) Definitions.--In this paragraph, the term
`ancillary asset' has the meaning given the term in
section 4B(a).
``(B) Exemption in connection with ancillary
assets.--An ancillary asset offered, sold, or
distributed in reliance on Regulation Crypto, as
adopted under section 103 of the Lummis-Gillibrand
Responsible Financial Innovation Act of 2026, shall be
treated as a covered security.''.
(h) Preservation of Regulation Best Interest.--
(1) In general.--Subject to paragraph (2), nothing in this
Act, any amendment made by this Act, or any rule issued under
this Act or pursuant to any such amendment may be construed to
limit, preempt, or otherwise affect the obligations of a broker
or dealer registered with the Commission under section 15 of
the Securities Exchange Act of 1934 (15 U.S.C. 78o) or section
240.15l-1 of title 17, Code of Federal Regulations (commonly
known as ``Regulation Best Interest''), or any successor
regulation.
(2) Application.--Paragraph (1) shall not apply with
respect to any person registered with the Commodity Futures
Trading Commission.
(i) Preservation of Investment Adviser Fiduciary Duties.--Nothing
in this Act, any amendment made by this Act, or any rule issued under
this Act or pursuant to any such amendment may be construed to limit,
preempt, or otherwise affect the fiduciary duty that an investment
adviser (as defined in section 202 of the Investment Advisers Act of
1940 (15 U.S.C. 80b-2)) owes to a client under section 206 of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-6) or any other
provision of Federal or State law, including in connection with
investment advice regarding a digital commodity.
SEC. 109. INSIDER TRADING WITH RESPECT TO ANCILLARY ASSET TRANSACTIONS.
(a) Definition.--In this section, the term ``distributed ledger
control person'' has the meaning given the term in section 104(a).
(b) Application of Securities Laws.--Any provision of the
securities laws, or any regulation issued under the securities laws,
including any duty that arises under the securities laws or under such
a regulation, that applies with respect to a person that purchases,
sells, or offers to sell a security, security-based swap, or security-
based swap agreement while in possession of material nonpublic
information, or communicates such information in connection with or in
the transaction, shall apply to any offer, sale, or purchase of a
security, security-based swap, or security-based swap agreement in
which an ancillary asset is offered, sold, or purchased, including any
offer, sale, or purchase conducted pursuant to Regulation Crypto, as
adopted pursuant to section 103, whether conducted by an ancillary
asset originator, a related person, or any other person.
(c) Rulemaking.--
(1) In general.--The Commission shall adopt rules to
implement subsection (b), which shall--
(A) include rules providing an affirmative defense
for an offer, sale, or purchase of an ancillary asset
made pursuant to a written plan adopted before the
applicable person became aware of material nonpublic
information, which shall be consistent with section
240.10b5-1 of title 17, Code of Federal Regulations, or
any successor regulation; and
(B) be interpreted and applied in a manner that is
consistent with, and may not be construed to expand or
contract, the principles of, and judicial precedent
interpreting (by the Supreme Court of the United
States), the securities laws and the regulations issued
under the securities laws, as those principles and that
judicial precedent are in effect, as of the day before
the date of enactment of this Act.
(2) Considerations.--In adopting rules under paragraph (1),
the Commission shall consider, subject to subsection (e),
whether, and under what circumstances, an offer, sale,
purchase, or communication should be addressed by those rules,
including by--
(A) a distributed ledger control person, any person
acting on behalf of, or in concert with, an ancillary
asset originator, related person, or distributed ledger
control person, or a person that obtained material
nonpublic information in the course of a relationship
of trust and confidence with an ancillary asset
originator or related person, where material nonpublic
information regarding an ancillary asset originator or
an ancillary asset was--
(i) obtained pursuant to or in breach of a
duty of trust or confidence;
(ii) deceptively obtained through theft,
bribery, misrepresentation, or espionage or in
violation of any Federal law protecting
computer data; or
(iii) obtained from an ancillary asset
originator or related person, the conduct of
which is described in subparagraph (B); or
(B) an ancillary asset originator or related person
that purchases, sells, or otherwise distributes an
ancillary asset, or communicates material nonpublic
information regarding an ancillary asset originator or
ancillary asset, while aware of material nonpublic
information that is required to be disclosed in any
disclosure furnished, or required to be furnished,
under section 4B of the Securities Act of 1933, as
added by this Act, or Regulation Crypto, as adopted
pursuant to section 103.
(d) Enforcement.--A violation of subsection (b), or any rule
adopted under subsection (c), shall be treated as a violation of the
securities laws and subject to the penalties under sections 21A and 32
of the Securities Exchange Act of 1934 (15 U.S.C. 78u-1, 78ff) and to
all other remedies available under the securities laws.
(e) Rule of Construction.--Consistent with section 4B(b)(3) of the
Securities Act of 1933, as added by this Act, nothing in this section
may be construed to apply the securities laws, or any regulation issued
under the securities laws (including any rule adopted under subsection
(c)), to any secondary market transaction in an ancillary asset that is
not otherwise a transaction in a security, security-based swap, or
security-based swap agreement.
SEC. 110. SECURITIES INVESTOR PROTECTION CORPORATION APPLICABILITY.
Section 16(14) of the Securities Investor Protection Act of 1970
(15 U.S.C. 78lll(14)) is amended by inserting after the second sentence
the following: ``The term `security' does not include a digital
commodity.''.
SEC. 111. INVESTOR AND CONSUMER PROTECTION ENFORCEMENT.
(a) Preservation of Certain Rights, Authorities, Laws, and
Obligations.--Subject to subsection (b), nothing in this Act, any
amendment made by this Act, or any rule, requirement, or regulation
promulgated pursuant to this Act may be construed to prohibit, limit,
impair, or otherwise affect--
(1) any person from bringing a civil action to enforce any
private right of action for fraud, deceit, manipulation, or
deceptive practices, to the extent that such private right of
action is expressly provided for in this Act or an amendment
made by this Act, or is otherwise available under Federal law,
including with respect to conduct involving an ancillary asset,
network token, digital commodity, or any transaction,
disclosure, certification, notice, report, statement,
communication, or other document involving any such asset;
(2) except as expressly provided in this Act or an
amendment made by this Act, any Federal or State regulator,
acting within the scope of authority otherwise provided by law,
from bringing an administrative or civil enforcement action
under--
(A) the Commodity Exchange Act (7 U.S.C. 1 et
seq.), including the provisions of that Act that are
added by this Act and relate to digital commodities and
the jurisdiction of the Commodity Futures Trading
Commission;
(B) the Securities Act of 1933 (15 U.S.C. 77a et
seq.), as amended by this Act, the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.), as amended by this
Act, or the Investment Advisers Act of 1940 (15 U.S.C.
80b-1 et seq.);
(C) State commodities laws, subject to the
provisions of this Act, and the amendments made by this
Act, relating to the jurisdiction of the Commodity
Futures Trading Commission; or
(D) section 18(c)(1) of the Securities Act of 1933
(15 U.S.C. 77r(c)(1)), or any functionally equivalent
anti-fraud or anti-manipulation provision of State
securities law (including any State securities law with
respect to a security or a transaction in a security to
the extent enforcement of that anti-fraud or anti-
manipulation provision of State securities law is not
preempted by section 18 of the Securities Act of 1933
(15 U.S.C. 77r)), with respect to an investment
contract involving an ancillary asset, or other
transaction involving any such asset, for which this
Act or an amendment made by this Act expressly
preserves or provides for the application of anti-fraud
or anti-manipulation authority;
(3) except as expressly provided in this Act or an
amendment made by this Act, any generally applicable State law,
including a law relating to fraud, deceit, unfair or deceptive
acts or practices, consumer protection, banking, payments,
property, contracts, criminal law, or unlawful conduct or
practices, or the remedies available under any such law, with
respect to conduct involving a digital asset, ancillary asset,
network token, or digital commodity, or any transaction,
activity, person, or service involving any such asset, provided
that such law does not impose any licensing, registration,
qualification, or other requirement that is expressly
preempted, or otherwise expressly limited, by this Act or an
amendment made by this Act;
(4) the fiduciary obligations of an investment adviser, as
defined in section 202(a) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-2(a)), under section 206 of that Act (15
U.S.C. 80b-6), any rule or regulation issued under such section
206, or any other provision of Federal or State law, including
in connection with investment advice regarding a digital asset,
ancillary asset, network token, digital commodity, or
substantially similar technology; or
(5) any right or remedy under Federal consumer financial
law, including under section 1011 of the Consumer Financial
Protection Act of 2010 (12 U.S.C. 5491) or the Federal Trade
Commission Act (15 U.S.C. 41 et seq.), or authority under
Federal consumer financial law with respect to any person,
subject to the limitations under section 1027 of the Consumer
Financial Protection Act of 2010 (12 U.S.C. 5517), including
subsections (i) and (j) of such section 1027.
(b) Limitations and Rules of Construction.--Nothing in subsection
(a) may be construed to--
(1) preserve, create, or authorize any Federal or State
registration, licensing, qualification, or merit-review
requirement under State law with respect to an ancillary asset,
network token, digital commodity, transaction, person, or
activity, to the extent that such requirement is preempted or
otherwise limited by this Act or an amendment made by this Act;
(2) create, preserve, or authorize any private right of
action under Federal or State law with respect to an ancillary
asset, network token, digital commodity, or transaction
involving any such asset;
(3) permit any claim, action, proceeding, requirement,
liability, obligation, or remedy to be brought, maintained,
imposed, or enforced under Federal or State securities or
commodities law to the extent that such claim, action,
proceeding, requirement, liability, obligation, or remedy
depends upon, is predicated on, or would require a
determination that an ancillary asset, network token, digital
commodity, or any transaction, activity, person, or service
involving any such asset has a status or characterization under
Federal or State securities or commodities law that is contrary
to an express classification or treatment provided by this Act
or an amendment made by this Act;
(4) expand, contract, or otherwise alter the jurisdiction,
exclusive or otherwise, of the Commission, the Commodity
Futures Trading Commission, or any State regulator;
(5) limit, impair, or otherwise affect the treatment of any
asset, transaction, or interest as a covered security for
purposes of section 18 of the Securities Act of 1933 (15 U.S.C.
77r); or
(6) create any new private right of action under Federal or
State law, except that nothing in this paragraph may be
construed to limit, impair, or otherwise affect any private
right of action preserved under subsection (a)(1), expressly
provided in this Act or an amendment made by this Act, or
otherwise available under Federal law.
TITLE II--PROTECTING AGAINST ILLICIT FINANCE
SEC. 201. TREATMENT UNDER THE BANK SECRECY ACT AND SANCTIONS LAWS.
(a) Amendment.--Section 5312(c)(1)(A) of title 31, United States
Code, is amended--
(1) by inserting ``digital commodity broker, digital
commodity dealer,'' after ``futures commission merchant,''; and
(2) by inserting before the period the following: ``and any
digital commodity exchange registered, or required to register,
under that Act that permits direct customer access''.
(b) Bank Secrecy Act Requirements.--
(1) Regulations.--The Secretary of the Treasury, acting
through the Director of the Financial Crimes Enforcement
Network, and in consultation with the Commodity Futures Trading
Commission, shall issue requirements consistent with the
requirements of futures commission merchants to apply the Bank
Secrecy Act to digital commodity brokers, digital commodity
dealers, and digital commodity exchanges that are tailored to
the size and complexity of such entities, including by
requiring each such entity to--
(A) establish and maintain an anti-money laundering
and countering the financing of terrorism program,
which shall include--
(i) an appropriate risk assessment;
(ii) the development of internal policies,
procedures, and controls;
(iii) the designation of a compliance
officer;
(iv) an ongoing employee training program;
and
(v) an independent audit function to test
such program;
(B) retain appropriate records of transactions;
(C) monitor and report suspicious activity, which
may include use of appropriate distributed ledger
analytics; and
(D) maintain an effective customer identification
program to identify and verify account holders and
carry out appropriate customer due diligence.
(2) Compliance with sanctions.--A digital commodity broker,
digital commodity dealer, or digital commodity exchange shall
comply with all laws and regulations related to United States
sanctions administered by the Office of Foreign Assets Control.
(c) Sense of Congress.--It is the sense of Congress that nothing in
this section shall limit the applicability of any law imposing or
authorizing the imposition of economic sanctions by the United States.
SEC. 202. DIGITAL ASSET EXAMINATION STANDARDS.
(a) Definitions.--In this section:
(1) Federal functional regulator.--The term ``Federal
functional regulator'' has the meaning given the term in
section 509 of the Gramm-Leach-Bliley Act (15 U.S.C. 6809).
(2) Financial institution.--The term ``financial
institution'' has the meaning given the term in section
5312(a)(2) of title 31, United States Code.
(b) Examination and Review.--The Secretary of the Treasury, in
consultation with Federal functional regulators, shall establish,
coordinated to the extent feasible, risk-based examination standards to
assess financial institutions involved in the digital asset sector for
compliance with anti-money laundering and countering the financing of
terrorism requirements under the Bank Secrecy Act.
SEC. 203. PREVENTING ILLICIT FINANCE THROUGH PARTNERSHIP ACT.
(a) Short Title.--This section may be cited as the ``Preventing
Illicit Finance Through Partnership Act''.
(b) Definitions.--In this section:
(1) Bank.--The term ``bank'' has the meaning given the term
in section 1010.100 of title 31, Code of Federal Regulations
(or any corresponding similar regulation).
(2) Certified or recognized information-sharing or
interdiction network.--The term ``certified or recognized
information-sharing or interdiction network'' means a real-
time, secure, public-private mechanism that--
(A) facilitates the detection, interdiction, and
prevention of illicit finance violations through rapid
information exchange between government and regulated
entities; and
(B) is--
(i) certified by the Secretary of the
Treasury for the purpose of supporting
interdiction and investigative actions
consistent with law enforcement or regulatory
authorities; or
(ii) recognized by the Secretary of the
Treasury as an existing (as of the day before
the date of enactment of this Act), effective
public-private partnership network that meets
standards for security, accountability, and
participation that are equivalent to the
standards that would be required by the
Secretary of the Treasury for certification
under clause (i).
(3) Covered agency.--The term ``covered agency'' means--
(A) the Department of Justice, including the
Federal Bureau of Investigation and the Drug
Enforcement Administration;
(B) the Department of the Treasury, including the
Financial Crimes Enforcement Network, the Internal
Revenue Service, and the Office of Foreign Assets
Control; and
(C) the Department of Homeland Security.
(4) Designated private sector entity.--The term
``designated private sector entity'' means a private sector
entity designated under subsection (d).
(5) Director.--The term ``Director'' means the Director of
the Financial Crimes Enforcement Network.
(6) Illicit finance violation.--The term ``illicit finance
violation'' means the illicit use of digital assets.
(7) Illicit use.--The term ``illicit use'' includes fraud,
money laundering, terrorist financing, the purchase and sale of
illicit goods, trafficking of fentanyl (including fentanyl
precursors and trade in other illicit drugs), sanctions
evasion, theft of funds, funding of illegal activities,
transactions relating to child sexual abuse material or elder
fraud abuse, and any other financial transaction involving the
proceeds of specified unlawful activity, as defined in section
1956(c) of title 18, United States Code.
(8) Money services business.--The term ``money services
business'' has the meaning given the term in section 1010.100
of title 31, Code of Federal Regulations (or any corresponding
similar regulation).
(c) Establishment of Program.--The Secretary of the Treasury shall
establish a pilot program under which covered agencies and designated
private sector entities securely share information focused on potential
illicit finance violations and threats and emerging risks relating to
illicit finance violations.
(d) Designation of Private Sector Entities.--
(1) Required action.--
(A) Initial companies.--Not later than 90 days
after the date of enactment of this Act, the Director
and the Secretary shall designate 10 private sector
entities that are money services businesses, 10 private
sector entities that are digital commodity brokers,
digital commodity dealers, or digital commodity
exchanges, and 10 private sector entities that are
banks to participate in the pilot program established
under subsection (c), if such entities agree and
volunteer to participate in the program.
(B) Biannual review.--Not less frequently than once
every 6 months, the Director shall review and, as
appropriate, replace the private sector entities
designated under this paragraph.
(C) Rule of construction.--Nothing in this section
may be construed as--
(i) requiring an entity to participate in
the pilot program established under this
section; or
(ii) enabling the Director to select an
entity to participate in the pilot program
without the consent of such entity.
(2) Optional designation.--In addition to the 30 private
sector entities designated under paragraph (1), the Director
may designate--
(A) 1 or more information sharing and analysis
centers to participate in the pilot program;
(B) 1 or more participants in a certified or
recognized information sharing or interdiction network;
or
(C) 1 or more private sector entities, as
appropriate, relating to a particular type of illicit
activity.
(e) Information Sharing With Private Sector Entities.--A covered
agency that initiates an investigation into a potential illicit finance
violation, or identifies a threat or emerging risk relating to an
illicit finance violation, may share with any designated private sector
entity such information about the investigation, threat, or emerging
risk as the covered agency determines is appropriate.
(f) Use of Information by Private Sector Entities.--Information
received by a designated private sector entity under this section may
not be used for any purpose other than identifying and reporting on
activities that may involve illicit finance violations or threats and
emerging risks relating to illicit finance violations, unless otherwise
prescribed by regulation or permitted by the covered agency sharing the
information.
(g) Means of Sharing Information.--The covered agencies and
designated private sector entities may share information about
potential illicit finance violations, or threats and emerging risks
relating to illicit finance violations, with each other--
(1) through a portal established by the Secretary of the
Treasury or a similar mechanism determined appropriate by the
Secretary of the Treasury;
(2) through secure email;
(3) at monthly meetings, which shall be facilitated by the
Secretary of the Treasury; or
(4) through a certified or recognized information-sharing
or interdiction network.
(h) Limitation on Liability.--A designated private sector entity
that transmits, receives, or shares information for the purposes of
identifying and reporting activities that may constitute illicit
finance violations, or threats and emerging risks relating to illicit
finance violations, shall not be liable to any person for such
disclosure or for any failure to provide notice of such disclosure to
the person who is the subject of such disclosure or any other person
identified in such disclosure.
(i) Sunset.--The pilot program established under subsection (c)
shall terminate on the date that is 5 years after the date of enactment
of this Act, unless made permanent through notice and comment
rulemaking by the Department of the Treasury.
SEC. 204. FINANCIAL TECHNOLOGY PROTECTION ACT.
(a) Short Title.--This section may be cited as the ``Financial
Technology Protection Act''.
(b) Definitions.--In this section:
(1) Appropriate congressional committees.--The term
``appropriate congressional committees'' means--
(A) the Committee on Banking, Housing, and Urban
Affairs of the Senate;
(B) the Committee on Agriculture, Nutrition, and
Forestry of the Senate;
(C) the Committee on Financial Services of the
House of Representatives; and
(D) the Committee on Agriculture of the House of
Representatives.
(2) Distributed ledger analytics company.--The term
``distributed ledger analytics company'' means any business
providing software, research, or other services (such as
tracing tools, geofencing, transaction screening, the
collection of business data, and sanctions screening) that--
(A) support private and public sector
investigations and risk management activities; and
(B) involve cryptographically secured distributed
ledgers or any similar technology or implementation.
(3) Emerging technologies.--The term ``emerging
technologies'' means the critical and emerging technology areas
listed in the Critical and Emerging Technologies List developed
by the Fast Track Action Subcommittee on Critical and Emerging
Technologies of the National Science and Technology Council,
including any updates to such list.
(4) Foreign terrorist organization.--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).
(5) Illicit use.--The term ``illicit use'' includes fraud,
money laundering, terrorist financing, the purchase and sale of
illicit goods, trafficking of fentanyl (including fentanyl
precursors and trade in other illicit drugs), sanctions
evasion, theft of funds, funding of illegal activities,
transactions related to child sexual abuse material or elder
fraud abuse, and any other financial transaction involving the
proceeds of specified unlawful activity (as defined in section
1956(c) of title 18, United States Code).
(6) State sponsor of terrorism.--The term ``state sponsor
of terrorism'' means a country determined by the Secretary of
State to have repeatedly provided support for acts of
international terrorism under section 40 of the Arms Export
Control Act (22 U.S.C. 2780) or section 620A of the Foreign
Assistance Act of 1961 (22 U.S.C. 2371).
(7) Terrorist.--The term ``terrorist'' includes a person
carrying out domestic terrorism or international terrorism (as
such terms are defined, respectively, under section 2331 of
title 18, United States Code).
(8) Transnational organized crime.--The term
``transnational organized crime'' has the meaning given the
term in section 284 of title 10, United States Code.
(c) Independent Financial Technology Working Group to Combat
Terrorism, Narcotics Trafficking, and Illicit Financing.--
(1) Establishment.--There is established the Independent
Financial Technology Working Group to Combat Terrorism,
Narcotics Trafficking, and Illicit Financing (in this section
referred to as the ``Working Group'' ), which shall consist of
the following:
(A) The Secretary of the Treasury or their
designee, who shall serve as the chair of the Working
Group.
(B) A senior-level representative from each of the
following:
(i) The Department of the Treasury.
(ii) The Office of Terrorism and Financial
Intelligence.
(iii) The Internal Revenue Service.
(iv) The Department of Justice.
(v) The Federal Bureau of Investigation.
(vi) The Drug Enforcement Administration.
(vii) The Department of Homeland Security.
(viii) The United States Secret Service.
(ix) The Department of State.
(x) The Office of the Director of National
Intelligence.
(C) At least 5 individuals appointed by the
Secretary of the Treasury to represent the following:
(i) Digital asset companies.
(ii) Distributed ledger analytics
companies.
(iii) Financial institutions.
(iv) Institutions or organizations engaged
in research.
(v) Institutions or organizations focused
on individual privacy and civil liberties.
(D) Such additional individuals as the Secretary of
the Treasury may appoint as necessary to accomplish the
duties described in paragraph (2).
(2) Duties.--The Working Group shall--
(A) conduct research on the illicit use of digital
assets and other related emerging technologies,
including by terrorists, foreign terrorist
organizations, state sponsors of terrorism, and
transnational organized crime groups; and
(B) develop legislative and regulatory proposals to
improve anti-money laundering, counter-terrorist, and
other counter-illicit financing efforts in the United
States.
(3) Reports.--
(A) In general.--Not later than 1 year after the
date of enactment of this Act, and annually for the 3
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 paragraph
(1)(B), 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.
(B) Final report.--Before the date on which the
Working Group terminates under paragraph (4)(A), the
Working Group shall submit to the appropriate
congressional committees a final report detailing the
findings, recommendations, and activities of the
Working Group, including any final results from the
research conducted by the Working Group.
(4) Sunset.--
(A) In general.--The Working Group shall terminate
on the later of--
(i) the date that is 4 years after the date
of enactment of this Act; or
(ii) the date on which the Working Group
completes any wind-up activities described in
subparagraph (B).
(B) Authority to wind up activities.--If there are
research, proposals, or other related activities of the
Working Group ongoing as of the date that is 4 years
after the date of enactment of this Act, the Working
Group may temporarily continue working in order to wind
up such activities.
(C) Return of appropriated funds.--On the date on
which the Working Group terminates under subparagraph
(A), any unobligated funds appropriated to carry out
this subsection shall be transferred to the Treasury.
SEC. 205. DIGITAL ASSET KIOSKS.
(a) Registration.--Section 5330 of title 31, United States Code, is
amended--
(1) in subsection (d)--
(A) in paragraph (1)(A), by inserting ``, any
person who owns, operates, or manages a digital asset
kiosk in the United States or its territories,'' after
``similar instruments''; and
(B) by adding at the end the following:
``(3) Digital asset; digital asset address; digital asset
kiosk; digital asset kiosk operator.--The terms `digital
asset', `digital asset address', `digital asset kiosk', and
`digital asset kiosk operator' have the meanings given those
terms, respectively, in section 5337.''; and
(2) by adding at the end the following:
``(f) Registration of Digital Asset Kiosk Locations.--
``(1) In general.--Not later than 90 days after the
effective date of this subsection, and not less than once every
90 days thereafter, the Secretary of the Treasury shall require
digital asset kiosk operators to submit an updated list
containing the physical address of each digital asset kiosk
owned or operated by the digital asset kiosk operator.
``(2) Form and manner of registration.--Each submission by
a digital asset kiosk operator pursuant to paragraph (1) shall
include--
``(A) the legal name of the digital asset kiosk
operator;
``(B) any fictitious or trade name of the digital
asset kiosk operator;
``(C) the physical address of each digital asset
kiosk owned, operated, or managed by the digital asset
kiosk operator that is located in the United States or
the territories of the United States;
``(D) the start date of operation of each digital
asset kiosk;
``(E) the end date of operation of each digital
asset kiosk, if applicable; and
``(F) each digital asset address used by the
digital asset kiosk operator.
``(3) False and incomplete information.--The filing of
false or materially incomplete information in a submission
required under paragraph (1) shall be deemed a failure to
comply with the requirements of this subsection.''.
(b) Preventing Fraudulent Transactions at Digital Asset Kiosks.--
(1) In general.--Subchapter II of chapter 53 of title 31,
United States Code, is amended by adding at the end the
following:
``Sec. 5337. Digital asset kiosk fraud prevention
``(a) Definitions.--In this section:
``(1) Customer.--The term `customer' means any person that
purchases or sells digital assets through a digital asset
kiosk.
``(2) Distributed ledger analytics.--The term `distributed
ledger analytics' means the analysis of data from public
distributed ledgers, and associated transaction information, to
provide risk-specific information about digital asset
transactions and digital asset addresses.
``(3) Digital asset.--The term `digital asset' has the
meaning given the term in section 2 of the GENIUS Act (12
U.S.C. 5901).
``(4) Digital asset address.--The term `digital asset
address' means an alphanumeric identifier associated with a
digital asset wallet identifying the location to which a
digital asset purchased through a digital asset kiosk can be
sent or from which a digital asset sold through a digital asset
kiosk can be accessed.
``(5) Digital asset kiosk.--The term `digital asset kiosk'
means a stand-alone machine that is capable of accepting or
dispensing legal tender in exchange for digital assets.
``(6) Digital asset kiosk operator.--The term `digital
asset kiosk operator' means a person who owns, operates, or
manages a digital asset kiosk located in the United States or
its territories.
``(7) Digital asset kiosk transaction.--The term `digital
asset kiosk transaction' means the purchase or sale of digital
assets via a digital asset kiosk.
``(8) Digital asset wallet.--The term `digital asset
wallet' means a software application or other mechanism
providing a means for holding, storing, and transferring
digital assets.
``(9) FinCEN.--The term `FinCEN' means the Financial Crimes
Enforcement Network of the Department of the Treasury.
``(10) New customer.--The term `new customer,' with respect
to a digital asset kiosk operator, means a customer during the
14-day period beginning on the date of the first digital asset
kiosk transaction of the customer with the digital asset kiosk
operator.
``(11) Transaction hash.--The term `transaction hash' means
a unique identifier made up of a string of characters that act
as a record of and provide proof that a transaction was
verified and added to the distributed ledger.
``(b) Disclosures.--
``(1) In general.--Before entering into a digital asset
transaction with a customer, a digital asset kiosk operator
shall disclose in a clear, conspicuous, and easily readable
manner--
``(A) all relevant terms and conditions of the
digital asset kiosk transaction, including--
``(i) the amount of the digital asset kiosk
transaction;
``(ii) the type and nature of the digital
asset kiosk transaction;
``(iii) a warning that the digital asset
kiosk transaction is final, is not refundable,
and may not be reversed; and
``(iv) the type and amount of any fees or
other expenses paid by the customer;
``(B) a warning relating to consumer fraud
including--
``(i) that consumer fraud often starts with
contact from a stranger, and that the customer
should never send money to someone the customer
does not know;
``(ii) the most common types of fraudulent
schemes involving digital asset kiosks, such
as--
``(I) impersonation of a government
official or a bank representative;
``(II) threats of jail time or
financial penalties;
``(III) offers of a job or reward
in exchange for payment, or offers of
deals that seem too good to be true;
``(IV) claims of a frozen bank
account or credit card;
``(V) requests for donations to
charity or disaster relief; or
``(VI) payment to an individual the
customer has never met; and
``(iii) a statement that the customer
should contact law enforcement if they suspect
fraudulent activity, such as scams, including
contact information for a relevant law
enforcement or government agency.
``(2) Additional disclosures.--FinCEN may adopt rules
relating to additional disclosures required to be made to
customers prior to engaging in a transaction.
``(c) Acknowledgment of Disclosures.--Each time a customer uses a
digital asset kiosk, the digital asset kiosk operator shall ensure
acknowledgment of all disclosures required under subsection (b) via
confirmation of consent of the customer at the digital asset kiosk.
``(d) Receipts.--Upon completion of each digital asset kiosk
transaction, the digital asset kiosk operator shall provide the
customer with a receipt, which shall include the following information:
``(1) The name and contact information of the digital asset
kiosk operator, including a telephone number for a customer
service helpline.
``(2) The name of the customer.
``(3) The type, value, date, and precise time of the
digital asset kiosk transaction, transaction hash, and each
applicable digital asset address.
``(4) The amount of the digital asset kiosk transaction
expressed in United States dollars.
``(5) All fees charged.
``(6) A statement that the customer should contact law
enforcement if they suspect fraudulent activity, such as scams,
including contact information for a relevant law enforcement or
government agency.
``(7) The exchange rate applied.
``(8) Any additional information the digital asset kiosk
operator determines appropriate.
``(e) Physical Receipts Available.--A physical version of the
receipt required under subsection (d) shall be issued to the customer
at the time of the digital asset kiosk transaction, if the customer
opts for such a physical version of the receipt.
``(f) Anti-Fraud Policy.--
``(1) In general.--Each digital asset kiosk operator shall
establish, maintain, and implement a written anti-fraud policy
if required by, and consistent with, applicable State law in
those States where the digital asset kiosk operator is
licensed.
``(2) Federal standard.--A digital asset kiosk operator
operating in any State that does not require an anti-fraud
policy under paragraph (1) shall establish, maintain, and
implement an anti-fraud policy that, at a minimum, includes--
``(A) the identification and assessment of fraud-
related areas;
``(B) procedures and controls to protect against
risks identified under subparagraph (A);
``(C) allocation of responsibility for monitoring
the risks identified under subparagraph (A); and
``(D) procedures for the periodic evaluation and
revision of the anti fraud procedures, controls, and
monitoring mechanisms under subparagraphs (B) and (C).
``(g) Appointment of Compliance Officer.--Each digital asset kiosk
operator shall designate and employ a compliance officer who--
``(1) is qualified to coordinate and monitor compliance
with this section and all other applicable Federal and State
laws, rules, and regulations;
``(2) is employed full-time by the digital asset kiosk
operator;
``(3) is not the chief executive officer of the digital
asset kiosk operator; and
``(4) does not own or control more than 10 percent of any
interest in the digital asset kiosk operator.
``(h) Use of Distributed Ledger Analytics and Wallet Pinning.--
``(1) In general.--Each digital asset kiosk operator shall
use distributed ledger analytics to prevent sending a digital
asset to a digital asset wallet known to be affiliated with
fraudulent activity at the time of a digital asset kiosk
transaction and to detect transaction patterns indicative of
fraud or other illicit activities.
``(2) Wallet pinning.--Each digital asset kiosk operator
shall maintain restrictions that prevent more than 1 customer
of the digital asset kiosk operator from using the same digital
wallet address.
``(3) Compliance.--The Director of FinCEN may request
evidence from any digital asset kiosk operator to confirm
compliance with this subsection.
``(i) Confirmation Required Before New Customer Transactions.--
Before entering into a digital asset kiosk transaction valued at $500
or more with a new customer, the digital asset kiosk operator shall
obtain confirmation from the new customer that--
``(1) the new customer wishes to proceed with the digital
asset kiosk transaction; and
``(2) the new customer is not being fraudulently induced
into engaging in the transaction.
``(j) Holding Period.--No digital asset kiosk operator shall
execute a transaction on behalf of a new customer that sends digital
assets to a specific wallet address unless at least 72 hours have
elapsed since the initiation of the transaction by the new customer.
``(k) Transaction Limits With Respect to New Customers.--The
Secretary of the Treasury shall prescribe by regulation the threshold
amounts for reporting or limiting digital asset kiosk transactions,
including aggregate or single-day deposit and withdrawal limits, as the
Secretary determines are reasonably necessary to deter fraud and
illicit finance. Such regulations shall consider the unique risks and
functionalities of digital asset kiosks and may provide for exceptions,
adjustments, or exclusions as deemed appropriate by the Secretary.
``(l) Interim Transaction Limits.--Until the effective date of
regulations prescribed under subsection (k), a digital asset kiosk
operator shall not permit a new customer to conduct transactions
exceeding $3,500 in the aggregate within any 24-hour period.
``(m) Refunds.--A digital asset kiosk operator shall issue a refund
for a customer's transaction fees within 30 days if--
``(1) the customer was fraudulently induced into engaging
in the digital asset kiosk transaction; and
``(2) the customer files a complaint to the digital asset
kiosk operator, which includes--
``(A) the name, address, and phone number of the
customer;
``(B) the transaction hash of the digital asset
kiosk transaction or information sufficient to
establish the type, value, date, and time of the
digital asset kiosk transaction; and
``(C) a copy of a report to a State or local law
enforcement or government agency made not later than 30
days after the digital asset kiosk transaction.
``(n) Customer Service Helpline.--Each digital asset kiosk operator
shall provide live customer service during business hours, the phone
number for which is regularly monitored and displayed in a clear,
conspicuous, and easily readable manner upon each digital asset kiosk.
During non-business hours, the digital asset kiosk operator shall
maintain an alternative customer service system that may include an
automated chatbot, an online complaint reporting portal, or other
customer service mechanism.
``(o) Communications With Law Enforcement.--Each digital asset
kiosk operator performing business in the United States shall have a
dedicated method of contact, such as a phone number, email address, or
other contact method, for law enforcement and regulatory agencies to
contact the digital asset kiosk operator. This contact method shall be
displayed and available on the digital asset kiosk operator's website.
``(p) Civil Penalties and State Enforcement.--Any State regulator
may bring a civil action or other appropriate proceeding to enforce the
provisions of this section and may assess or collect civil penalties or
other remedies for violations of this section, as provided under
applicable State law.
``(q) Rule of Construction.--Nothing in this section may be
construed to prohibit a State from enacting a law, rule, or regulation
that provides greater protection to customers.''.
(2) Technical and conforming amendment.--The table of
sections for subchapter II of chapter 53 of title 31, United
States Code, is amended by adding at the end the following:
``5337. Digital asset kiosk fraud prevention.''.
SEC. 206. STUDY ON ILLICIT USE OF DIGITAL ASSETS.
(a) Definitions.--In this section:
(1) Foreign terrorist organization.--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).
(2) Transnational organized criminal.--The term
``transnational organized criminal'' means an individual who
participates in transnational organized crime, as defined in
section 284(i) of title 10, United States Code.
(b) Review.--Not later than 1 year after the date of enactment of
this Act, the Secretary of the Treasury, in consultation with the
Attorney General, shall conduct a comprehensive review of how foreign
terrorist organizations and transnational organized criminals utilize
digital assets in connection with illicit activities.
(c) Report.--Not later than 180 days after completing the review
under subsection (b), the Secretary of the Treasury shall submit to the
Committee on Agriculture, Nutrition, and Forestry and the Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee on
Agriculture and the Committee on Financial Services of the House of
Representatives a report on the findings of the Secretary, including--
(1) an assessment of how foreign terrorist organizations
and transnational organized criminals utilize digital assets in
connection with illicit activities; and
(2) recommendations to assist the Commission and the
Commodity Futures Trading Commission in strengthening
compliance and enforcement of digital assets-related entities
registered with their respective agencies.
(d) Additional Agencies.--The Secretary of the Treasury may, in the
sole discretion of the Secretary of the Treasury, solicit input for the
report required under subsection (c) from any or all of the Federal
functional regulators, as defined in section 509 of the Gramm-Leach-
Bliley Act (15 U.S.C. 6809), and the Commodity Futures Trading
Commission.
(e) Classified Annex.--The report required under subsection (c) may
include a classified annex, as appropriate.
TITLE III--RESPONSIBLE INNOVATION IN DECENTRALIZED FINANCE
SEC. 301. RULEMAKING ON APPLICATION OF EXISTING SECURITIES INTERMEDIARY
REQUIREMENTS AND EXISTING BANK SECRECY ACT REQUIREMENTS
TO NON-DECENTRALIZED FINANCE TRADING PROTOCOLS.
(a) Definitions.--In this section:
(1) Decentralized finance trading protocol.--The term
``decentralized finance trading protocol'' means a distributed
ledger system through which multiple participants can execute a
financial transaction--
(A) in accordance with an automated rule or
algorithm that is predetermined and non-discretionary;
and
(B) without reliance on a person other than the
user to maintain custody or control of any digital
assets subject to the financial transaction.
(2) Non-decentralized finance trading protocol.--
(A) In general.--The term ``non-decentralized
finance trading protocol'' means a decentralized
finance trading protocol that meets 1 or more of the
following:
(i) A person or group of persons under
common control, or acting pursuant to an
agreement, arrangement, or understanding to act
in concert, has the authority, directly or
indirectly, through any contract, arrangement,
understanding, relationship, or otherwise, to
control or materially alter the functionality,
operation, or rules of consensus or agreement
of the decentralized finance trading protocol.
(ii) The decentralized finance trading
protocol does not operate, execute, and enforce
its operations and transactions based solely on
pre-established, transparent rules encoded
directly within the source code of the
distributed ledger system.
(iii) A person or group of persons under
common control, or acting pursuant to an
agreement, arrangement, or understanding to act
in concert, has the authority, via operation of
the decentralized finance trading protocol, to
restrict, censor, or prohibit the use of the
decentralized finance trading protocol,
including any applicable system-based user
activity.
(B) Special rule.--For purposes of subparagraph
(A), a decentralized governance system, solely by
virtue of the operation of the decentralized governance
system, shall not be considered to be a person or a
group of persons under common control or acting
pursuant to an agreement, arrangement, or understanding
to act in concert.
(C) Exclusions.--For purposes of this section,
participation in an incident-response or security
council, as described in subsection (f), shall not, by
itself, be deemed to constitute control of a non-
decentralized finance trading protocol.
(D) Scoping.--In implementing this section, the
Commission and the Department of the Treasury shall
construe the term ``non-decentralized finance trading
protocol'' in a manner consistent with section 15H of
the Securities Exchange Act of 1934, as added by
section 601.
(b) Rules.--
(1) In general.--The Commission, in consultation with the
Department of the Treasury, shall adopt tailored, clear, and
specific rules, after notice and comment, that clarify how a
person, or group of persons under common control, or acting
pursuant to an agreement, arrangement, or understanding to act
in concert, that controls a non-decentralized finance trading
protocol and is subject to the Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.), as amended by this Act, shall comply
with applicable requirements under that Act, including with
respect to registration, conduct, disclosure, recordkeeping,
supervision, and other requirements under the securities laws.
(2) Requirements.--The rulemaking required under paragraph
(1) shall--
(A) ensure that the rules adopted pursuant to that
rulemaking are consistent with the purposes of the
securities laws, including the public interest, the
protection of investors, and the maintenance of fair
and orderly markets;
(B) protect the rights of software developers,
publishers, and users to create, publish, and use code
and software in a manner consistent with the First
Amendment to the Constitution of the United States;
(C) provide legal clarity for the development,
publication, and operation of distributed ledger
systems and the components therein in a manner
consistent with the purposes of this section; and
(D) result in, by operation of law, the application
and enforcement by the Department of the Treasury,
where applicable and pursuant to existing law, as in
effect on the day before the date of enactment of this
Act, of anti-money laundering and countering the
financing of terrorism requirements under the Bank
Secrecy Act and other Federal law with respect to any
person or group of persons that the Commission
determines, through that rulemaking, is required to
register, or comply as a registrant, under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.).
(3) Application.--
(A) In general.--Any person or group of persons
determined under this subsection to be required to
register, or comply as a registrant, under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)
(referred to in this paragraph as the ``Exchange Act'')
shall be subject to that Act and the Bank Secrecy Act
to the extent applicable under existing law, as in
effect on the day before the date of enactment of this
Act, consistent with the treatment of similarly
situated participants under the Exchange Act.
(B) Rulemaking.--The Secretary of the Treasury, in
consultation with the Commission, shall adopt tailored,
clear, and specific rules, after providing notice and
the opportunity to comment, that define compliance with
obligations under the Bank Secrecy Act and other
Federal laws relating to anti-money laundering and
countering the financing of terrorism with respect to
any person, or group of persons under common control
(or acting pursuant to an agreement, arrangement, or
understanding to act in concert), that--
(i) controls the operation of a non-
decentralized finance trading protocol
identified in the rulemaking conducted under
paragraph (1);
(ii) is required to register, or comply as
a registrant, under the Exchange Act, as
determined in the rulemaking conducted under
paragraph (1); and
(iii) is caused to be treated as a
financial institution under the Bank Secrecy
Act pursuant to existing law, as in effect on
the day before the date of enactment of this
Act, as a result of registration or compliance
described in clause (ii).
(c) Activity-Based Application.--Rules adopted under subsection
(b)(1) shall require the Commission to determine the applicable
requirements only with respect to securities-related activities, based
on the functions performed by the controlling person or group of
persons, including brokerage, dealing, trading, execution, clearing, or
custody of securities, without regard to technological form,
distributed architecture, or purportedly decentralized
characterization.
(d) Rules of Construction.--
(1) Registration not required.--Nothing in this section,
nor any rule adopted under this section, may be construed to--
(A) require a distributed ledger system or any
software code to register with the Commission in its
own capacity; or
(B) prohibit the launch, deployment, or operation
of a distributed ledger system.
(2) No expansion of statutory authority.--Notwithstanding
any rulemaking required under subsection (b), and
notwithstanding any action the Commission or the Secretary of
the Treasury may take under that subsection, nothing in this
section, including any such rulemaking, may be construed to--
(A) expand or contract the statutory authority of
the Commission or the Department of the Treasury, as in
effect on the day before the date of enactment of this
Act, under the Bank Secrecy Act; or
(B) limit the use of the authority described in
subparagraph (A) to determine, pursuant to that
rulemaking, the applicability of existing statutory
requirements, as in effect on the day before the date
of enactment of this Act, to persons or activities
described in this section.
(3) No presumption of applicability.--Nothing in this
section may be construed to create a presumption that any
person or activity described in this section is or is not
subject to the Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) or the Bank Secrecy Act absent a determination made
pursuant to a rulemaking required under this section.
(e) Preservation of Existing Authorities.--Nothing in this section
may be construed to--
(1) limit the authority of the Commission under the
securities laws to investigate violations, bring actions, or
issue subpoenas with respect to persons determined, pursuant to
rulemaking, to be subject to the securities laws under this
section; or
(2) limit the authority of the Secretary of the Treasury
under the Bank Secrecy Act, including to investigate violations
or bring actions with respect to persons determined, pursuant
to rulemaking, to be subject to the Bank Secrecy Act.
(f) Non-Decentralized Finance Trading Protocols.--
(1) In general.--In adopting rules under subsection (b),
the Commission shall treat a decentralized governance system
and any person participating in the decentralized governance
system as separate persons unless such persons are under common
control or acting pursuant to an agreement, arrangement, or
understanding to act in concert.
(2) Emergency measures.--
(A) In general.--Pre-defined, temporary rules-based
cybersecurity emergency measures exercised by an
incident-response or security council exclusively in
response to a specific and documented cybersecurity
incident or imminent threat and pursuant to publicly
disclosed, on-chain authorization mechanisms, strictly
limited in scope and duration solely to address such
specific and documented cybersecurity incident or
imminent threat, and without unilateral control by any
single person, shall not, by themselves, constitute
common control or an agreement, arrangement, or
understanding to act in concert, provided that such
rules and authorities, including the procedures and
operational limits governing such emergency measures,
are disclosed in publicly available written
documentation reasonably available to the applicable
Federal regulator, by a decentralized governance system
or similar legal entity sufficiently in advance of any
exercise of such emergency powers.
(B) Prohibition.--The emergency measures described
in subparagraph (A) may not be used to implement
protocol upgrades, governance decisions, or economic
changes that are unrelated to the mitigation of the
applicable cybersecurity incident or imminent threat,
as described in that subparagraph.
(3) Standards.--The standards criteria for temporary rules-
based cybersecurity emergency measures under paragraph (2)
shall be established by rulemaking pursuant to subsection (b).
SEC. 302. ILLICIT FINANCE OBLIGATIONS FOR DISTRIBUTED LEDGER MESSAGING
SYSTEMS.
(a) Definitions.--In this section:
(1) Distributed ledger messaging system.--The term
``distributed ledger messaging system''--
(A) means a web-hosted software application that
provides a user with the ability to create or submit an
instruction, communication, or message to a distributed
ledger application or decentralized finance trading
protocol for the purpose of executing a transaction by
the user; and
(B) does not include--
(i) a distributed ledger application;
(ii) a distributed ledger protocol;
(iii) a distributed ledger system;
(iv) a decentralized finance trading
protocol;
(v) any client, node, validator, or other
form of computational infrastructure with
respect to a distributed ledger system; or
(vi) any software or hardware wallet that
facilitates the custody of an individual of
their digital assets.
(2) United States sanction law.--The term ``United States
sanction law'' means any Federal law imposing, or authorizing
the imposition of, economic sanctions.
(b) Guidance.--Not later than 360 days after the date of enactment
of this Act, the Secretary of the Treasury shall issue guidance with
respect to the economic sanctions and anti-money laundering and
countering the financing of terrorism obligations, risk management
practices, or compliance considerations, applicable to a distributed
ledger messaging system that is owned or operated by a United States
person, as defined in any law imposing or authorizing the imposition of
economic sanctions, which may include--
(1) the use of commercially reasonable distributed ledger-
analytics screening measures, through industry-standard
distributed ledger-analytics tools, to identify wallet
addresses that are owned by sanctioned persons, involve
jurisdictions or financial institutions subject to United
States sanctions, or activity prohibited by United States
sanctions;
(2) blocking, rejecting, preventing the routing of, or
otherwise restricting attempted transactions prohibited by
United States sanction laws;
(3) blocking or restricting transactions that exhibit
indicators of ransomware activity, illicit finance typologies,
or any other pattern that presents a significant and
identifiable illicit finance risk based on a commercially
reasonable distributed ledger-analytics assessment to identify
transactions that involve ransomware activity and other illicit
finance activity; and
(4) implementing and maintaining risk-based measures,
consistent with applicable law, to identify, mitigate, and
address anti-money laundering and countering the financing of
terrorism risks, including--
(A) monitoring for risk indicators and limiting
exposure to illicit-finance risks, which may include
restricting, limiting, or otherwise mitigating exposure
to high-risk transactions; and
(B) complying, as applicable, with special measures
implemented by the Secretary of the Treasury under
section 5318A of title 31, United States Code.
(c) Enforcement and Penalties.--The Secretary of the Treasury and
any other Federal agency with relevant jurisdiction have the authority,
as applicable, to enforce this section using their existing
authorities, as of the day before the date of enactment of this Act,
under applicable law.
(d) Rules of Construction.--Nothing in this section may be
construed to--
(1) alter or amend any laws imposing or authorizing
imposition of economic sanctions by the United States,
including those that apply to United States persons that own or
operate a distributed ledger messaging system;
(2) expand or contract the applicability of--
(A) economic sanctions, anti-money laundering, or
any other illicit finance laws in effect as of the day
before the date of enactment of this Act to any person,
including any person that owns or operates a
distributed ledger messaging system; or
(B) the definition of a ``financial institution''
under applicable laws, which shall not apply to non-
controlling developers or providers as defined in
section 604(b)(3); or
(3) restrict the authority of the Secretary of the Treasury
to implement, administer, and enforce, including by imposing
civil money penalties, any law imposing or authorizing the
imposition of economic sanctions or any law to prevent money
laundering or illicit finance otherwise provided by Federal law
to the Secretary of the Treasury.
SEC. 303. SPECIAL MEASURE RELATING TO CERTAIN TRANSMITTALS OF FUNDS.
Section 5318A of title 31, United States Code, is amended--
(1) in subsection (a)(2)(C), by striking ``subsection
(b)(5)'' and inserting ``paragraph (5) or (6) of subsection
(b)'' and
(2) in subsection (b), by adding at the end the following:
``(6) Special measure for certain transmittals of funds.--
If the Secretary of the Treasury finds that a jurisdiction
outside of the United States, 1 or more financial institutions
operating outside of the United States, or 1 or more classes of
transactions within, or involving, a jurisdiction outside of
the United States is of primary money laundering concern in
connection with illicit finance through the use of digital
assets, as defined in section 2 of the GENIUS Act (12 U.S.C.
5901), the Secretary may, by order, regulation, or otherwise as
permitted by law, prohibit, or impose conditions upon, certain
transmittals of funds (to be defined by the Secretary by
regulation) by any domestic financial institution or domestic
financial agency, if such transmittal of funds involves any
such institution, class of transaction, or type of account.''.
SEC. 304. OFFSHORE STABLECOIN REPORT.
(a) Definitions.--In this section:
(1) Material volume of transactions.--The term ``material
volume of transactions'' means a sustained level of transaction
activity that is--
(A) publicly observable;
(B) exceeds de minimis usage over a 12-month
period; and
(C) is reasonably likely to affect the illicit
finance or national security risk exposure of the
United States.
(2) Payment stablecoin.--The term ``payment stablecoin''
has the meaning given the term in section 2 of the GENIUS Act
(12 U.S.C. 5901).
(3) United states-dependent offshore stablecoin.--The term
``United States-dependent offshore stablecoin'' means a payment
stablecoin--
(A) that is not issued by a permitted payment
stablecoin issuer or any foreign payment stablecoin
issuer registered with the Comptroller (as those terms
are defined in section 2 of the GENIUS Act (12 U.S.C.
5901));
(B) that is issued by a person operating outside of
the United States; and
(C) the value of which is supported or backed by a
reserve of assets that has a substantial nexus to the
United States, which may include--
(i) obligations of the United States,
including United States Treasury securities and
repurchase agreements backed by United States
Treasury securities and funds held as deposits
at any bank subject to the jurisdiction of the
United States;
(ii) deposits maintained at a banking
entity or insured depository institution
located in the United States, including
correspondent or payable-through accounts;
(iii) securities issued or guaranteed by
the United States or any agency or
instrumentality thereof; or
(iv) assets custodied, cleared, or settled
through payment, clearing, or settlement
systems located in the United States.
(b) Report.--Not later than June 30 of the second calendar year
that begins after the date of enactment of this Act, and every 4 years
thereafter for not more than 3 reports, the Secretary 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, and make available on the website of the Department of
the Treasury, a report assessing whether there is credible,
articulable, and publicly supportable evidence of significant illicit
finance threats or vulnerabilities associated with any United States-
dependent offshore stablecoin employed in a material volume of
transactions.
(c) Contents.--Each report required under subsection (b) shall
include--
(1) an assessment of the illicit finance risk of each
United States-dependent offshore stablecoin employed in a
material volume of transactions;
(2) an assessment of the controls employed by the issuers
of United States-dependent offshore stablecoins to address the
use of such stablecoins in illicit finance, as available;
(3) data and information regarding the volume of United
States-dependent offshore stablecoins assessed to be employed
in connection with illicit finance, as available;
(4) a general description of the relationships between
United States-dependent offshore stablecoins and the financial
system of the United States, including principal channels of
interaction; and
(5) such other information or analysis as the Secretary of
the Treasury deems relevant to assessing the illicit finance
risks of United States-dependent offshore stablecoins.
(d) Classified Annex.--Each report required under subsection (b)
shall be submitted in unclassified form, but may contain a classified
annex.
(e) National Strategy.--The reporting requirement under subsection
(b) may be met as part of the national strategy for combating terrorist
and other illicit financing required under sections 261 and 262 of the
Countering America's Adversaries Through Sanctions Act (Public Law 115-
44; 131 Stat. 934) for the reporting years.
(f) Rule of Construction.--Nothing in this section may be construed
to authorize--
(1) the disclosure of any information that is protected
from disclosure under Federal law; and
(2) the collection or use of any information other than
publicly available data or information lawfully obtained by the
Department of the Treasury under existing authorities, as of
the day before the date of enactment of this Act.
SEC. 305. TEMPORARY HOLD FOR CERTAIN DIGITAL ASSET TRANSACTIONS.
(a) Definitions.--In this section:
(1) Covered agency.--The term ``covered agency'' means any
State or Federal law enforcement agency, including the
Department of the Treasury.
(2) Covered person.--The term ``covered person'' means a
person that is--
(A) a permitted payment stablecoin issuer;
(B) a foreign payment stablecoin issuer (as defined
in section 2 of the GENIUS Act (12 U.S.C. 5901))
registered with the Office of the Comptroller of the
Currency pursuant to section 18(c) of that Act (12
U.S.C. 5916(c)); or
(C) a digital asset service provider, as that term
is defined in section 2 of the GENIUS Act (12 U.S.C.
5901).
(3) Payment stablecoin; permitted payment stablecoin
issuer.--The terms ``payment stablecoin'' and ``permitted
payment stablecoin issuer'' have the meanings given those terms
in section 2 of the GENIUS Act (12 U.S.C. 5901).
(4) Qualified written request.--The term ``qualified
written request'' means a written communication issued by an
authorized official of a covered agency that--
(A) identifies a specific wallet, address, account,
or transaction reasonably suspected of being linked to
illicit activity;
(B) requests a covered person initiate an action
with respect to the specified wallet, address, account,
or transaction reasonably suspected of being linked to
illicit activity, including delaying the execution of a
transaction, conversion, or withdrawal involving
digital assets; and
(C) includes a designated agency contact.
(5) Temporary hold.--The term ``temporary hold'' means a
restriction applied by a covered person that delays execution
of a transaction, conversion, or withdrawal involving digital
assets for a reasonable period of time, not to exceed 30
calendar days, which may be extended for an additional 150
calendar days pursuant to a qualified written request.
(b) Protection From Private Causes of Action.--
(1) In general.--Any covered person that, in good faith and
in compliance with this section, or any person complying with a
temporary lawful order under subsection (c) that, voluntarily
implements a temporary hold shall not be held liable pursuant
to any Federal or State private right of action for
implementing the temporary hold, provided that--
(A) the covered person or other person, as
applicable--
(i) implements the temporary hold based on
a reasonable belief the transaction,
conversion, or withdrawal relates to a
violation or attempted violation of State or
Federal law; or
(ii) implements the temporary hold after
receiving a qualified written request from a
covered agency;
(B) the covered person--
(i) makes reasonable efforts to notify the
affected customer of the temporary hold;
(ii) reasonably determines that
notification would impede actual or potential
law enforcement efforts; or
(iii) receives a qualified written request
from a covered agency that requests
notification not be attempted; and
(C) the covered person notifies as soon as
reasonably practicable an appropriate State or Federal
law enforcement agency or the Federal Trade Commission,
provided that such notification is not required when
the covered person has received a qualified written
request from a covered agency.
(2) Documentation.--A covered person shall--
(A) maintain for the 3-year period following the
implementation of a temporary hold documentation of the
basis for applying a temporary hold; and
(B) make available the documentation described in
subparagraph (A) upon the request of a covered agency
or the Federal Trade Commission.
(c) Compliance With Temporary Lawful Orders.--A permitted payment
stablecoin issuer shall comply with any valid writ, process, order,
rule, decree, command, or other requirement issued or promulgated under
Federal law by a court of competent jurisdiction that--
(1) requires a person to freeze or prevent the transfer of
payment stablecoins;
(2) specifies the payment stablecoins or accounts subject
to blocking with reasonable particularity; and
(3) is subject to judicial or administrative review or
appeal, as provided by law.
(d) Rules of Construction.--Nothing in this section may be
construed to--
(1) compel or require any covered person to take action to
freeze, seize, or block digital assets that is not otherwise
required under existing Federal or State law, as in effect on
the day before the date of enactment of this Act;
(2) limit or alter the authority of any government agency,
including with respect to authority to pursue enforcement
actions;
(3) limit or affect the application of--
(A) section 5318(g)(3) of title 31, United States
Code, and any regulation requiring any financial
institution to report suspicious activity; or
(B) any lawful authority to seize or freeze assets
pursuant to a lawful order or sanctions designation; or
(4) limit the ability of a covered person to apply a
temporary hold to any wallet, address, account, or transaction
located outside the United States.
(e) Reporting.--The Attorney General and the Federal Trade
Commission may issue regulations or guidance relating to any
notification by covered persons pursuant to this section to the
Department of Justice and the Federal Trade Commission, respectively.
SEC. 306. VOLUNTARY CYBERSECURITY PROGRAM FOR DECENTRALIZED FINANCE
TRADING PROTOCOLS.
(a) Definitions.--In this section:
(1) Covered activities.--The term ``covered activities''
means the activities described in section 15H(b) of the
Securities Exchange Act of 1934, as added by section 601.
(2) Decentralized finance trading protocol.--The term
``decentralized finance trading protocol'' has the meaning
given the term in section 15H(a) of the Securities Exchange Act
of 1934, as added by section 601.
(3) Director.--The term ``Director'' means the Director of
NIST.
(4) NIST.--The term ``NIST'' means the National Institute
of Standards and Technology.
(b) Establishment of Program.--The Director shall, in consultation
with the Commission and the Commodity Futures Trading Commission,
establish a voluntary program for the adoption by persons developing
decentralized finance trading protocols or engaging in covered
activities of applicable cybersecurity standards published by NIST.
(c) Development of Program Criteria.--
(1) Request for information.--The Director shall issue a
request for information in the Federal Register to gather input
from experts and industry stakeholders on--
(A) cybersecurity threats, vulnerabilities, and
risks to decentralized finance trading protocols;
(B) auditing and code security standards, including
best practices for code audits;
(C) consumer protection and code transparency best
practices on decentralized finance trading protocols;
and
(D) existing NIST standards, as of the day before
the date of enactment of this Act, and their
applicability to decentralized finance trading
protocols.
(2) Report.--The Director shall develop a report on the
software development of decentralized finance protocols to
assess technical input from paragraph (1).
(3) Publication of program criteria.--After evaluating
input provided under paragraph (1), the Director shall release
a special publication containing a detailed evaluation of
cybersecurity best practices and existing applicable standards,
as of the day before the date of enactment of this Act, for
decentralized finance trading protocols, to provide program
criteria to software developers and industry stakeholders under
the voluntary program, which shall include a summary of public
comments and responses as to how input was incorporated.
(4) Requests for revision.--
(A) In general.--After the Director publishes the
program criteria under paragraph (3), the Director
shall issue a request for comment in the Federal
Register to gather input on the workability of the
program.
(B) Petition.--The public may petition the Director
to reevaluate certain aspects of the program criteria
published under paragraph (3).
(5) Program updates.--As the technology underpinning
decentralized finance trading protocols evolves, the Director
shall update the special publication under paragraph (3) in
compliance with subsection (d).
(d) Program.--
(1) Application.--A person seeking evaluation of a
decentralized finance trading protocol or a covered activity
under the program established under subsection (b) shall submit
to the Director an application at such time and in such manner
as the Director considers appropriate for purposes of the
program.
(2) Review.--In carrying out the program established under
subsection (b), the Director shall review each application
submitted by a person under paragraph (1) of this subsection.
(3) Determination.--In carrying out a review under
paragraph (2) of an application regarding a decentralized
finance trading protocol or covered activity, the Director
shall determine whether the protocol or activity is in
compliance with existing applicable standards, frameworks, and
guidelines published by the Director under subsection (c).
(4) Notice.--For each determination made under paragraph
(3) pursuant to an application by a person of a decentralized
finance trading protocol or covered activity, the Director
shall transmit to the person a notice of the determination.
(e) Benefits of Program.--
(1) Display.--A person that receives notice under
subsection (d)(4) that the Director has determined that a
decentralized finance trading protocol or a covered activity
has adopted the applicable cybersecurity standards published by
NIST, the person may publicly display a designation, seal, or
other identifier issued by the Director.
(2) Treatment of adoption.--In adopting a regulation or
guidance relating to this section, a Federal agency shall
consider adoption of cybersecurity standards under the program
required by subsection (b) as evidence of good faith compliance
with the law.
(f) Rule of Construction Relating to Preemption.--Nothing in this
section may be construed to preempt any otherwise applicable provision
of law of a State.
SEC. 307. AMENDMENTS TO MONETARY INSTRUMENT DEFINITION.
(a) Definitions.--In this section:
(1) Self-hosted wallet.--The term ``self-hosted wallet''
means a digital interface--
(A) that is used to secure and transfer digital
assets; and
(B) under which the owner of digital assets secured
and transferred under subparagraph (A) retains
independent control over those digital assets.
(2) United states sanction law.--The term ``United States
sanction law'' has the meaning given the term in section
302(a).
(b) Monetary Instruments.--Section 5312(a)(3)(D) of title 31,
United States Code, is amended by inserting ``, including digital
assets (as defined in section 2 of the GENIUS Act (12 U.S.C. 5901)), as
may be applicable,'' after ``value''.
(c) Treasury Risk Assessment.--As part of the national strategy for
combating terrorist and other illicit financing required under sections
261 and 262 of the Countering America's Adversaries Through Sanctions
Act (Public Law 115-44; 131 Stat. 934), the Secretary of the Treasury
shall consider--
(1) illicit activity, such as money laundering and
sanctions evasion, involving self-hosted wallets;
(2) the effectiveness of and gaps in existing (as of the
day before the date of enactment of this Act) methods,
techniques, and strategies used by regulated financial
institutions in detecting illicit activity, such as money
laundering, involving self-hosted wallets;
(3) any illicit actors, including nation state actors, that
pose a high risk of facilitating illicit activity through the
use of self-hosted wallets;
(4) the benefits of the use of self-hosted wallets to--
(A) enhance user privacy and civil liberties
through direct asset custody; and
(B) expand financial inclusion and access for
communities underserved by traditional financial
institutions;
(5) end user and counterparty risks associated with self-
hosted wallets, including consumer fraud, cybersecurity, and
identity verification;
(6) the use of hardware self-hosted wallets to smuggle
digital assets for financing cross-border illicit activity;
(7) the use of hardware self-hosted wallets for tax evasion
and asset concealment; and
(8) other considerations the Secretary may determine
appropriate.
(d) Guidance.--The Secretary of the Treasury may issue guidance for
financial institutions that transact with self-hosted wallets based on
the results of the research on benefits and risks required under
subsection (c), which shall not--
(1) require a regulated entity to collect, with respect to
any transaction, personally identifiable information about the
controller of a self-hosted wallet when the controller is not
both the customer of the regulated entity and a party to such
transaction, except as required by Federal law, including
United States sanctions laws and regulations or lawful process;
or
(2) be construed to hinder, restrict, or otherwise impair
the authority of any Federal agency to investigate, detect,
counteract, or prevent illegal activity.
SEC. 308. RISK MANAGEMENT STANDARDS FOR DIGITAL ASSET INTERMEDIARIES.
(a) In General.--Before conducting trading activity (including
routing orders and executing trades) through a decentralized finance
trading protocol, a digital asset intermediary shall implement risk
management standards as described in subsection (b) with respect to
trading using that decentralized finance trading protocol.
(b) Requirements.--The risk management standards applicable to a
digital asset intermediary shall be comprised of the following:
(1) Conducting an effective risk analysis with respect to
the decentralized finance trading protocol, including--
(A) money laundering and sanctions evasion risks,
including whether trading will involve activity
relating to a primary money laundering concern;
(B) fraud and market manipulation;
(C) operational and cybersecurity risk, including
settlement; and
(D) implementing robust policies and procedures to
mitigate the risks identified under this paragraph.
(2) Disclosing the risks identified under paragraph (1)
using plain language to customers.
(3) Maintaining robust, risk-based capability to detect
market manipulation, fraud, money laundering, and sanctions
evasion occurring on the decentralized finance trading
protocol, which may include the use of alternative tools that
will properly target such risks, including distributed ledger
analytics tools.
(4) Implementing an effective risk-based procedure for
determining whether to execute, reject, or suspend an incoming
or outgoing transaction relating to the decentralized finance
trading protocol, as applicable, including a determination
based on suspected risk of money laundering, sanctions evasion,
fraud, or market manipulation.
(5) Consistent with this subsection, implementing other
reasonable standards which may be required by rule.
(c) Examinations.--
(1) Compliance.--The Commission or the Commodity Futures
Trading Commission, or other appropriate self-regulatory
organization, shall verify compliance with the requirements of
this section as part of a regular examination of the digital
asset intermediary at the frequency and under the conditions
otherwise provided by law or rule.
(2) Rule of construction.--Nothing in this section may be
construed to limit the authority of the Financial Crimes
Enforcement Network or the Office of Foreign Assets Control
from conducting examinations, investigations, or enforcement
actions relating to this section as otherwise provided by law.
(d) Rulemaking.--Rules shall be adopted to implement this section
as follows:
(1) The Department of the Treasury, in consultation with
the Commission and the Commodity Futures Trading Commission,
shall adopt rules to implement the money laundering and
sanctions evasion risk analysis standards of this section.
(2) The Commission and the Commodity Futures Trading
Commission shall adopt rules to implement this section other
than the provisions described in paragraph (1).
(3) Rules adopted under this paragraph shall be reasonably
tailored to the size of the applicable digital asset
intermediary and risks of the digital asset intermediary that
are reasonably knowable to the digital asset intermediary.
SEC. 309. STUDY ON DIGITAL ASSET MIXERS AND TUMBLERS.
(a) Digital Asset Mixer and Tumbler Defined.--In this section, the
term ``digital asset mixer and tumbler'' means a smart contract, or set
of smart contracts, that obfuscate or eliminate the source or other
forms of identification of the holder of a digital asset, including by
pooling assets from different holders and redistributing those assets
among holders.
(b) Report.--Not later than 1 year after the date of enactment of
this Act, the Secretary 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 digital asset mixers and tumblers and
historical transaction volume.
(2) Estimates of the percentage of transactions relating to
digital asset mixers and tumblers that are used by actors
engaged in illicit finance.
(3) Estimates of the reliance, and financial exposure, of
centralized exchanges and traditional financial institutions to
digital asset mixers and tumblers, and the extent to which
centralized exchanges and traditional financial institutions
are adequately implementing anti-money laundering and economic
sanctions compliance with respect to digital asset mixers and
tumblers.
(4) An assessment of potential non-illicit uses of mixers
and tumblers described in paragraph (1), including privacy
benefits.
(5) An analysis of regulatory approaches employed by other
jurisdictions relating to digital asset mixers and tumblers.
(6) Recommendations for legislation or regulation relating
to digital asset mixers and tumblers.
SEC. 310. GAO STUDY ON INTERMEDIARIES IN FOREIGN JURISDICTIONS.
(a) In General.--The Comptroller General of the United States, in
consultation with the Secretary of the Treasury, shall conduct a study
to--
(1) assess the risks posed by digital asset intermediaries
that--
(A) are primarily located in foreign jurisdictions
that lack regulatory requirements that are
substantially similar to the requirements of the Bank
Secrecy Act; and
(B) provide services to United States persons; and
(2) provide any regulatory or legislative recommendations
to address the risks described in paragraph (1).
(b) Report.--Not later than 1 year after the date of enactment of
this Act, the Comptroller General of the United States shall submit to
Congress a report containing all findings and determinations made in
carrying out the study required under subsection (a).
SEC. 311. STUDIES ON FOREIGN ADVERSARY ACTIVITIES.
(a) Definitions.--In this section:
(1) Foreign adversary.--The term ``foreign adversary''
means a foreign government or foreign non-government person
determined by the Secretary of Commerce to be a foreign
adversary under section 791.4(a) of title 15, Code of Federal
Regulations, or any successor regulation.
(2) Relevant congressional committees.--The term ``relevant
congressional committees'' means--
(A) the Committee on Banking, Housing, and Urban
Affairs of the Senate;
(B) the Committee on Agriculture, Nutrition, and
Forestry of the Senate;
(C) the Select Committee on Intelligence of the
Senate;
(D) the Committee on Financial Services of the
House of Representatives;
(E) the Committee on Agriculture of the House of
Representatives; and
(F) the Permanent Select Committee on Intelligence
of the House of Representatives.
(b) Treasury Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary of the Treasury, in consultation
with the Commodity Futures Trading Commission and the Commission, shall
conduct a study and submit a report to the relevant congressional
committees, which may include a classified annex, that--
(1) identifies any digital asset intermediary that is
controlled by a government of a foreign adversary, or by
individuals or entities acting at the direction of a foreign
adversary;
(2) determines whether any government of a foreign
adversary is collecting trading data about United States
persons in digital asset markets; and
(3) evaluates whether any proprietary intellectual property
of digital asset intermediaries is being misused or stolen by
any government of a foreign adversary.
(c) GAO Study and Report.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General shall conduct a study
and submit a report to the relevant congressional committees, which may
include a classified annex, that--
(1) identifies any digital asset intermediary that is owned
by a government of a foreign adversary, or by individuals or
entities acting at the direction of a foreign adversary;
(2) determines whether any government of a foreign
adversary is collecting trading data about United States
persons in digital asset markets; and
(3) evaluates whether any proprietary intellectual property
of digital asset intermediaries is being misused or stolen by
any government of a foreign adversary.
SEC. 312. TREASURY STUDY ON CYBERSECURITY STANDARDS.
(a) Study.--The Secretary of the Treasury, in consultation with the
Director of the Cybersecurity and Infrastructure Security Agency, the
Director of the National Security Agency, and the Director of the
National Institute of Standards and Technology, shall conduct a study
on cybersecurity standards applicable to digital asset smart contracts,
custody, key management, and smart contract deployment.
(b) Report.--
(1) In general.--Not later than 365 days after the date of
enactment of this Act, the Secretary 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 containing--
(A) the findings of the study under subsection (a);
and
(B) any legislative recommendations.
(2) Classified annex.--The report under paragraph (1) may
include a classified annex, as appropriate.
SEC. 313. STUDIES ON FINANCIAL STABILITY RISKS OF DECENTRALIZED FINANCE
TRADING AND CREDIT IN DIGITAL COMMODITY MARKETS.
Not later than 1 year after the date of enactment of this Act, and
every 4 years thereafter until 4 consecutive reports have been issued,
the Secretary of the Treasury, the Board of Governors of the Federal
Reserve System, the Commission, and the Commodity Futures Trading
Commission shall--
(1) conduct a study examining--
(A) the role of decentralized finance protocols in
the financial system, including--
(i) the functions of such protocols;
(ii) the use of such protocols to obtain
leverage or financing;
(iii) the effects of such protocols on the
pricing and trading of financial instruments,
including descriptions of any linkages between
such protocols and traditional financial
instrument; and
(iv) the types and volumes of financial
activity conducted through such protocols;
(B) the risks of decentralized finance protocols to
financial stability, fair and orderly markets, and
otherwise to the financial system of the United States,
which shall include a quantification of those risks, to
the extent possible;
(C) the strategies and guardrails regulators and
market participants have used and are using to mitigate
risks arising from the use of decentralized finance
protocols; and
(D) an assessment of whether the regulatory
framework adequately controls any risk with respect to
decentralized finance protocols;
(2) conduct a separate study examining the risks to
financial stability and orderly markets arising from the
extension and maintenance of credit with respect to digital
assets by digital asset service providers, including--
(A) the effect of gaps in the regulatory framework
for credit extended on digital assets, such as risks
arising from the extension and maintenance of credit on
digital assets; and
(B) the interconnections between leverage in the
market for digital assets and the financial system; and
(3) submit to the Committee on Banking, Housing, and Urban
Affairs of the Senate, the Committee on Agriculture, Nutrition,
and Forestry of the Senate, the Committee on Financial Services
of the House of Representatives, and the Committee on
Agriculture of the House of Representatives a report on the
studies conducted under paragraphs (1) and (2), which--
(A) shall include legislative and regulatory
recommendations, as appropriate; and
(B) may include a classified annex.
TITLE IV--RESPONSIBLE BANKING INNOVATION
SEC. 401. PERMISSIBILITY OF DIGITAL ASSET ACTIVITIES.
(a) Definitions.--In this section:
(1) Appropriate federal banking agency; state bank; state
bank supervisor; state member bank.--The terms ``appropriate
Federal banking agency'', ``State bank'', ``State bank
supervisor'', and ``State member bank'' have the meanings given
those terms in section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813).
(2) Customer-driven transaction.--The term ``customer-
driven transaction''--
(A) means a transaction that is entered into for a
valid and independent business purpose of a customer;
and
(B) does not include a transaction, the principal
purpose of which is to deliver to a financial holding
company, insured State bank, national bank, or Federal
credit union assets that the financial holding company,
insured State bank, national bank, or Federal credit
union, respectively, could not invest in directly.
(3) Federal branch; state branch.--The terms ``Federal
branch'' and ``State branch'' have the meanings given those
terms in section 1(b) of the International Banking Act of 1978
(12 U.S.C. 3101).
(4) Federal credit union; insured credit union.--The terms
``Federal credit union'' and ``insured credit union'' have the
meanings given those terms in section 101 of the Federal Credit
Union Act (12 U.S.C. 1752).
(5) Financial holding company.--The term ``financial
holding company'' has the meaning given the term in section 2
of the Bank Holding Company Act of 1956 (12 U.S.C. 1841).
(6) Financial subsidiary.--The term ``financial
subsidiary'' has the meaning given the term in section
5136A(g)(3) of the Revised Statutes (12 U.S.C. 24a).
(7) Insured state bank.--The term ``insured State bank''
means a State bank, the deposits of which are insured by the
Federal Deposit Insurance Corporation.
(8) National bank.--The term ``national bank'' means a
national banking association.
(b) Authorized Activities for Financial Holding Companies and
Financial Subsidiaries.--
(1) In general.--A financial holding company or financial
subsidiary may use a digital asset or distributed ledger system
to perform, provide, or deliver any activity, function,
product, or service that the financial holding company is
otherwise authorized by law to perform, provide, or deliver.
(2) Financial in nature.--The activities described in
subsection (g) are financial in nature, or incidental to a
financial activity, for purposes of section 4(k) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1843(k)) and section
5136A(b) of the Revised Statutes (12 U.S.C. 24a(b)).
(3) Rule of construction.--Nothing in this subsection may
be construed to exempt the performance, provision, or delivery
by a financial holding company or financial subsidiary of an
activity, function, product, or service from a requirement that
would apply if the activity were not performed, provided, or
delivered using a digital asset or distributed ledger system.
(c) Authorized Activities for National Banks.--
(1) In general.--
(A) Authorized activities.--A national bank may use
a digital asset or distributed ledger system to
perform, provide, or deliver any activity, function,
product, or service that the national bank is otherwise
authorized by law to perform, provide, or deliver.
(B) Branches of foreign banks.--
(i) Federal branches.--Consistent with
section 4(b) of the International Banking Act
of 1978 (12 U.S.C. 3102(b)), the activities
authorized for a national bank under
subparagraph (A) and paragraph (2) shall be
permissible for a Federal branch, subject to
any limitations that would apply to those
activities pursuant to the International
Banking Act of 1978 (12 U.S.C. 3101 et seq.) if
the activity were not performed, provided, or
delivered using a digital asset or distributed
ledger system.
(ii) Rule of construction for state
branches.--For the purposes of activities
engaged in by a State branch as principal under
section 7(h) of the International Banking Act
of 1978 (12 U.S.C. 3105(h)), the activities
authorized under clause (i) are permissible
activities of a Federal branch.
(2) Business of banking and other authorized activities.--
The activities described in subsection (g) are authorized as
part of the business of banking under the paragraph designated
as the ``Seventh'' of section 5136 of the Revised Statutes (12
U.S.C. 24) or under other applicable law.
(3) Rules of construction.--Nothing in this subsection may
be construed to--
(A) exempt the performance, provision, or delivery
by a national bank of an activity, function, product,
or service from a prohibition, restriction,
registration, limitation, or other requirement that
would apply if the activity were not performed,
provided, or delivered using a digital asset or
distributed ledger system by a national bank; or
(B) expand or contract the meaning of ``operations
are or have been required by the Comptroller of the
Currency to be limited to those of a trust company and
activities related thereto'', as that term is used in
section 5169(a) of the Revised Statutes (12 U.S.C.
27(a)).
(d) State Banks.--The activities authorized under subsection (c)
are permissible activities--
(1) of a national bank for purposes of activities of an
insured State bank and any subsidiary of an insured State bank
to engage in as principal under subsections (a) and (d) of
section 24 of the Federal Deposit Insurance Act (12 U.S.C.
1831a); and
(2) of a State member bank, and any subsidiary of a State
member bank, to engage in as principal.
(e) Authorized Activities for Federal Credit Unions.--
(1) In general.--A Federal credit union may use a digital
asset or distributed ledger system to perform, provide, or
deliver any activity, function, product, or service that the
Federal credit union is otherwise authorized by law to perform,
provide, or deliver.
(2) Business of credit unions.--The activities described in
subsection (g) are authorized as part of, or incidental to, the
authority necessary or requisite to carry on effectively the
business for which Federal credit unions are incorporated under
paragraph (17) of section 107 of the Federal Credit Union Act
(12 U.S.C. 1757(17)).
(3) Rule of construction.--Nothing in this subsection may
be construed to exempt the performance, provision, or delivery
by a Federal credit union of an activity, function, product, or
service from a requirement that would apply if the activity
were not performed, provided, or delivered using a digital
asset or distributed ledger system.
(f) Insured Credit Unions.--The activities authorized for a Federal
credit union under subsection (e)(1) shall be permissible for an
insured credit union, subject to authorization by applicable State law.
(g) Activities Described.--The activities described in this
subsection are--
(1) providing custodial, fiduciary, or safekeeping services
for digital assets;
(2) providing services related to custodial services for
digital assets, including staking, facilitating digital asset
lending, distributed ledger governance services, and advancing
funds for the purchase of digital assets or in respect of
distributions on digital assets;
(3) making loans collateralized by digital assets;
(4) engaging in payment activities involving digital
assets, including facilitating customer or principal payments
in connection with otherwise permissible activities;
(5) operating a node on a distributed ledger;
(6) providing self-custodial wallet software;
(7) engaging in derivatives transactions, including related
hedging activities, in a manner consistent with section 7.1030
of title 12, Code of Federal Regulations, as in effect as of
the date of enactment of this Act;
(8) providing brokerage services with respect to any
digital asset, including clearing and execution services,
whether alone or in combination with other permissible
activities;
(9) facilitating transactions in the secondary market for
all types of digital assets on the order of customers as a
riskless principal to the extent of engaging in a transaction
in which a company, after receiving an order to buy or sell a
digital asset from a customer, purchases or sells the digital
asset for its own account to offset a contemporaneous sale to
or purchase from the customer;
(10) holding as principal digital assets for which the
banking entity anticipates a reasonably foreseeable need to the
extent incidental to an otherwise permissible activity, which
shall include holding digital assets as principal in order to
pay fees arising from interactions with a distributed ledger
system or for the purposes of risk management, treasury
services, liquidity management or trade or margin settlement or
similar purposes, subject to the otherwise applicable
limitations on the activities of a banking entity pursuant to
section 13 of the Bank Holding Company Act of 1956 (12 U.S.C.
1851) and only to the extent that the terms and prohibitions of
that section apply to a transaction; and
(11) underwriting, dealing in, or making a market in
digital assets in customer-driven transactions, including
related hedging activities in connection with those customer-
driven transactions, subject to the otherwise applicable
limitations on the activities of a banking entity pursuant to
section 13 of the Bank Holding Company Act of 1956 (12 U.S.C.
1851) and only to the extent that the terms and prohibitions of
that section apply to a transaction.
(h) Other Requirements.--There shall be no other prior notice or
approval requirements to engage in the activities described in
subsections (b) through (g) of this section other than those required
under title LXII of the Revised Statutes, the Act entitled ``An Act to
place authority over the trust powers of national banks in the
Comptroller of the Currency'', approved September 28, 1962 (12 U.S.C.
92a et seq.), the Federal Reserve Act (12 U.S.C. 221 et seq.), or the
Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) and the
regulations promulgated under those Acts.
(i) Rule of Construction.--Nothing in this section may be construed
to--
(1) exclude other possible permissible activities that are
not activities described in subsection (g);
(2) imply that inclusion of an activity described in
subsection (g) means that the activity is otherwise
impermissible;
(3) limit the authority of an appropriate Federal banking
agency to determine that activities other than those activities
described in subsection (g) are permissible for a Federal
credit union or authorized as part of the business of banking,
or financial in nature, or incidental or complementary thereto,
or other applicable law, as applicable, through
interpretations, guidance, or rulemaking; or
(4) limit the authority of an appropriate Federal banking
agency, or a State bank supervisor, to supervise and take
enforcement action with respect to an insured depository
institution (or, to the extent applicable, a financial holding
company) engaging in a digital asset activity authorized by
this section that the appropriate Federal banking agency or
State bank supervisor, as applicable, determines, pursuant to
applicable law, to be an unsafe or unsound practice or a
violation of a law, rule, or regulation, or any condition
imposed in writing.
(j) Application.--The authorities described in this section shall
not apply to nonfungible assets.
SEC. 402. JOINT RULES FOR PORTFOLIO MARGINING DETERMINATIONS.
(a) In General.--The Commodity Futures Trading Commission and the
Commission shall jointly issue rules to facilitate portfolio margining
of securities (including related extensions of credit), security-based
swaps, futures contracts for future delivery, options on futures
contracts for future delivery, swaps, and digital commodities, or any
subset thereof, for persons registered with either such Commission,
in--
(1) a securities account carried by a registered broker or
dealer or a security-based swap account carried by a registered
security-based swap dealer;
(2) a futures or cleared swap account carried by a
registered futures commission merchant;
(3) a swap account carried by a swap dealer; or
(4) a digital commodity account carried by a registered
digital commodity broker or digital commodity dealer that is
also registered in such other capacity as is necessary to also
carry the other customer or counterparty positions being held
in the account.
(b) Process.--The rules required to be jointly issued under
subsection (a) shall--
(1) describe the treatment of any account to which the
rules relate, and any assets that may be held therein, in a
proceeding under title 11, United States Code, the Securities
Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.),
title II of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5381 et seq.), or any other
applicable insolvency law with respect to the person carrying
the account;
(2) be issued only if that issuance is in the public
interest and provides for the appropriate protection of
customers, including appropriate disclosures to each current
and potential customer concerning the treatment of any account
to which the rules relate, and any assets that may be held
therein, in a proceeding under title 11, United States Code,
the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa
et seq.), title II of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (12 U.S.C. 5381 et seq.), or any other
applicable insolvency law with respect to the person carrying
the account;
(3) require the Commission and the Commodity Futures
Trading Commission to consider the public interest of, and the
protection of investors by, those rules through the
solicitation of public comments; and
(4) require the Commission and the Commodity Futures
Trading Commission to--
(A) consult with other relevant foreign or domestic
regulators, including the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the
Currency, and State bank supervisors, as appropriate;
and
(B) if the rules pertain to a securities account
carried by a registered broker or dealer that is a
member of the Securities Investor Protection
Corporation, consult with the Securities Investor
Protection Corporation.
SEC. 403. CAPITAL REQUIREMENTS TO ADDRESS NETTING AGREEMENTS.
(a) Definitions.--In this section, the terms ``depository
institution holding company'' and ``insured depository institution''
have the meanings given those terms in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813).
(b) Capital Requirements.--Not later than 360 days after the date
of enactment of this Act, the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, and the Chair of the Federal
Deposit Insurance Corporation shall develop risk-based and leverage
capital requirements for insured depository institutions, depository
institution holding companies, and nonbank financial companies
supervised by the Board of Governors of the Federal Reserve System that
address netting agreements that provide for termination and close-out
netting across multiple types of financial transactions, consistent
with section 402, in the event of the default of a counterparty.
SEC. 404. PROHIBITING INTEREST AND YIELD ON PAYMENT STABLECOINS.
(a) Definitions.--In this section:
(1) Affiliate.--The term ``affiliate'' means any entity
that controls, is controlled by, or is under common control
with another entity.
(2) Commissions.--The term ``Commissions'' means the
Commission and the Commodity Futures Trading Commission.
(3) Comptroller; foreign payment stablecoin issuer; payment
stablecoin; permitted payment stablecoin issuer.--The terms
``Comptroller'', ``foreign payment stablecoin issuer'',
``payment stablecoin'', and ``permitted payment stablecoin
issuer'' have the meanings given those terms in section 2 of
the GENIUS Act (12 U.S.C. 5901).
(4) Covered party.--The term ``covered party'' means any
digital asset service provider, together with all of its
affiliates, but in each case excluding any permitted payment
stablecoin issuer or foreign payment stablecoin issuer
registered with the Comptroller.
(5) Deposit.--The term ``deposit'' has the meaning given
the term in section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813).
(6) Restricted recipient.--The term ``restricted
recipient'' means a United States person that is a customer or
user of a covered party.
(7) United states person.--The term ``United States
person'' means a person that is a resident of the United States
or is organized or incorporated under the laws of the United
States.
(b) Sense of Congress.--It is the sense of Congress that--
(1) depository institutions provide financial services that
are integral to the strength of the economy of the United
States and that the payment of consideration by digital asset
service providers to United States customers or users based on
their payment stablecoin balances in a manner that is
economically or functionally equivalent to the payment of
interest or yield on an interest-bearing bank deposit may
inhibit the key functions of depository institutions in the
economy of the United States; and
(2) payment stablecoins represent a significant innovation
in financial infrastructure that can strengthen the United
States payments system and the primacy of the United States
dollar and that activity-based rewards and incentives tied to
the use of payment stablecoins and participation in distributed
ledger systems are critical to enabling innovation,
competition, and consumer adoption.
(c) Prohibition on Interest and Yield.--
(1) In general.--No covered party shall, directly or
indirectly, pay any form of interest or yield (whether in cash,
tokens, or other consideration) to a restricted recipient--
(A) solely in connection with the holding of the
payment stablecoins of that restricted recipient; or
(B) on a payment stablecoin balance in a manner
that is economically or functionally equivalent to the
payment of interest or yield on an interest-bearing
bank deposit.
(2) Activity-based or transaction-based rewards and
incentives permitted.--
(A) In general.--The prohibition under paragraph
(1) shall not apply with respect to rewards or
incentives based on bona fide activities or bona fide
transactions that are not economically or functionally
equivalent to the payment of interest or yield on an
interest-bearing bank deposit pursuant to the
regulations promulgated under paragraph (3).
(B) Equivalence to bank deposits.--Except as
permitted under subparagraph (A), the prohibition under
paragraph (1) shall apply to the payment of interest or
yield (whether in cash, tokens, or other consideration)
by a covered party to a restricted recipient in
connection with a loyalty, promotional, subscription,
or incentive program that is economically or
functionally equivalent to the payment of interest or
yield on an interest-bearing bank deposit.
(3) Rulemaking.--
(A) In general.--Not later than 1 year after the
date of enactment of this Act, the Commissions and the
Secretary of the Treasury shall jointly promulgate
regulations through notice and comment rulemaking to
clarify the circumstances under which the prohibition
and permissible rewards and incentives in paragraphs
(1) and (2) shall apply. Such rulemaking shall include
a non-exhaustive list of permissible activity-based or
transaction-based rewards or incentives, including
payments to restricted recipients in connection with or
in compensation for any of the following, provided such
payments are not economically or functionally
equivalent to the payment of interest or yield on an
interest-bearing bank deposit:
(i) A transaction, payment, transfer,
conversion, remittance, or settlement activity,
including a rebate or incentive provided in
connection with the acceptance or use of a
payment stablecoin.
(ii) Providing liquidity for market-marking
activity, posting of collateral in connection
with trading, or otherwise putting assets at
credit or investment risk.
(iii) The use of any product or service,
including participation in governance,
validation, staking, or a loyalty, promotional,
subscription, or incentive program.
(B) Calculation by reference.--Payments to
restricted recipients of consideration, rewards, or
benefits that are permissible pursuant to paragraph (2)
and subparagraph (A) of this paragraph may be
calculated by reference to a balance, duration, tenure,
or any combination of the foregoing.
(4) Evasion.--It shall be unlawful for a covered party to
violate the prohibition under paragraph (1) or rules
promulgated pursuant to paragraph (3). A covered party may not
circumvent or evade such prohibition or rules. The Commissions
and the Secretary may jointly issue such rules as may be
necessary or appropriate to prevent circumvention or evasion of
the prohibition under paragraph (1) or the rules promulgated
pursuant to paragraph (3).
(5) Good faith reliance.--A covered party that structures a
program in good faith reliance on paragraphs (2) and (3) shall
not be subject to penalties if a subsequent rulemaking or
adjudication determines the program falls outside paragraphs
(2) and (3), provided--
(A) the covered party comes into compliance within
90 days of such determination; and
(B) the violation is not substantially similar to a
past violation by the covered party.
(d) Prohibition on Specified Representations.--
(1) Certain marketing practices.--No covered party shall
represent that--
(A) payment stablecoins are investment products,
deposits, backed by the full faith and credit of the
United States, guaranteed by the United States
Government, subject to deposit insurance by the Federal
Deposit Insurance Corporation, or subject to share
insurance by the National Credit Union Administration;
or
(B) any compensation (whether in cash, tokens, or
other consideration) paid to a restricted recipient in
connection with the holding, use, or retention of the
payment stablecoins of that restricted recipient is--
(i) paid or generated by the payment
stablecoin itself, a permitted payment
stablecoin issuer, or a foreign payment
stablecoin issuer registered with the
Comptroller;
(ii) risk-free or comparable to interest
paid on a deposit; or
(iii) offered, administered, or paid by a
person other than the covered party.
(2) Misleading.--No covered party shall omit material
information necessary to prevent any marketing, promotion, or
description described in this subsection from being misleading.
(e) Disclosures.--
(1) In general.--Not later than 1 year after the date of
enactment of this Act, the Commissions and the Secretary of the
Treasury shall jointly promulgate rules requiring clear and
conspicuous disclosure, in plain English, of any compensation
(whether in cash, tokens, or other consideration) paid by a
covered party in connection with the holding, use, or retention
of the payment stablecoins of a restricted recipient in a
manner that is consistent with subsection (d).
(2) Requirements.--In promulgating rules under paragraph
(1), the Commissions and the Secretary of the Treasury shall
require that any required disclosure of compensation described
in that paragraph, and any related term, representation, or
description--
(A) is presented in a clear, factual,
nonpromotional, and non-misleading manner;
(B) clearly identifies the circumstances under
which such compensation can be paid;
(C) clearly identifies the person or persons
responsible for offering, administering, and paying
such compensation, including whether such persons are
affiliated with the issuer of associated payment
stablecoins;
(D) outlines all material terms with respect to
such compensation; and
(E) includes a statement that payment stablecoins
are not investment products, deposits, backed by the
full faith and credit of the United States, guaranteed
by the United States Government, subject to deposit
insurance by the Federal Deposit Insurance Corporation,
or subject to share insurance by the National Credit
Union Administration.
(3) Prohibition.--After the date on which the rules
promulgated under paragraph (1) become effective, no covered
party shall market the offering of compensation (whether in
cash, tokens, or other consideration) paid by such covered
party in connection with the holding, use, or retention of the
payment stablecoins of a restricted recipient unless the
covered party has provided the disclosures required under this
subsection.
(4) Satisfaction of requirement.--A covered party that
provides the disclosures required under this subsection shall
be deemed not to have made a representation that is prohibited
under subsection (d), provided that--
(A) any marketing, promotion, or description with
respect to the applicable compensation does not
contradict those disclosures; and
(B) those disclosures are presented in plain
English and in a clear and conspicuous manner.
(f) Penalty.--
(1) Civil monetary penalty.--Whoever knowingly and
willfully participates in a violation of subsection (c)(1),
(d)(1), (d)(2), or (e)(3), or rules issued under subsection
(c)(4), shall be subject to a civil monetary penalty by the
Department of the Treasury of not more than $5,000,000 for each
such violation.
(2) Determination of the number of violations.--For
purposes of determining the number of violations for this
subsection, separate acts of noncompliance are a single
violation when the acts are a result of--
(A) a common or substantially overlapping
originating cause; or
(B) the same statement or publication.
(g) Referral to Secretary of the Treasury.--If the Commission or
the Commodity Futures Trading Commission has reason to believe that any
covered party has knowingly and willfully violated subsection (c)(1),
(d)(1), (d)(2), or (e)(3), or rules issued under subsection (c)(4), the
Commission or the Commodity Futures Trading Commission, as applicable,
shall refer the matter to the Secretary of the Treasury.
(h) Report to Congress.--Not later than 2 years after the date of
enactment of this Act, the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the National Credit Union Administration, and the
Secretary of the Treasury shall jointly submit to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives a report on payment
stablecoin activity that--
(1) analyzes and quantifies--
(A) the adoption of United States dollar-
denominated payment stablecoins and of other payment
stablecoins issued by permitted payment stablecoin
issuers and foreign payment stablecoin issuers
registered with the Comptroller;
(B) the effect of United States dollar-denominated
payment stablecoins on the average yields of, and
demand for, United States Treasury securities of
various durations;
(C) the effect of United States dollar-denominated
payment stablecoins on the use of the dollar in global
foreign exchange transactions, global foreign exchange
reserves, and global trade;
(D) the effect of United States dollar-denominated
payment stablecoins on increasing access to financial
services for unbanked and underbanked persons, both
domestically and globally;
(E) the effect of United States dollar-denominated
payment stablecoins on payment costs of consumers and
merchants; and
(F) the adoption of non-United States dollar-
denominated stablecoins, including foreign central bank
digital currencies, and their effect on the use of the
dollar in global foreign exchange transactions, global
foreign exchange reserves, and global trade;
(2) describes how compensation, if any, is paid by covered
parties to restricted recipients with respect to the payment
stablecoins of restricted recipients, including through
rewards, incentives, or similar programs; and
(3) analyzes and quantifies the effect of any compensation
described in paragraph (2) and the effect of prohibitions on
the payment of interest or yield by covered parties under this
Act and by issuers of payment stablecoins under section
4(a)(11) of the GENIUS Act (12 U.S.C. 5903(a)(11)) on--
(A) the volume, stickiness, composition, and
concentration of deposits at depository institutions,
including any deposit outflows from depository
institutions and the extent to which community banks
and credit unions are disproportionately affected
thereby;
(B) net interest margin accrued to depository
institutions;
(C) the average rate of interest paid to depositors
at depository institutions;
(D) consumer and business access to credit;
(E) financial arrangements between depository
institutions and digital asset service providers and
issuers of payment stablecoins; and
(F) the items described in paragraph (1).
(i) No Deeming of Payment of Interest or Yield.--For purposes of
this section, a covered party shall not be deemed to violate the
prohibition in subsection (c) solely because an unaffiliated third
party independently makes a payment with respect to a payment
stablecoin, unless the covered party directs or maintains significant
influence over the offering of such consideration and the offering of
such consideration would otherwise violate the prohibition in
subsection (c).
(j) Clarification of Scope and Regulatory Authority.--
(1) Compensation.--The prohibitions under subsections (c),
(d), and (e) shall only apply to compensation paid in
connection with a payment stablecoin or payment stablecoin
balance.
(2) Other assets.--Nothing in this section shall be
construed to authorize the Commissions or the Secretary of the
Treasury to regulate, restrict, or prohibit the payment of any
compensation paid in connection with any asset other than a
payment stablecoin.
(k) Non-applicability.--Nothing in this section shall--
(1) modify, alter, or extend prohibitions on the payment of
yield, interest, or consideration applicable to permitted
payment stablecoin issuers or foreign payment stablecoin
issuers, including under section 4(a)(11) of the GENIUS Act (12
U.S.C. 5903(a)(11)); or
(2) prohibit the disclosure by covered parties of truthful,
non-misleading factual information or any information otherwise
required by Federal law or regulation.
SEC. 405. EXPANDED SECURITIES PORTFOLIO MARGIN ACCOUNTS UNDER THE
SECURITIES INVESTOR PROTECTION ACT OF 1970.
(a) Amendments.--The Securities Investor Protection Act of 1970 (15
U.S.C. 78aaa et seq.) is amended--
(1) in section 9(a) (15 U.S.C. 78fff-3(a))--
(A) in paragraph (4), by striking ``and'' at the
end;
(B) in paragraph (5), by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following:
``(6) no advance shall be made by SIPC to the trustee to
pay or otherwise satisfy any net equity claim of any customer
with respect to any digital commodities or swaps held in an
expanded securities portfolio margin account.'';
(2) in section 10(g) (15 U.S.C. 78fff-4(g)), by striking
``16(12)'' and inserting ``16(13)''; and
(3) in section 16 (15 U.S.C. 78lll)--
(A) by redesignating paragraphs (7) through (14) as
paragraphs (8) through (15), respectively;
(B) by inserting after paragraph (6) the following:
``(7) Expanded securities portfolio margin account.--The
term `expanded securities portfolio margin account' means a
customer account--
``(A) that is maintained by a broker or dealer
registered with the Commission;
``(B) that includes positions in securities,
security-based swaps, futures contracts, options on
futures contracts, swaps, digital commodities, or other
financial instruments, or any combination thereof, as
permitted by rule jointly issued by the Commission and
the Commodity Futures Trading Commission;
``(C) that is subject to portfolio margining
requirements approved pursuant to section 402 of the
Digital Asset Market Clarity Act; and
``(D) in which margin requirements are determined
on a risk-based, portfolio-wide basis, rather than on
an instrument-by-instrument basis.''; and
(C) in paragraph (10), as so redesignated, in the
matter following subparagraph (L), by striking ``a
transaction in the portfolio margining account'' and
inserting ``the portfolio margining account or expanded
securities portfolio margin account''.
(b) Rules.--
(1) Definitions.--In this subsection:
(A) Expanded securities portfolio margin account.--
The term ``expanded securities portfolio margin
account'' has the meaning given the term in section 16
of the Securities Investor Protection Act of 1970 (15
U.S.C. 78lll), as amended by this section.
(B) SIPC.--The term ``SIPC'' means the Securities
Investor Protection Corporation.
(2) Issuance of rules.--Notwithstanding any provision of
the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa
et seq.), in jointly issuing rules under section 402, the
Commission and the Commodity Futures Trading Commission, in
consultation with the SIPC and the Secretary of the Treasury,
shall issue rules relating to the treatment under that Act of
securities (including related extensions of credit), security-
based swaps, contracts of sale of a commodity for future
delivery, options on contracts of sale of a commodity for
future delivery, swaps, digital commodities, cash, or other
property (to the extent that such instruments, cash, or other
property effectively hedge or collateralize a securities
position) held in an account offering portfolio margining
carried as a securities account by a registered broker or
dealer pursuant to an expanded securities portfolio margin
account to facilitate portfolio margining in a manner that
protects customers, including portfolio margin customers, which
shall include rules relating to--
(A) the transfer of accounts;
(B) the allocation of customer property among
customers;
(C) the eligibility of products and positions to be
held in an expanded securities portfolio margin
account, including any disclosures to and any elections
that may need to be performed by customers;
(D) the application of customer protection or
segregation requirements as between securities
customers who are and are not maintaining positions in
an expanded securities portfolio margin account;
(E) further defining the terms, solely as relating
to an expanded securities portfolio margin account,
``customer'', ``customer property'', and ``net
equity'', as necessary or appropriate to address non-
securities and non-cash positions and assets held in an
expanded securities portfolio margin account, and in a
manner consistent with subparagraphs (A) through (D);
and
(F) any interaction between a securities account
and an expanded securities portfolio margin account,
including any funding of debits in one type of account
by credits in the other type of account.
(3) Process for issuance of rules.--The requirements of
section 402(b) shall apply with respect to the rules issued
under this subsection.
(c) Effect of Rules.--An expanded securities portfolio margin
account may not be offered, maintained, or utilized until the final
rules required under subsection (b) are issued.
TITLE V--RESPONSIBLE REGULATORY INNOVATION
SEC. 501. CFTC-SEC MICRO-INNOVATION SANDBOX.
(a) Definitions.--In this section:
(1) Commission.--The term ``Commission'' means either of
the Commissions, as the context requires.
(2) Commissions.--The term ``Commissions'' means the
Securities and Exchange Commission and the Commodity Futures
Trading Commission.
(3) Eligible firm.--The term ``eligible firm'' means a
person that is eligible to participate in the Sandbox, in
accordance with the requirements under this section.
(4) Innovative.--The term ``innovative'' means new or
emerging technology, or a novel application of technology,
including artificial intelligence, that--
(A) provides a financial product, service, business
model, or delivery mechanism to the public; and
(B) lacks--
(i) a substantially comparable, widely
available analogue in common use in the United
States; and
(ii) an analogous Federal regulatory
regime.
(5) Person.--The term ``person'' means a person, as defined
in section 3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)) or section 1a of the Commodity Exchange Act (7
U.S.C. 1a).
(6) Sandbox.--The term ``Sandbox'' means the CFTC-SEC
Micro-Innovation Sandbox established under subsection (b).
(7) Self-regulatory organization.--The term ``self-
regulatory organization'' means a self-regulatory organization,
as defined in--
(A) section 3(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)); or
(B) section 1.52(a)(2) of title 17, Code of Federal
Regulations, or any successor regulation.
(b) Establishment.--Not later than 360 days after the date of
enactment of this Act, the Commissions shall, by joint notice and
comment rulemaking, establish a CFTC-SEC Micro-Innovation Sandbox to
enable eligible firms to test innovative activities within the United
States, subject to--
(1) applicable Federal and State securities and commodities
laws;
(2) other State laws that are not specific to the
regulation of securities or commodities; and
(3) the limitations of this section.
(c) Eligible Firm.--
(1) In general.--A United States-based person shall be an
eligible firm, and shall be eligible to participate in the
Sandbox, if the person--
(A) submits an application under subsection (e)
that is approved under that subsection;
(B) seeks to conduct an eligible and lawful
innovative activity in the United States;
(C) is not subject to--
(i) a statutory disqualification, as
defined in section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a));
(ii) a disqualification under section 8a(2)
of the Commodity Exchange Act (7 U.S.C.
12a(2)); or
(iii) a disqualification under State law;
(D) does not have a criminal conviction for fraud;
(E) agrees to submit to the jurisdiction and
oversight of the Commissions, to the extent that the
person is not subject to that jurisdiction or
oversight, for purposes of, and while participating in,
the Sandbox;
(F) designates to the Commissions an individual as
a point of contact with respect to activities that the
person undertakes as an applicant and participant with
respect to the Sandbox;
(G) employs not more than 25 employees; and
(H) has annual gross revenues of not more than
$10,000,000 in any fiscal year.
(2) Application of requirements.--The requirements under
paragraph (1) shall be satisfied during the entire period in
which an eligible firm participates in the Sandbox.
(d) Eligible Activities and Activity Ceilings.--
(1) List of eligible activities.--
(A) In general.--After providing notice and an
opportunity for public comment, the Commissions shall
maintain and publish a list of eligible innovative
activities, which shall be--
(i) updated once every 2 years after
providing notice and an opportunity for public
comment;
(ii) reasonably tailored to include
activities that--
(I) further the purposes of this
section; and
(II) are consistent with the
interests of the public and the
protection of investors;
(iii) sufficiently flexible to accommodate
evolving technological developments, including
distributed ledger-based products and services;
and
(iv) focused exclusively on activities for
which specific provisions of the securities
laws and commodities laws may create a material
impediment to the proposed innovative activity.
(B) Identification of requirements.--
(i) In general.--For each eligible
innovative activity, the Commissions shall,
consistent with existing (as of the day before
the date of enactment of this Act) statutory
and regulatory precedent concerning the
respective jurisdiction of each Commission,
identify the requirements that each Commission
will administer.
(ii) Joint jurisdiction.--With respect to
an eligible innovative activity that is subject
to the jurisdiction of both Commissions, the
rulemaking under subsection (b) shall specify
which requirements each Commission will
administer and any coordinated conditions
needed to protect investors and market
integrity.
(2) Activity ceilings.--For each eligible innovative
activity, the Commissions shall, after public input and
consultation, establish individual customer and monetary
ceilings, which shall provide that an eligible firm may not
raise or commit more than $20,000,000 in aggregate customer,
investor, or counterparty funds in connection with Sandbox
activities.
(3) Annual participation cap.--Each of the Commissions may
approve not more than 20 projects per year.
(e) Application.--
(1) In general.--An eligible firm seeking to participate in
the Sandbox shall submit to the Commission or Commissions, as
applicable, an application that--
(A) describes the proposed innovative activity and
the desired outcomes;
(B) subject to approval of the applicable
Commission, identifies the provisions of the securities
laws, or of the Commodity Exchange Act (7 U.S.C. 1 et
seq.), from which the eligible firm proposes to be
exempt during the period in which the eligible firm
participates in the Sandbox, which--
(i) shall not include any Federal or State
anti-fraud law or any other law that is not
specific to the regulation of securities or
commodities; and
(ii) shall be subject to the limitations of
this section;
(C) sets forth how relief from the provisions of
law identified under subparagraph (B) is reasonably
necessary to engage in the innovative activity;
(D) identifies material risks to investors,
customers, or market integrity and how the eligible
firm will mitigate those risks;
(E) certifies that the eligible firm will comply
with applicable Federal and State anti-fraud laws;
(F) states an exit objective of the eligible firm
involving action from the applicable Commission, which
may include registration, an exemptive order,
interpretive guidance, a no-action letter, or a
rulemaking petition, together with milestones and
metrics the eligible firm will use to demonstrate
readiness for that exit;
(G) states the agreement of the eligible firm to
submit to the jurisdiction and oversight of the
Commissions, to the extent that the eligible firm is
not otherwise subject to that jurisdiction and
oversight, for purposes of, and while participating in,
the Sandbox;
(H) designates to the Commissions an individual as
a point of contact with respect to activities that the
eligible firm undertakes as an applicant and
participant with respect to the Sandbox; and
(I) states the agreement of the eligible firm to
abide by any condition that either of the Commissions
may impose for engaging in an eligible innovative
activity in the Sandbox.
(2) Deadline for decision.--Not later than 180 business
days after the date on which an eligible firm submits an
application under this subsection, the Commission or
Commissions, as applicable, shall make a decision with respect
to the application, after which the eligible firm submitting
the application may commence eligible innovative activities in
the Sandbox unless the application is denied.
(3) Updates and status reports.--Each eligible firm shall
submit to the Commission or Commissions, as applicable, on a
semi-annual basis while participating in the Sandbox, an
updated application that--
(A) describes any material changes to the
information originally provided under paragraph (1);
and
(B) reports the progress of the eligible firm
toward the stated exit objective described in paragraph
(1)(F), including milestones achieved, remaining
impediments, and any pending requests for official
action before the applicable Commission or the
Commissions.
(4) Unredacted and redacted versions.--
(A) In general.--An eligible firm that submits an
initial or updated application under this subsection
may submit to the applicable Commission or the
Commissions an unredacted version, together with a
request for confidential treatment, pursuant to
procedures the applicable Commission shall establish
that are modeled on the rules of that Commission
relating to the confidential treatment of information,
which shall include--
(i) for the Securities and Exchange
Commission, sections 200.83, 230.406, and
240.24b-2 of title 17, Code of Federal
Regulations, or any successor regulations; and
(ii) for the Commodity Futures Trading
Commission, section 145.9 of title 17, Code of
Federal Regulations, or any successor
regulations.
(B) Omitted information.--An eligible firm may omit
information granted confidential treatment under
subparagraph (A) from any public posting under
subsection (h) in accordance with the procedures
established under subparagraph (A).
(C) Indication of confidential information.--Any
omission in a public posting under subsection (h) shall
be clearly indicated by brackets with a prominent
legend stating that--
(i) confidential information has been
omitted; and
(ii) an unredacted version has been filed
with the applicable Commission or the
Commissions.
(f) Duration of Participation.--
(1) Duration.--Except as provided in paragraph (2), an
eligible firm may participate in the Sandbox for a period of
not more than 2 years, provided that the eligible firm does not
exceed the ceilings established under subsection (d)(2).
(2) Extension.--
(A) Sole jurisdiction.--If an eligible innovative
activity is subject only to the jurisdiction of 1
Commission, that Commission may extend participation by
an eligible firm in the Sandbox by not more than 1
additional year, if that Commission determines that the
eligible firm--
(i) is actively pursuing the exit objective
described in subsection (e)(1)(F) in good
faith;
(ii) is making demonstrable progress toward
achieving such an exit; and
(iii) establishes that such an extension is
necessary to achieve such an exit.
(B) Joint jurisdiction.--Where an eligible
innovative activity is subject to the jurisdiction of
both Commissions, an extension of participation by an
eligible firm in the Sandbox by not more than 1
additional year shall be by joint order of the
Commissions after making the findings described in
clauses (i) through (iii) of subparagraph (A).
(g) Conditions and Enforcement.--
(1) Conditions.--An eligible firm shall comply with
applicable regulatory conditions approved by the applicable
Commission or the Commissions under subsection (e)(1)(B), which
shall be consistent with applicable Federal and State anti-
fraud laws.
(2) Monitoring.--The Commissions shall monitor Sandbox
activities and enforce compliance with applicable regulatory
conditions and Federal anti-fraud laws.
(3) Coordination.--
(A) In general.--The Commissions shall coordinate
supervision, information requests, and examinations to
avoid duplication while each Commission retains full
authority under the provisions of law that such
Commission administers.
(B) Cooperation with states.--The Commissions may
cooperate with any State in enforcing compliance with
applicable regulatory conditions and Federal and State
anti-fraud laws with respect to the operation of the
Sandbox.
(4) Self-regulatory organizations.--Each self-regulatory
organization shall recognize and respect Sandbox conditions
that are applicable to a participant in the Sandbox.
(5) Cessation of activities.--The Commissions may, at any
time during the participation of an eligible firm in the
Sandbox, disqualify the eligible firm from continued
participation in the Sandbox, order the eligible firm to cease
engaging in a permitted activity in the Sandbox, revoke a grant
of exemptive relief, or impose additional or more stringent
conditions on continuing participation or engagement in a
permitted activity in the Sandbox, if the Commissions find that
the eligible firm has failed to comply with--
(A) the requirements of this section;
(B) the terms or conditions of participation
established by the Commissions; or
(C) other applicable law.
(h) Public Disclosure.--
(1) Initial posting.--Each eligible firm shall post, in a
prominent location on a public website of the eligible firm,
the information required under subsection (e)(1), subject to
confidential treatment under subsection (e)(4), not later than
the date on which the notice becomes effective under subsection
(e)(3).
(2) Updates.--Each eligible firm shall post, in the same
manner as under paragraph (1), the information required under
subsection (e)(3), subject to confidential treatment under
subsection (e)(4), concurrently with submission to the
applicable Commission or the Commissions.
(3) Disclosure requirements.--Each post under this
subsection shall satisfy the disclosure requirements of both
Commissions where the jurisdictions of both Commissions are
implicated.
(i) Use of Data by Commissions.--Each Commission may collect and
share data from Sandbox activities with the other Commission to inform
permanent, principles-based regulatory frameworks that advance the
missions of the Commissions.
(j) Publication by Commissions.--Not less frequently than annually,
each Commission shall publish on the public website of the Commission a
report summarizing the activities conducted under this section,
including--
(1) the number and general nature of eligible firms
participating in the Sandbox;
(2) the categories of innovative activities tested;
(3) the impact of Sandbox participation on innovation,
investor protection, market integrity, and the public interest;
(4) the disclosures posted by eligible firms under
subsection (h)(1); and
(5) exit outcomes, including the types of relief requested
and actions taken by the Commissions.
(k) Relationship of Sandbox Participation to State Law.--
(1) Limited preemption for sandbox participants.--This
section, including participation in the Sandbox, and any
exemption or relief granted under this section, shall supersede
any State securities or commodities law requiring registration,
qualification, or licensing as a condition of engaging in an
approved activity or otherwise regulating that activity as a
security or commodity.
(2) State enforcement preserved.--Nothing in this section
may be construed to prohibit or limit any State securities or
commodities regulator, any State bank regulator, or any State
law enforcement agency from conducting an investigation or
bringing an administrative, civil, or criminal enforcement
action under--
(A) a State law prohibiting fraud or deceit, or
fraudulent, deceptive, manipulative, unethical,
dishonest, or other unlawful conduct or practices, in
connection with securities or securities transactions;
(B) the anti-fraud provisions of the Commodity
Exchange Act (7 U.S.C. 1 et seq.) or State commodities
laws; or
(C) any State law of general applicability,
including such a law relating to banking, consumer
protection, contracts, property, or criminal conduct.
(3) Notice filings.--A State may require notice of any
document filed with either of the Commissions in connection
with participation in the Sandbox, together with consent to
service of process and reasonable fees, consistent with section
18(c) of the Securities Act of 1933 (15 U.S.C. 77r(c)).
SEC. 502. INTERNATIONAL COOPERATION.
(a) Definition.--In this section, the term ``Commissions'' means
the Commission and the Commodity Futures Trading Commission.
(b) Cooperation.--In order to promote United States leadership in
effective, reciprocal, and innovative global regulation of digital
assets, and to advance the strategic economic and policy interests of
the United States, the Commissions, as appropriate--
(1) shall consult and coordinate with foreign regulatory
authorities or other relevant international organizations on
the application of consistent international standards with
respect to the regulation of digital assets;
(2) may enter into such information sharing arrangements as
may be determined to be necessary or appropriate in the public
interest or for the protection of investors, customers, and
users of digital assets;
(3) shall pursue reciprocal arrangements with foreign
regulatory authorities that ensure United States-based digital
asset firms, exchanges, and infrastructure providers receive
treatment equivalent to that granted to foreign counterparts
operating within the United States;
(4) shall advocate in international fora for the
development and adoption of technology-neutral, open standards
that preserve lawful access to public distributed ledger
infrastructure, support dollar-denominated digital asset usage,
and safeguard individual rights, including self-custody and
privacy; and
(5) may, as appropriate, engage in, at the least,
cooperative enforcement, supervisory coordination, and joint
technical assistance, in a manner that promotes responsible
innovation in digital financial markets.
(c) Cross-border Sandbox.--The Commissions may leverage the
activities described in paragraphs (1) through (5) of subsection (b) to
establish or participate in cross-border regulatory sandboxes that
build upon the CFTC-SEC Micro-Innovation Sandbox established pursuant
to section 501.
SEC. 503. AUTOMATED REGULATORY COMPLIANCE STUDY.
(a) Definitions.--In this section:
(1) Automated regulatory compliance.--The term ``automated
regulatory compliance'' means the use of technology, including
data standards, automation, and distributed ledger or smart
contract functionality, to automate, tag, or otherwise
streamline regulatory reporting, disclosure, supervisory, or
other compliance obligations.
(2) Innovative.--The term ``innovative'' has the meaning
given the term in section 501(a).
(b) Study Required.--The Comptroller General of the United States
shall, in consultation with the Department of the Treasury (including
the Financial Crimes Enforcement Network, the Office of Foreign Assets
Control, and the Office of Financial Research), the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation,
the National Credit Union Administration, the Commission, the Commodity
Futures Trading Commission, the Bureau of Consumer Financial
Protection, and the Federal Housing Finance Agency, carry out a study
of distributed ledger-based compliance tools that--
(1) to the extent feasible, identifies and evaluates--
(A) the landscape of existing (as of the day before
the date of enactment of this Act) distributed ledger-
based compliance tools for--
(i) statutory and regulatory disclosures;
(ii) real-time reporting and audit-trail
logging; and
(iii) anti-money-laundering practices,
sanctions screening, and customer-
identification checks;
(B) the feasibility, benefits, and risks of
allowing regulated entities to satisfy applicable
regulatory obligations through on-chain, code-based, or
other automated mechanisms;
(C) the potential for interoperability with
automated regulatory compliance mechanisms across and
among each of those agencies;
(D) the data collection systems of each of those
agencies; and
(E) standards or taxonomies, or other common data