The CLARITY Act of 2025, Explained

In this Act:
 (1) Ancillary asset; ancillary asset originator; network 
 token.--The terms "ancillary asset", "ancillary asset 
 originator", and "network token" have the meanings given 
 those terms in section 4B(a) of the Securities Act of 1933, as 
 added by this Act.
 (2) Bank secrecy act.--The term "Bank Secrecy Act" 
 means--
 (A) section 21 of the Federal Deposit Insurance Act 
 (12 U.S.C. 1829b);
 (B) chapter 2 of title I of Public Law 91-508 (12 
 U.S.C. 1951 et seq.); and
 (C) subchapter II of chapter 53 of title 31, United 
 States Code.
 (3) Commission.--Except where otherwise expressly provided, 
 the term "Commission" means the Securities and Exchange 
 Commission.
 (4) Coordinated control.--With respect to any distributed 
 ledger system and a related ancillary asset, the term 
 "coordinated control" has the meaning given the term by the 
 Commission pursuant to rules adopted under section 104(b).
 (5) Decentralized governance system.--
 (A) In general.--The term "decentralized 
 governance system" means, with respect to a 
 distributed ledger system, any transparent, rules-based 
 system permitting persons to form consensus or reach 
 agreement in the development, provision, publication, 
 maintenance, or administration of the distributed 
 ledger system, in which participation is not limited 
 to, or under the control of, any person or group of 
 persons under common control.
 (B) Relationship of persons to decentralized 
 governance systems.--With respect to a decentralized 
 governance system, the decentralized governance system 
 and any persons participating in the decentralized 
 governance system shall be treated as separate persons 
 unless those persons are under common control or acting 
 pursuant to an agreement to act in concert.
 (C) Legal entities for decentralized governance 
 systems.--The term "decentralized governance system" 
 shall include a legal entity, including a decentralized 
 unincorporated nonprofit association or other entity 
 created pursuant to State law, used to implement the 
 rules-based system described in subparagraph (A), 
 provided that the legal entity does not operate 
 pursuant to centralized management. For the purposes of 
 this subparagraph, the delegation of ministerial or 
 administrative authority at the direction of the 
 participants in a decentralized governance system shall 
 not be construed to be centralized management.
 (D) Rule of construction.--For purposes of this 
 Act, and the amendments made by this Act, a 
 decentralized governance system shall not be deemed to 
 be a person or a group of persons acting under common 
 control.
 (6) Digital asset; digital asset service provider.--The 
 terms "digital asset" and "digital asset service provider" 
 have the meanings given those terms in section 2 of the GENIUS 
 Act (12 U.S.C. 5901).
 (7) Digital asset intermediary.--The term "digital asset 
 intermediary" means a person that is engaged in digital asset 
 activities and required by law to register with the Commodity 
 Futures Trading Commission or with the Commission under the 
 Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
 (8) Digital commodity.--The term "digital commodity" has 
 the meaning given the term in section 1a of the Commodity 
 Exchange Act (7 U.S.C. 1a), as added by this Act.
 (9) Distributed ledger.--The term "distributed ledger" 
 means technology--
 (A) through which data is shared across a network 
 that creates a public digital ledger of verified 
 transactions or information among network participants; 
 and
 (B) in which cryptography is used to link the data 
 described in subparagraph (A) to--
 (i) maintain the integrity of the digital 
 ledger described in that subparagraph; and
 (ii) execute other functions.
 (10) Distributed ledger application.--The term 
 "distributed ledger application" means executable software 
 that is deployed to and maintained on a distributed ledger and 
 composed of source code that is publicly available, including a 
 smart contract or any network of smart contracts, or other 
 similar technology.
 (11) Distributed ledger protocol.--The term "distributed 
 ledger protocol" means publicly available source code of a 
 distributed ledger that is executed by the network participants 
 of a distributed ledger to facilitate its functioning, or other 
 similar technology.
 (12) Distributed ledger system.--The term "distributed 
 ledger system" means a distributed ledger (together with its 
 distributed ledger protocol), a distributed ledger application, 
 or a network of distributed ledger applications.
 (13) Related person.--The term "related person", with 
 respect to an ancillary asset originator or an ancillary 
 asset--
 (A) means--
 (i) any person that is, or within the 
 preceding 36-month period was--
 (I) a founder or person serving in 
 a similar capacity with respect to the 
 ancillary asset originator; and
 (II) a beneficial owner of not less 
 than 4 percent of the total amount of 
 outstanding units of an ancillary asset 
 associated with the ancillary asset 
 originator;
 (ii) any person that is, or in the 
 preceding 12-month period was, an executive 
 officer, director, trustee, general partner, 
 owner of more than 10 percent of any class of 
 equity shares of the ancillary asset 
 originator, or person serving in a similar 
 capacity with respect to the ancillary asset 
 originator;
 (iii) any person, or group of persons under 
 common control, that beneficially owns, or in 
 the preceding 6-month period owned, 10 percent 
 or more of the total amount of outstanding 
 units of the ancillary asset; and
 (iv) any person, or group of persons under 
 common control, that beneficially owns, or in 
 the preceding 6-month period owned, covered 
 tokens (as that term is defined in section 
 104(a)) that equal not less than 2 percent of 
 the total amount of outstanding units of the 
 ancillary asset; and
 (B) does not include a decentralized governance 
 system.
 (14) Securities laws.--The term "securities laws" has the 
 meaning given the term in section 3(a) of the Securities 
 Exchange Act of 1934 (15 U.S.C. 78c(a)).
 (15) Smart contract.--The term "smart contract" means a 
 self-executing contract or program that--
 (A) is stored on a distributed ledger system; and
 (B) automatically executes or enforces digital 
 asset transactions upon the occurrence of explicit, 
 pre-determined conditions encoded in the contract or 
 program, without intervention, other than to provide 
 data, by any entity or natural person.

This title may be cited as the "Lummis-Gillibrand Responsible 
Financial Innovation Act of 2026".

ANCILLARY ASSETS.

 (a) In General.--The Securities Act of 1933 (15 U.S.C. 77a et seq.) 
is amended by inserting after section 4A (15 U.S.C. 77d-1) the 
following:

"SEC. 4B. REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS INVOLVING 
 ANCILLARY ASSETS.

 "(a) Definitions.--In this section:
 "(1) Ancillary asset.--The term `ancillary asset' means a 
 network token, the value of which is dependent upon the 
 entrepreneurial or managerial efforts of an ancillary asset 
 originator or a related person, as those concepts are further 
 specified by the Commission by regulation.
 "(2) Ancillary asset originator.--
 "(A) In general.--The term `ancillary asset 
 originator' means, with respect to a particular 
 ancillary asset, a person that (whether directly or 
 through 1 or more subsidiary or controlled entities)--
 "(i) initially offers, sells, or 
 distributes the ancillary asset; or
 "(ii) during the 12-month period beginning 
 on the date on which the ancillary asset is 
 initially offered, sold, or distributed, 
 controls or causes the initial offer, sale, or 
 distribution of that ancillary asset.
 "(B) Joint and several liability.--For the 
 purposes of this paragraph, if the person that 
 initially offered, sold, or distributed an ancillary 
 asset (or otherwise sold, distributed, controlled, or 
 caused the initial offer, sale, or distribution of the 
 ancillary asset) did not receive the largest amount of 
 those ancillary assets distributed in the 12-month 
 period following the commencement of that offer, sale, 
 or distribution, then that person, solely for purposes 
 of subsection (c), shall be jointly and severally 
 considered to be an ancillary asset originator with 
 respect to that ancillary asset (with the person that 
 controlled such offer, sale, or distribution) along 
 with the person (including a person under direct or 
 indirect control of that person) that received the 
 largest amount of those ancillary assets in that 
 period, other than ancillary assets received--
 "(i) in an intermediary capacity;
 "(ii) solely through a gratuitous 
 distribution;
 "(iii) through an offer, sale, or 
 distribution of a security to the public 
 registered under section 5; or
 "(iv) otherwise in a broad and public 
 manner that the Commission determines, pursuant 
 to regulation, should not subject the person to 
 disclosure requirements under subsection (d).
 "(C) Rulemaking.--Not later than 360 days after 
 the date of enactment of this section, the Commission 
 shall, after providing notice and the opportunity for 
 comment, issue rules regarding the circumstances under 
 which persons that are jointly and severally considered 
 an ancillary asset originator pursuant to subparagraph 
 (B) are responsible for furnishing the disclosures 
 required under subsection (d) on behalf of the 
 ancillary asset originator.
 "(3) Certification covered party.--The term `certification 
 covered party' means--
 "(A) an ancillary asset originator;
 "(B) a subsidiary of the ancillary asset 
 originator;
 "(C) a related person of the ancillary asset 
 originator; or
 "(D) any entity that directly or indirectly 
 controls or is controlled by a common entity with the 
 ancillary asset originator.
 "(4) Decentralized governance system; digital asset; 
 digital asset intermediary; related person; securities laws.--
 The terms `decentralized governance system', `digital asset', 
 `digital asset intermediary', `related person', and `securities 
 laws' have the meanings given those terms in section 2 of the 
 Digital Asset Market Clarity Act.
 "(5) Gratuitous distribution.--
 "(A) In general.--The term `gratuitous 
 distribution'--
 "(i) means a distribution of a network 
 token, including a distribution effected by an 
 agent or other service provider engaged solely 
 in an administrative or ministerial capacity, 
 in exchange for not more than a nominal value 
 of cash, property, services, or other assets in 
 a broad, equitable, and non-discretionary 
 manner; and
 "(ii) includes, without limitation, the 
 mechanisms and methods of distribution 
 described in subparagraph (B).
 "(B) Mechanisms and methods of distribution.--The 
 mechanisms and methods of distribution described in 
 this subparagraph are the following:
 "(i) Self staking.--The distribution of a 
 unit of a network token, as a programmatic 
 result of validating or staking activity for a 
 distributed ledger system's consensus 
 mechanism, including the staking of a network 
 token, and the operation of a node, validator, 
 or substantially similar software for such 
 activity where the owner of the staked network 
 token and the operator of the node, validator, 
 or substantially similar software are the same 
 person or entity.
 "(ii) Self-custodial staking with a third 
 party.--The distribution of a unit of a network 
 token, as a programmatic result of validating 
 or staking activity for a distributed ledger 
 system's consensus mechanism, including the 
 staking of a network token, and the operation 
 of a node, validator, or substantially similar 
 software for such activity in which--
 "(I) the owner of the staked 
 network token, and operator of the 
 node, validator, or substantially 
 similar software for such activity are 
 different persons or entities; and
 "(II) the operator of the node, 
 validator, or substantially similar 
 software does not maintain custody or 
 control of the staked network token.
 "(iii) Liquid staking.--The distribution 
 of network tokens, as the issuance, transfer, 
 or redemption of liquid staking tokens 
 representing a pro rata interest in staked 
 network tokens, and their associated rewards, 
 provided that such tokens are issued as 
 administrative or ministerial receipts and are 
 not providing discretionary management 
 authority.
 "(iv) Custodial and ancillary staking 
 services.--
 "(I) In general.--Subject to the 
 rules issued pursuant to subclause 
 (II), the provision of custodial or 
 ancillary staking services enabling the 
 owner of a network token to participate 
 in validating or staking activity for a 
 distributed ledger system's consensus 
 mechanism that results in the 
 programmatic distribution of a unit of 
 a network token, provided that such 
 custodial or ancillary services are 
 exclusively administrative or 
 ministerial in nature.
 "(II) Rulemaking to define the 
 custodial and ancillary staking 
 services.--The Commission shall issue 
 rules defining the custodial and 
 ancillary staking services described in 
 subclause (I) that are exclusively 
 administrative or ministerial in 
 nature, consistent with what is 
 necessary or appropriate for the public 
 interest or for the protection of 
 investors.
 "(v) Programmatic and automated 
 distributions.--The automated, programmatic, 
 protocol-defined, or rules-based distribution 
 of network tokens achieved through the 
 transparent functioning of a distributed ledger 
 system, a distributed ledger, or distributed 
 ledger applications, in which--
 "(I) distributions occur pursuant 
 to public, transparent, rules-based 
 parameters that are publicly available 
 and are accessible on a permissionless 
 basis, without individualized or real-
 time negotiation with recipients;
 "(II) recipients receive network 
 tokens as a direct, programmatic result 
 of objective, verifiable network 
 participation, consumption, or 
 contribution, including consensus 
 participation, data availability, 
 bandwidth, governance, or use and 
 interaction with the protocol or 
 application;
 "(III) the number of network 
 tokens received is proportionate to the 
 verifiable service, usage, or 
 contribution;
 "(IV) any expected utility or 
 value of the network tokens arises 
 primarily from decentralized network 
 participation and market forces, rather 
 than the discretionary actions of any 
 single person or affiliated group; and
 "(V) no person or group has 
 unilateral authority to alter, 
 restrict, or direct the issuance 
 parameters or distribution mechanisms 
 of the distributed ledger system, and 
 any modification occurs only through a 
 decentralized governance system.
 "(vi) Technology-neutral clause.--The 
 distribution employing a mechanism, protocol, 
 or technology not specifically described in 
 clauses (i) through (v), without regard to 
 whether such mechanism, protocol, or technology 
 is in existence at the time of enactment of 
 this section, and without regard to terminology 
 or underlying technical framework, provided 
 such distribution meets the requirements 
 described in subparagraph (A)(i).
 "(6) Investment company.--The term `investment company' 
 has the meaning given the term in section 3(a) of the 
 Investment Company Act of 1940 (15 U.S.C. 80a-3(a)).
 "(7) Network token.--
 "(A) In general.--The term `network token' means a 
 digital commodity that is intrinsically linked to a 
 distributed ledger system and that derives, or is 
 reasonably expected to derive, its value from the use 
 of such distributed ledger system, and, pursuant to the 
 Digital Asset Market Clarity Act and the amendments 
 made by the Digital Asset Market Clarity Act, is 
 treated as a non-security solely for purposes of the 
 securities laws.
 "(B) Disqualifying financial rights.--The term 
 `network token' does not include any of the following:
 "(i) Any security, consistent with the 
 categories of disqualifying financial rights 
 described in clause (ii).
 "(ii) An investment contract or a 
 certificate of interest or participation in any 
 profit-sharing agreement that represents, gives 
 the holder, or is substantially economically or 
 functionally equivalent to, any of the 
 following, as the Commission shall establish by 
 rule:
 "(I) A debt or equity interest, or 
 an option on a debt or equity interest, 
 in a person.
 "(II) Liquidation rights with 
 respect to a person.
 "(III) An entitlement to, or a 
 reasonable expectation of, an interest, 
 dividend, or other payment, or direct 
 or indirect transfer of value, from a 
 person (other than a decentralized 
 governance system).
 "(IV) An express or implied 
 financial interest in (including a 
 limited partnership interest or 
 interest in intellectual property of), 
 or provided by, a person (other than a 
 decentralized governance system).
 "(iii) Any interest that is, represents, 
 or is functionally equivalent to an interest in 
 an investment company or a company (as defined 
 in section 2 of the Investment Company Act of 
 1940 (15 U.S.C. 80a-2)) that would be an 
 investment company under section 3(a) of that 
 Act (15 U.S.C. 80a-3(a)) but for the exclusions 
 provided from that definition by section 3(c) 
 of that Act (15 U.S.C. 80a-3(c)).
 "(iv) Any interest that is, represents, or 
 is functionally equivalent to an interest in 
 any entity or person that is not an investment 
 company but holds or will hold assets other 
 than securities.
 "(C) Rule of construction.--A digital commodity--
 "(i) shall be deemed to be intrinsically 
 linked to a distributed ledger system if the 
 digital commodity is directly related to the 
 functionality or operation of the distributed 
 ledger system or to the activities or services 
 for which the distributed ledger system is 
 created or utilized; and
 "(ii) shall not be disqualified from being 
 deemed a network token due to the granting of 
 economic interests or voting capabilities with 
 respect to a distributed ledger system or its 
 decentralized governance system, as further 
 clarified by the Commission through the final 
 rules adopted under section 105 of the Lummis-
 Gillibrand Responsible Financial Innovation Act 
 of 2026.
 "(b) Treatment of Network Tokens and Transactions.--
 "(1) In general.--The offer, sale, or distribution of an 
 ancillary asset by, or caused by, an ancillary asset 
 originator, including through an underwriter, shall be 
 considered to be an offer, sale, or distribution of an 
 investment contract involving an ancillary asset, except with 
 respect to a gratuitous distribution.
 "(2) Treatment as non-security.--Except as provided in 
 this section, and subject to paragraph (3), a network token 
 shall be treated as a non-security, to the extent materially 
 consistent with the requirements and conditions of this 
 section, for purposes of --
 "(A) section 2(a)(1);
 "(B) section 3(a) of the Securities Exchange Act 
 of 1934 (15 U.S.C. 78c(a));
 "(C) section 2(a) of the Investment Company Act of 
 1940 (15 U.S.C. 80a-2(a));
 "(D) section 202(a) of the Investment Advisers Act 
 of 1940 (15 U.S.C. 80b-2(a));
 "(E) section 16 of the Securities Investor 
 Protection Act of 1970 (15 U.S.C. 78lll); or
 "(F) any applicable requirement of State law that 
 is functionally equivalent to the provisions described 
 in subparagraphs (A) through (E), including any 
 provision of State law that directly or indirectly 
 prohibits, limits, or imposes any conditions on the 
 use, offer, sale, transfer, or disposition of a network 
 token in a manner that is--
 "(i) not substantially similar to 
 prohibitions, limitations, or conditions 
 imposed by that State relating to assets that 
 are commodities under the laws of that State; 
 and
 "(ii) inconsistent with this section.
 "(3) Secondary market treatment.--
 "(A) In general.--Except as provided in this 
 section (including the limitation under subparagraph 
 (B)), and to the extent materially consistent with the 
 requirements and conditions of this section, the offer, 
 sale, or distribution of a network token by a person 
 shall be treated as not involving the offer, sale, or 
 distribution of a security under--
 "(i) section 2(a)(1);
 "(ii) the Securities Exchange Act of 1934 
 (15 U.S.C. 78a et seq.);
 "(iii) the Investment Company Act of 1940 
 (15 U.S.C. 80a-1 et seq.);
 "(iv) the Investment Advisers Act of 1940 
 (15 U.S.C. 80b-1 et seq.);
 "(v) the Securities Investor Protection 
 Act of 1970 (15 U.S.C. 78aaa et seq.); and
 "(vi) any applicable requirement of State 
 law that is functionally equivalent to the 
 provisions described in clauses (i) through 
 (v), including any provision of State law that 
 directly or indirectly prohibits, limits, or 
 imposes any conditions on the use, offer, sale, 
 transfer, or disposition of a network token in 
 a manner that is--
 "(I) not substantially similar to 
 prohibitions, limitations, or 
 conditions imposed by that State 
 relating to assets that are commodities 
 under the laws of that State; and
 "(II) inconsistent with this 
 section.
 "(B) Limitation.--Subparagraph (A) shall not apply 
 if the applicable network token is offered, sold, or 
 distributed pursuant to the offer, sale, or 
 distribution of a security by an ancillary asset 
 originator or underwriter.
 "(4) Treatment of gratuitous distributions.--
 "(A) In general.--A gratuitous distribution, by 
 itself, shall be presumed to not constitute an offer, 
 sale, or distribution of a security for the purposes 
 of--
 "(i) section 2(a)(1);
 "(ii) section 3(a) of the Securities 
 Exchange Act of 1934 (15 U.S.C. 78c(a));
 "(iii) section 2(a) of the Investment 
 Company Act of 1940 (15 U.S.C. 80a-2(a));
 "(iv) section 202(a) of the Investment 
 Advisers Act of 1940 (15 U.S.C. 80b-2(a));
 "(v) section 16 of the Securities Investor 
 Protection Act of 1970 (15 U.S.C. 78lll); or
 "(vi) any applicable requirement of State 
 law, or any provision of State law that is 
 functionally equivalent to the provisions 
 described in clauses (i) through (v), including 
 any provision of State law that directly or 
 indirectly prohibits, limits, or imposes any 
 conditions on the use, offer, sale, transfer, 
 or disposition of a network token in a manner 
 that is--
 "(I) not substantially similar to 
 prohibitions, limitations, or 
 conditions imposed by that State 
 relating to assets that are commodities 
 under the laws of that State; and
 "(II) inconsistent with this 
 section.
 "(B) Savings clause.--Nothing in this paragraph 
 may be construed to limit, impair, or otherwise affect 
 the anti-fraud or anti-manipulation authorities of the 
 Commission, the Commodity Futures Trading Commission, 
 or a State regulator.
 "(5) Prior certification.--
 "(A) Submission and default treatment.--
 "(i) In general.--
 "(I) Presumption.--For purposes of 
 this section, there shall be a 
 rebuttable presumption that a network 
 token, including a network token 
 distributed in the manner described in 
 paragraph (4), is an ancillary asset 
 unless the originator of that network 
 token, or a digital asset intermediary 
 (as provided under subsection (c)(4)), 
 submits to the Commission a completed 
 written certification, supported by 
 reasonable evidence, as defined by the 
 Commission, sufficient to demonstrate 
 that the network token is not an 
 ancillary asset.
 "(II) Contents.--A certification 
 submitted under subclause (I) shall 
 include a statement in accordance with 
 subsection (d)(3)(B)(i).
 "(ii) Notification.--The Commission shall 
 notify the Commodity Futures Trading Commission 
 of each certification made pursuant to clause 
 (i) and of any final agency action with respect 
 to that certification.
 "(iii) Reciprocal notice.--The Commission 
 shall receive a copy of any certification and 
 supporting materials submitted to the Commodity 
 Futures Trading Commission under section 203(d) 
 of the Digital Commodity Intermediaries Act.
 "(B) Automatic effectiveness.--A certification 
 submitted under subparagraph (A) by an originator or a 
 digital asset intermediary shall become effective upon 
 the earlier of--
 "(i) the date on which the Commission 
 notifies the originator or digital asset 
 intermediary in writing that the Commission 
 does not object to the certification; or
 "(ii) if the Commission has not issued a 
 rebuttal to the originator or digital asset 
 intermediary in accordance with subparagraph 
 (C), 60 days after the date on which the 
 originator or digital asset intermediary 
 submits the certification.
 "(C) Commission denial.--
 "(i) Authority to deny.--Subject to 
 clauses (ii) and (iii), the Commission may deny 
 a certification submitted under subparagraph 
 (A) by an originator or digital asset 
 intermediary only during the 60-day period 
 described in subparagraph (B)(ii) or upon 
 determining, based on reasonable evidence, that 
 a material change in circumstances has occurred 
 after the submission of the certification, 
 whether or not the certification has taken 
 effect.
 "(ii) Notice of intent to deny.--If the 
 Commission intends to deny a certification 
 submitted under subparagraph (A), the 
 Commission shall--
 "(I) either not later than 20 
 business days after the date on which 
 the certification is submitted, or 
 promptly after determining that a 
 material change in circumstances has 
 occurred, provide to the applicable 
 originator or digital asset 
 intermediary notice of the intent of 
 the Commission to deny that 
 certification; and
 "(II) provide to the applicable 
 originator or digital asset 
 intermediary a 10-day period following 
 the provision of notice under subclause 
 (I) during which--
 "(aa) interested persons 
 shall have an opportunity to 
 submit written data, views, and 
 arguments relating to that 
 certification; and
 "(bb) the Commodity 
 Futures Trading Commission may, 
 at the discretion of the 
 Commodity Futures Trading 
 Commission, submit input 
 regarding whether the 
 applicable asset--

 "(AA) satisfies 
 the requirements for 
 being considered an 
 ancillary asset; or

 "(BB) includes any 
 disqualifying financial 
 right described in 
 subsection (a)(7)(B).

 "(iii) Requirements after notice of 
 intent.--After the 10-day period described in 
 clause (ii)(II), the Commission shall--
 "(I) upon request of the 
 applicable originator or digital asset 
 intermediary, provide an opportunity 
 for the oral presentation of data, 
 views, and arguments by certification 
 covered parties;
 "(II) have a vote of the 
 Commission (which, notwithstanding 
 section 4A of the Securities Exchange 
 Act of 1934 (15 U.S.C. 78d-1), may not 
 be delegated to an employee or employee 
 board or to any individual 
 Commissioner) to deny the certification 
 after a finding that the applicable 
 asset--
 "(aa) is an ancillary 
 asset; or
 "(bb) includes any 
 disqualifying financial right 
 described in subsection 
 (a)(7)(B); and
 "(III) notify the Commodity 
 Futures Trading Commission of each 
 denial made under subclause (II).
 "(iv) Interested person.--For purposes of 
 this subparagraph, the term `interested person' 
 means, with respect to a network token--
 "(I) the ancillary asset 
 originator with respect to that network 
 token (referred to in this clause as 
 `the originator');
 "(II) a subsidiary of the 
 originator;
 "(III) a related person of the 
 originator;
 "(IV) any entity that directly or 
 indirectly controls or is controlled by 
 a common entity with the originator;
 "(V) any broker or dealer (as 
 those terms are defined in section 3(a) 
 of the Securities Exchange Act of 1934 
 (15 U.S.C. 78c(a))), or an exchange 
 registered pursuant to section 6 of 
 that Act (15 U.S.C. 78f), that operates 
 in connection with digital assets; or
 "(VI) any person registered with 
 the Commodity Futures Trading 
 Commission that operates or proposes to 
 operate in connection with digital 
 assets.
 "(D) Certification filed by digital asset 
 intermediary.--
 "(i) In general.--A certification 
 submitted by a digital asset intermediary under 
 this paragraph shall only become effective if--
 "(I) the digital asset 
 intermediary has--
 "(aa) conducted a 
 reasonable inquiry of publicly 
 available information, 
 appropriate under the 
 circumstances, regarding 
 whether the applicable 
 originator has engaged in 
 entrepreneurial and managerial 
 efforts with respect to the 
 applicable network token during 
 the most recent 180-day period, 
 or is likely to engage in those 
 efforts in the future; and
 "(bb) concluded that the 
 efforts described in item (aa) 
 have not occurred or are not 
 reasonably likely to occur; and
 "(II) subject to clause (ii), the 
 applicable originator has certified 
 that there is not (and, during the most 
 recent 180-day period, there has not 
 been) material, non-public information 
 regarding entrepreneurial or managerial 
 efforts with respect to the applicable 
 network token in the possession of the 
 originator or a related party.
 "(ii) Limitation.--Clause (i)(II) shall 
 not be required if the applicable digital asset 
 intermediary, after a reasonable inquiry, 
 appropriate under the circumstances, determines 
 that the applicable originator, or any person 
 jointly and severally liable pursuant to 
 subsection (a)(2)(B), is not capable of 
 submitting the applicable certification.
 "(E) Final agency action.--Denial under this 
 paragraph constitutes final agency action reviewable 
 under applicable law.
 "(F) Tolling.--Any applicable period specified in 
 this paragraph may be tolled, for periods of not longer 
 than 60 days, during the 3-year period following the 
 effective date of the Digital Asset Market Clarity Act, 
 upon a showing in writing that the originator or 
 digital asset intermediary has not substantially 
 responded to a request for information from the 
 Commission within a reasonable time.
 "(G) Withdrawal.--An originator or digital asset 
 intermediary may withdraw a certification submitted 
 under subparagraph (A) at any time before approval.
 "(H) Designated commission office.--The Commission 
 shall designate an office that shall--
 "(i) acknowledge receipt of certifications 
 submitted under subparagraph (A);
 "(ii) support those seeking certification 
 under subparagraph (A) by providing guidance 
 regarding the mechanics of preparing and 
 submitting those certifications; and
 "(iii) route certifications submitted 
 under subparagraph (A), together with any 
 associated comments or recommendations, to the 
 appropriate division or office of the 
 Commission for review.
 "(I) Misstatements or omissions.--Any material 
 misstatement or omission to state a material fact, 
 including with respect to continuing compliance, in a 
 certification that has become effective under this 
 paragraph shall constitute grounds for the Commission, 
 consistent with the securities laws, to issue an order 
 denying, suspending, or revoking the effectiveness of 
 the certification and to pursue any appropriate 
 enforcement action.
 "(c) Disclosure Requirements for Certain Transactions Involving 
Ancillary Assets.--
 "(1) Specified initial and periodic disclosure 
 requirements.--
 "(A) In general.--An ancillary asset originator 
 shall be subject to the initial and periodic disclosure 
 requirements under subsection (d) upon the occurrence 
 of the earlier of the following:
 "(i) Any offer, sale, or distribution of 
 an ancillary asset after the effective date of 
 the Digital Asset Market Clarity Act by, or 
 that is caused by, that ancillary asset 
 originator pursuant to--
 "(I) Regulation Crypto, as adopted 
 pursuant to section 103 of the Lummis-
 Gillibrand Responsible Financial 
 Innovation Act of 2026;
 "(II) the filing of an effective 
 registration statement under this Act;
 "(III) the filing of an offering 
 statement described in section 3(b)(2); 
 or
 "(IV) an offering conducted 
 pursuant to section 4(a)(6).
 "(ii)(I) The first secondary market offer, 
 sale, or distribution of an ancillary asset in 
 the United States after the effective date of 
 the Digital Asset Market Clarity Act that 
 constitutes a public offering, whether by the 
 ancillary asset originator or any other person.
 "(II) For the purposes of subclause (I), 
 the term `public offering' shall be interpreted 
 consistent with the meaning of that term under 
 section 4(a)(2).
 "(B) Exclusion.--Subparagraph (A) shall not apply 
 if--
 "(i) the aggregate gross proceeds from the 
 offer, sale, or distribution of the applicable 
 ancillary asset (together with any related 
 assets sold in those offers, sales, or 
 distributions) were $5,000,000 or less 
 (adjusted for inflation) during the 12-month 
 period immediately following the date of the 
 first such offer, sale, or distribution; or
 "(ii) the average daily aggregate value of 
 trading in the applicable ancillary asset in 
 all spot markets open to the public in the 
 United States for which trading volume is 
 generally available is $5,000,000 or less 
 (adjusted for inflation) during the 12-month 
 period (or such shorter period as the 
 Commission may determine) immediately following 
 the commencement of compliance with the 
 disclosure requirements under subsection (d) 
 (as determined pursuant to paragraph (2) of 
 this subsection), based on the knowledge of the 
 ancillary asset originator after due inquiry 
 (or, if the ancillary asset has not yet traded 
 on spot markets open to the public in the 
 United States, the trading volume is reasonably 
 expected to be $5,000,000 or less (adjusted for 
 inflation) during the 12-month period 
 immediately following the reporting date 
 specified by paragraph (2)).
 "(C) Calculation.--For the purposes of this 
 paragraph, the calculation of daily aggregate value 
 shall be based on a reasonable calculation of public 
 data.
 "(2) Commencement of compliance with specified initial and 
 periodic disclosure requirements.--
 "(A) In general.--An ancillary asset originator 
 subject to the requirements of paragraph (1) shall 
 comply with the disclosure requirements under 
 subsection (d)--
 "(i) before--
 "(I) any initial offer, sale, or 
 distribution described in paragraph 
 (1)(A)(i); or
 "(II) a secondary market offer, 
 sale, or distribution described in 
 paragraph (1)(A)(ii); and
 "(ii) semiannually thereafter.
 "(B) Exclusion.--The requirements of this 
 paragraph shall not apply to an offer, sale, or 
 distribution of an ancillary asset that occurs after 
 the effective date of the Digital Asset Market Clarity 
 Act if an ancillary asset originator has submitted a 
 certification under subsection (d)(3)(B) and the 
 Commission has not denied that certification within a 
 60-day period after the completion of the process under 
 that subsection.
 "(3) Transition rule.--
 "(A) In general.--An ancillary asset originator 
 that initially offered, sold, or distributed (or 
 otherwise controlled or caused the offer, sale, or 
 distribution of) a security involving an ancillary 
 asset before the effective date of the Digital Asset 
 Market Clarity Act shall comply with the periodic 
 disclosure requirements under subsection (d), if 
 applicable, beginning on the date that is 1 year after 
 that effective date.
 "(B) Effect on certification.--An ancillary asset 
 originator, or any other certification covered party, 
 subject to this paragraph that meets the requirements 
 of subsection (d)(3) may furnish a certification as 
 provided in that subsection without complying with the 
 periodic disclosure requirements under subsection (d), 
 if the Commission has not denied that certification 
 within a 60-day period after the completion of the 
 process under that subsection.
 "(C) Period of disclosures.--The disclosures 
 required under subparagraph (A) shall apply with 
 respect to the 3-year period preceding the effective 
 date described in that subparagraph.
 "(4) Digital asset intermediaries.--
 "(A) In general.--Other than as provided under 
 subparagraph (B), with respect to an ancillary asset 
 that is listed for trading on a digital asset 
 intermediary, that digital asset intermediary may, in 
 lieu of the applicable ancillary asset originator, 
 satisfy the requirements of subsection (d) in 
 accordance with such rules as the Commission shall 
 jointly adopt with the Commodity Futures Trading 
 Commission.
 "(B) Allocation of disclosure responsibility.--
 "(i) Originator filings.--A digital asset 
 intermediary may not satisfy the requirements 
 of subsection (d) in lieu of the applicable 
 ancillary asset originator, if--
 "(I) the ancillary asset 
 originator is incorporated, organized, 
 or otherwise registered under the laws 
 of the United States or of any State; 
 and
 "(II) the applicable ancillary 
 asset is--
 "(aa) offered, sold, or 
 distributed after the effective 
 date of the Digital Asset 
 Market Clarity Act pursuant 
 to--

 "(AA) an 
 investment contract 
 that is offered, sold, 
 or distributed pursuant 
 to Regulation Crypto, 
 as adopted pursuant to 
 section 103 of the 
 Lummis-Gillibrand 
 Responsible Financial 
 Innovation Act of 2026;

 "(BB) the filing 
 of an effective 
 registration statement 
 under this Act (other 
 than a registration 
 statement on the form 
 described in section 
 239.31 or 239.33 of 
 title 17, Code of 
 Federal Regulations, or 
 the successor to either 
 such form);

 "(CC) the filing 
 of an offering 
 statement described in 
 section 3(b)(2); or

 "(DD) an offering 
 conducted pursuant to 
 section 4(a)(6); or

 "(bb) first offered or 
 sold after the effective date 
 of the Digital Asset Market 
 Clarity Act in a transaction 
 described in paragraph 
 (1)(A)(ii).
 "(ii) Commission determination.--
 "(I) In general.--If, after 
 notice, comment, and the opportunity 
 for a hearing, the Commission 
 determines that it is in the public 
 interest or necessary for the 
 protection of investors, including with 
 respect to an ancillary asset 
 originator incorporated or organized in 
 a foreign jurisdiction, the Commission 
 may require an ancillary asset 
 originator, after a transition period, 
 to file the disclosures required under 
 subsection (d).
 "(II) Extraterritorial effect.--
 Subclause (I) shall apply 
 extraterritorially.
 "(C) Standard of liability.--Notwithstanding any 
 other provision of this Act, it shall be unlawful for a 
 digital asset intermediary to file disclosures under 
 subsection (d) pursuant to this paragraph that contain 
 any material misstatement or omission to state a 
 material fact required to be stated therein, or 
 necessary to make the statements therein not 
 misleading, unless that digital asset intermediary did 
 not know (and, in the exercise of reasonable care, 
 could not have known) of that misstatement or omission.
 "(5) Failure to comply.--Subject to the requirements of 
 this section, an ancillary asset shall not be listed for 
 trading on a digital asset intermediary if the Commission and 
 the Commodity Futures Trading Commission jointly find that the 
 ancillary asset originator that initially offered, sold, or 
 distributed the ancillary asset after the effective date of the 
 Digital Asset Market Clarity Act (or, if a digital asset 
 intermediary is satisfying the requirements of this subsection 
 in lieu of that ancillary asset originator in accordance with 
 paragraph (4), such digital asset intermediary) has materially 
 failed to furnish the required disclosures under this 
 subsection after a reasonable opportunity to cure, as provided 
 by joint rule of the Commission and the Commodity Futures 
 Trading Commission in a manner that is consistent with the 
 considerations under subsection (d)(5).
 "(d) Specified Initial and Periodic Disclosure Requirements.--
 "(1) In general.--
 "(A) Furnishing of information.--An ancillary 
 asset originator that is subject to the requirements of 
 paragraph (1) or (3) of subsection (c), or a digital 
 asset intermediary acting in accordance with subsection 
 (c)(4), shall furnish to the Commission, in such form 
 as the Commission may prescribe by rule after providing 
 notice and the opportunity for comment, and until the 
 requirement terminates under paragraph (3) of this 
 subsection, the information described in paragraph (2) 
 of this subsection, to the extent that the information 
 is material and known, or reasonably knowable, to the 
 ancillary asset originator or digital asset 
 intermediary.
 "(B) Requirements for rules.--A rule prescribed 
 under subparagraph (A) shall be reasonably tailored, 
 including by adjusting the scope, form, and content of 
 required disclosures, based on--
 "(i) the size of the applicable ancillary 
 asset originator in accordance with section 
 108(a) of the Lummis-Gillibrand Responsible 
 Financial Innovation Act of 2026;
 "(ii) the aggregate amount of ancillary 
 assets offered, sold, or distributed by the 
 applicable ancillary asset originator to the 
 public in the United States; and
 "(iii) whether the applicable ancillary 
 asset and any related distributed ledger system 
 is subject to coordinated control, as defined 
 by the Commission pursuant to rules adopted 
 under section 104(b) of the Lummis-Gillibrand 
 Responsible Financial Innovation Act of 2026.
 "(2) Categories of information.--The information required 
 under paragraph (1) shall include the following with respect to 
 the applicable ancillary asset originator and the related 
 ancillary asset:
 "(A) Basic corporate information regarding the 
 ancillary asset originator and the ancillary asset 
 activities of the ancillary asset originator, which may 
 include the following items, as the Commission shall 
 determine by rule:
 "(i) The experience of the ancillary asset 
 originator (or persons controlling the 
 ancillary asset originator) in developing 
 ancillary assets.
 "(ii) If the ancillary asset originator 
 (or persons controlling the ancillary asset 
 originator) has previously distributed 
 ancillary assets, information on the subsequent 
 distribution history of those ancillary assets, 
 including price history, if the information is 
 publicly available.
 "(iii) The activities that the ancillary 
 asset originator has taken in the relevant 
 disclosure period, and is projecting to take in 
 the 1-year period following the submission of 
 the disclosure, with respect to promoting the 
 use, value, or resale of the ancillary asset 
 (including any activity to facilitate the 
 creation or maintenance of a trading market for 
 the ancillary asset and any distributed ledger 
 system, application, or system that uses the 
 ancillary asset).
 "(iv) The anticipated cost of the 
 activities of the ancillary asset originator 
 described in clause (iii), whether the 
 ancillary asset originator has unencumbered, 
 liquid funds equal to that amount, and, if the 
 ancillary asset originator does not have those 
 funds, the anticipated plan of operations of 
 the ancillary asset originator for the portion 
 of time where those liquid funds are less than 
 the anticipated cost of the activities of the 
 ancillary asset originator.
 "(v) The experience of the ancillary asset 
 originator with the use of a distributed ledger 
 system or distributed ledger technology.
 "(vi) The identities and expertise of the 
 board of directors (or equivalent body) and 
 senior management of the ancillary asset 
 originator, the experience or functions of whom 
 are material to the development or value of the 
 ancillary asset, as well as any personnel 
 changes relating to the ancillary asset 
 originator during the period covered by the 
 disclosure.
 "(vii) Financial statements of the 
 ancillary asset originator that are--
 "(I) if the aggregate amount of 
 such ancillary assets offered, sold, or 
 distributed to the public does not 
 exceed $25,000,000 in gross proceeds, 
 reviewed by a public accountant that is 
 independent of the ancillary asset 
 originator; or
 "(II) if the aggregate amount of 
 such ancillary assets offered, sold, or 
 distributed to the public exceeds 
 $25,000,000 in gross proceeds, audited 
 by a public accountant that is 
 independent of the ancillary asset 
 originator.
 "(viii) A description of any legal 
 proceedings in which the ancillary asset 
 originator is engaged.
 "(ix) Risk factors arising from the 
 activities of the ancillary asset originator 
 with respect to the ancillary asset, and not 
 generally applicable to other kinds of 
 ancillary assets, that may limit the utility or 
 liquidity of the ancillary asset, investor 
 demand with respect to the ancillary asset, or 
 the market price or value of the ancillary 
 asset.
 "(x) Information relating to ownership of 
 the ancillary asset by--
 "(I) persons owning not less than 
 10 percent of any class of equity 
 security or other ownership interest of 
 the ancillary asset originator; and
 "(II) the board of directors (or 
 equivalent body) and senior management 
 of the ancillary asset originator, if 
 those individuals, in the aggregate, 
 own not less than 5 percent of the 
 ancillary asset.
 "(xi) For any material transactions 
 involving the ancillary asset between the 
 ancillary asset originator and any related 
 person, a description, in the aggregate, of the 
 parties, the number of ancillary assets 
 involved, and a summary of any material 
 features of the transactions, including any 
 material terms or ongoing obligations.
 "(xii) A summary, in the aggregate by 
 year, of transactions in ancillary assets 
 during the 4-year period preceding the 
 furnishing of the disclosure, by the ancillary 
 asset originator and persons that directly or 
 indirectly control the ancillary asset 
 originator.
 "(xiii) Purchases or similar acquisitions 
 of ancillary assets by the ancillary asset 
 originator and affiliates of the ancillary 
 asset originator.
 "(xiv) A statement, made in good faith, 
 from the chief financial officer of the 
 ancillary asset originator or equivalent 
 official, stating whether the ancillary asset 
 originator reasonably expects to maintain or 
 have the financial resources to continue 
 business as a going concern for the 12-month 
 period following the furnishing of the 
 disclosure, absent a change in circumstances.
 "(xv) The current state and timeline for 
 the development of the distributed ledger 
 system to which the ancillary asset relates, 
 detailing if, how, and when the distributed 
 ledger system and the related ancillary asset 
 are intended to no longer be subject to 
 coordinated control, including by related 
 persons, if the distributed ledger system has 
 not yet received a certification under section 
 104(d) of the Lummis-Gillibrand Responsible 
 Financial Innovation Act of 2026.
 "(B) Economic and technical information relating 
 to the ancillary asset, which may include the following 
 items, as the Commission shall determine by rule:
 "(i) A general description of the 
 ancillary asset and the distributed ledger 
 system to which that ancillary asset relates, 
 including--
 "(I) a plain-English description 
 of how the applicable distributed 
 ledger, distributed ledger system, or 
 distributed ledger application 
 functions;
 "(II) the intended or known 
 functionality and uses of the ancillary 
 asset and any associated fees for use 
 or disposition of the ancillary asset;
 "(III) the market for the 
 ancillary asset;
 "(IV) other assets or services 
 that may compete with the ancillary 
 asset;
 "(V) the total supply of the 
 ancillary asset or the manner and rate 
 of the ongoing production or creation 
 of the ancillary asset; and
 "(VI) the governance and consensus 
 mechanism for the ancillary asset and 
 that distributed ledger system, if 
 applicable, including for validating 
 transactions and implementing changes 
 to the distributed ledger system, the 
 method of generating or mining 
 ancillary assets, and any process for 
 burning or destroying units of the 
 ancillary asset on a distributed ledger 
 system.
 "(ii) If the ancillary asset originator 
 has offered, sold, or otherwise provided 
 ancillary assets to affiliates, investors, 
 employees, intermediaries, or resellers, a 
 description of the amount of assets offered, 
 sold, or otherwise provided to such persons and 
 a summary of any material resale restrictions 
 or other material obligations arising from 
 related contracts, agreements, or other 
 arrangements.
 "(iii) If ancillary assets were 
 distributed by the ancillary asset originator 
 without charge or upon meeting certain 
 conditions, a description of the distributions, 
 in the aggregate, along with the identity of 
 any recipient that received more than 5 percent 
 of the total amount of ancillary assets 
 (calculated as a percentage of the total supply 
 of such asset at the time of distribution).
 "(iv) The amount of ancillary assets owned 
 by the ancillary asset originator.
 "(v) For the 12-month period following the 
 furnishing of the disclosure, a description of 
 the current state and anticipated timeline for 
 the development of the distributed ledger 
 system to which that ancillary asset relates, 
 including--
 "(I) plans of the ancillary asset 
 originator to support (or to cease 
 supporting) the use or development of 
 the ancillary asset, including markets 
 for the ancillary asset and that 
 distributed ledger system;
 "(II) the various roles that exist 
 or are intended to exist in connection 
 with any applicable distributed ledger, 
 distributed ledger system, or 
 distributed ledger application, such as 
 users, service providers, developers, 
 transaction validators, and governance 
 participants;
 "(III) a discussion of any 
 mechanisms by which control or 
 authority are exerted with respect to 
 that distributed ledger system, if 
 applicable, or the related ancillary 
 asset; and
 "(IV) any critical operational 
 dependencies of any applicable 
 distributed ledger, distributed ledger 
 system, or distributed ledger 
 application or of the related ancillary 
 asset.
 "(vi) Risk factors that may materially 
 affect the liquidity of the ancillary asset, 
 investor demand with respect to the ancillary 
 asset, or the market price or value of the 
 ancillary asset.
 "(vii) To the extent available to the 
 ancillary asset originator, the average daily 
 price for a constant unit of value of the 
 ancillary asset during the relevant reporting 
 period, as well as the 12-month high and low 
 prices for the ancillary asset, as calculated 
 based on the 3 exchanges with the largest 
 trading volume in that ancillary asset.
 "(viii) If applicable, and subject to 
 cybersecurity best practices, information 
 relating to any external audit of the code and 
 functionality of the ancillary asset, including 
 the entity performing the audit and the 
 experience of the entity in conducting similar 
 audits.
 "(ix) Information relating to custodial 
 services available for the ancillary asset.
 "(x) Information on intellectual property 
 rights claimed or disputed relating to the 
 ancillary asset.
 "(xi) A description of the technology 
 underlying the initial distribution and trading 
 of the ancillary asset, including the source 
 code for the ancillary asset, if applicable, 
 and technical requirements for holding, 
 accessing, and transferring the ancillary 
 asset.
 "(xii) If applicable, a description of the 
 steps necessary to independently access, 
 search, and verify the transaction history of 
 the ancillary asset.
 "(C) In addition to the information expressly 
 required to be included under subparagraphs (A) and 
 (B), the ancillary asset originator or digital asset 
 intermediary, as applicable, shall provide such further 
 material information, if any, as may be necessary to 
 ensure that the statements made in the disclosure are 
 not, in light of the circumstances under which the 
 statements are made, materially misleading.
 "(3) Termination of requirements.--
 "(A) Termination.--The obligation of an ancillary 
 asset originator to provide disclosures under paragraph 
 (1) shall terminate on the date that a certification 
 becomes effective under subparagraph (B), including 
 through an approval or deemed approval.
 "(B) Certification.--
 "(i) In general.--A certification covered 
 party may submit to the Commission a 
 certification, based on the knowledge of the 
 certification covered party after due inquiry 
 and supported by reasonable evidence, that 
 states--
 "(I) that--
 "(aa) during the 180-day 
 period preceding the date on 
 which the certification covered 
 party submits the 
 certification, and as of the 
 date of submission, no 
 certification covered party has 
 engaged in more than a nominal 
 level of entrepreneurial or 
 managerial efforts (as defined 
 by the Commission by rule), 
 which shall not, for the 
 purposes of this clause, 
 include providing 
 administrative services alone;
 "(bb) any efforts 
 described in item (aa) were not 
 a primary factor in determining 
 the value of the related 
 ancillary asset (which may 
 include that any essential 
 promises made by the 
 certification covered party 
 have been fulfilled); and
 "(cc) a certification is 
 effective under section 104(d) 
 of the Lummis-Gillibrand 
 Responsible Financial 
 Innovation Act of 2026;
 "(II) in good faith that the 
 certification covered party does not 
 reasonably expect there to be any 
 efforts that would render the 
 certification covered party unable to 
 provide a new certification following 
 the date of the certification; and
 "(III) that substantially all 
 material information that is reasonably 
 expected to contribute to the value of 
 the ancillary assets offered, sold, or 
 distributed to the public by the 
 ancillary asset originator is, and is 
 reasonably expected to remain, 
 available to the public.
 "(ii) Change in circumstances.--
 "(I) Effectiveness of the 
 certification.--A certification under 
 clause (i) shall remain effective until 
 the date on which any certification 
 covered party engages in 
 entrepreneurial or managerial efforts 
 that would render the certification 
 covered party unable to meet the 
 standards of the certification.
 "(II) New disclosures required.--
 On and after the date described in 
 subclause (I), the certification 
 covered party undertaking efforts 
 described in that subclause shall be 
 responsible for furnishing to the 
 Commission the disclosures required 
 under paragraph (1), including a 
 description of the change in 
 circumstances.
 "(III) Periodic disclosures.--The 
 furnishing of disclosures pursuant to 
 subclause (II) shall restart the 
 schedule for periodic disclosures under 
 paragraph (1).
 "(IV) Prior certifications.--A 
 certification submitted under clause 
 (i) before a change in circumstances 
 shall not be deemed false or misleading 
 solely by reason of subsequent 
 reengagement under this clause.
 "(iii) Commission denial.--
 "(I) In general.--The Commission 
 may deny a certification submitted 
 under clause (i) by a certification 
 covered party by--
 "(aa) issuing a written 
 notice of objection to the 
 certification submitted under 
 clause (i) or upon determining 
 that more than a nominal level 
 of entrepreneurial or 
 managerial efforts has been 
 undertaken by any certification 
 covered party after the 
 submission of the 
 certification; and
 "(bb) providing to the 
 certification covered party 10 
 days notice of the intent of 
 the Commission to deny that 
 certification, during which 
 period interested persons shall 
 have an opportunity to submit 
 written data, views, and 
 arguments relating to that 
 certification.
 "(II) Requirements after notice of 
 intent.--After the 10-day period 
 described in subclause (I)(bb), the 
 Commission shall--
 "(aa) upon request of the 
 certification covered party, 
 provide an opportunity for the 
 oral presentation of data, 
 views, and arguments by any 
 interested persons; and
 "(bb) have a vote of the 
 Commission on whether to grant 
 or deny the certification, 
 based on a finding as to 
 whether the applicable 
 ancillary asset meets the 
 standard for certification 
 under clause (i).
 "(III) Final agency action.--
 Denial under this clause constitutes 
 final agency action reviewable under 
 applicable law.
 "(iv) Deemed approval.--If the Commission 
 fails to issue a written notice of objection or 
 non-objection within 90 days after submission 
 of a certification under clause (i), the 
 certification shall be deemed approved by the 
 Commission.
 "(v) Withdrawal.--A certification covered 
 party may withdraw a certification submitted 
 under clause (i) at any time before that 
 certification is approved or denied.
 "(vi) Designated commission office.--The 
 Commission shall designate an office that 
 shall--
 "(I) acknowledge the receipt of 
 certifications submitted under clause 
 (i);
 "(II) support certification 
 covered parties seeking certification 
 under clause (i) by providing guidance 
 regarding the mechanics of preparing 
 and submitting those certifications; 
 and
 "(III) route certifications 
 submitted under clause (i), together 
 with any associated comments or 
 recommendations, to the appropriate 
 division or office of the Commission 
 for review.
 "(vii) Advance review.--
 "(I) In general.--A certification 
 covered party may submit a 
 certification under clause (i) before 
 the offer, sale, or distribution of a 
 network token.
 "(II) Intended originator.--In 
 submitting for a certification for 
 advance review under subclause (I), a 
 certification covered party shall 
 identify the person intending to offer, 
 sell, or distribute the applicable 
 network token, and that person shall be 
 treated as the applicable ancillary 
 asset originator for the purposes of 
 this subparagraph.
 "(viii) Tolling.--Any applicable period 
 specified in this subparagraph may be tolled, 
 for periods of not longer than 60 days, during 
 the 3-year period following the effective date 
 of the Digital Asset Market Clarity Act, upon a 
 showing in writing that the submitting 
 certification covered party has not 
 substantially responded to a request for 
 information from the Commission within a 
 reasonable time.
 "(ix) Misstatements or omissions.--Any 
 material misstatement or omission to state a 
 material fact, including with respect to 
 continuing compliance, in a certification that 
 has become effective under this subparagraph 
 shall constitute grounds for the Commission, 
 consistent with the securities laws, to--
 "(I) issue an order denying, 
 suspending, or revoking the 
 effectiveness of that certification; 
 and
 "(II) pursue any appropriate 
 enforcement action.
 "(4) Voluntary disclosure.--An ancillary asset originator 
 may voluntarily furnish to the Commission the information 
 required under this subsection if the ancillary asset 
 originator determines that it is reasonably likely that the 
 ancillary asset originator will become subject to the 
 requirements of paragraph (1) or (3) of subsection (c) in the 
 future.
 "(5) Rulemaking considerations.--In adopting rules under 
 this subsection, the Commission shall--
 "(A) require only such information as the 
 Commission finds to be necessary or appropriate to 
 protect investors, maintain fair, orderly, and 
 efficient markets, and facilitate capital formation, 
 innovation, and efficiency;
 "(B) include in any final versions of those rules 
 a cost-benefit analysis evaluating the effects of any 
 such rule on innovation, efficiency, competition, 
 maintaining fair and orderly markets, and capital 
 formation, including the competitiveness of United 
 States market participants; and
 "(C) act jointly with the Commodity Futures 
 Trading Commission to establish a process for 
 implementing the requirements of this subsection, 
 including with respect to listing and disclosures, that 
 is consistent and coordinated with the listing process 
 for digital asset intermediaries.
 "(6) Limitations.--Rules adopted under this subsection 
 shall not require the inclusion of financial statements of an 
 ancillary asset originator, except with respect to the 
 disclosure of financial information under paragraph (2).
 "(e) Exemptions.--The Commission may, by order, exempt an 
ancillary asset originator or digital asset intermediary, or any class 
of ancillary asset originators or digital asset intermediaries, from 
specified requirements under subsection (d) if it is in the public 
interest or for the protection of investors, consistent with the 
purposes of this section and subject to such conditions as the 
Commission determines necessary to protect investors and in the public 
interest.
 "(f) Confidential Treatment of Certain Information.--Subject to 
Commission rules and procedures, an ancillary asset originator required 
to furnish to the Commission disclosures under subsection (d), or a 
digital asset intermediary furnishing those disclosures in lieu of such 
an ancillary asset originator, may submit a request for confidential 
treatment of information included in such disclosures pursuant to 
procedures the Commission shall establish and that are modeled on or 
identical to section 230.406 of title 17, Code of Federal Regulations, 
or any successor regulation.
 "(g) Effect of Failure to Comply.--The failure of an ancillary 
asset originator or digital asset intermediary to comply with a 
provision of this section shall not, by itself, cause an ancillary 
asset offered, sold, or distributed by that ancillary asset originator 
(or that the ancillary asset originator caused to be offered, sold, or 
distributed) to be a security under any applicable law.
 "(h) Liability for False or Misleading Statements.--
 "(1) In general.--It shall be unlawful for an ancillary 
 asset originator, in any initial and periodic disclosure, 
 certification, or other document furnished under this section, 
 to make an untrue statement of a material fact or omit to state 
 a material fact required to be stated therein or necessary to 
 make the statements therein not misleading.
 "(2) Rule of construction.--Nothing in this subsection may 
 be construed as limiting the application of section 240.10b-5 
 of title 17, Code of Federal Regulations, or any successor 
 regulation, to false or misleading disclosure statements or 
 preventing any private right of action otherwise available 
 under the securities laws.
 "(i) Special Disposition Restrictions by Related Persons.--
 "(1) In general.--The Commission shall adopt rules, 
 consistent with section 104 of the Lummis-Gillibrand 
 Responsible Financial Innovation Act of 2026, establishing 
 limitations on the disposition of certain ancillary assets with 
 specified characteristics by related persons.
 "(2) Considerations.--In adopting rules under paragraph 
 (1), the Commission shall consider what is necessary or 
 appropriate to protect investors, promote capital formation, 
 and maintain fair and orderly markets, which may include the 
 prevention of insider self-dealing or other abuses of a 
 privileged position.
 "(j) Safe Harbor for Forward-Looking Statements.--In any action 
against an ancillary asset originator or digital asset intermediary 
arising under this Act that is based on an untrue statement of a 
material fact or omission of a material fact necessary to make the 
statement not misleading, no liability shall arise with respect to any 
forward-looking statement (including any statement of plans, 
objectives, projections, expectations, or assumptions concerning future 
performance, financial position, development milestones, asset utility, 
system adoption, or market conditions) made in an ancillary asset 
disclosure, statement, or other document furnished pursuant to this 
section, if the statement is--
 "(1) identified as forward-looking; and
 "(2) accompanied by meaningful cautionary language that 
 identifies important factors that could cause actual results to 
 differ materially.
 "(k) Transactions Before Effective Date.--
 "(1) Primary transactions.--Notwithstanding any other 
 provision of law, neither the Commission nor any private 
 plaintiff may initiate, pursue, or maintain any action, or an 
 appeal of an action, for a violation of section 5 or 12(a)(1) 
 of this Act arising from any offer, sale, or distribution of 
 ancillary assets occurring before the effective date of the 
 Digital Asset Market Clarity Act, provided that the ancillary 
 asset originator or a certification covered party complies with 
 any applicable requirements under subsection (c)(3).
 "(2) Primary transactions related to fraud.--Nothing in 
 paragraph (1) shall limit the ability of the Commission to 
 bring an action based on the anti-fraud or anti-manipulation 
 authorities of the Commission.
 "(3) Secondary transactions.--Notwithstanding any other 
 provision of law, the offer, sale, or distribution of a network 
 token by a person occurring before the effective date of the 
 Digital Asset Market Clarity Act shall be treated as not 
 involving the offer, sale, or distribution of a security 
 under--
 "(A) section 2(a)(1);
 "(B) section 3(a) of the Securities Exchange Act 
 of 1934 (15 U.S.C. 78c(a));
 "(C) section 2(a) of the Investment Company Act of 
 1940 (15 U.S.C. 80a-2(a));
 "(D) section 202(a) of the Investment Advisers Act 
 of 1940 (15 U.S.C. 80b-2(a));
 "(E) section 16 of the Securities Investor 
 Protection Act of 1970 (15 U.S.C. 78lll); or
 "(F) any applicable requirement of State law that 
 is functionally equivalent to the provisions described 
 in subparagraphs (A) through (E), including any 
 provision of State law that directly or indirectly 
 prohibits, limits, or imposes any conditions on the 
 use, offer, sale, transfer, or disposition of a network 
 token in a manner that is--
 "(i) not substantially similar to 
 prohibitions, limitations, or conditions 
 imposed by that State relating to assets that 
 are commodities under the laws of that State; 
 and
 "(ii) inconsistent with this section.
 "(4) No inference of liability.--Nothing in paragraph (1), 
 (2), or (3) may be construed as an admission, acknowledgment, 
 or inference of liability for any act, transaction, or conduct 
 occurring before the effective date of the Digital Asset Market 
 Clarity Act.
 "(5) Rules of construction.--Nothing in this subsection 
 may be construed to--
 "(A) impair vested rights or contractual 
 obligations lawfully established before the effective 
 date of the Digital Asset Market Clarity Act; or
 "(B) limit the authority of the Commission to 
 bring an action against an ancillary asset originator 
 or a related person for securities fraud or 
 manipulation in connection with a statement, a 
 disclosure, or conduct by that ancillary asset 
 originator or related person, except that the 
 Commission may not exercise that authority to treat a 
 network token as a security or regulate secondary 
 market trading.
 "(l) Rules of Construction.--Nothing in this section may be 
construed to--
 "(1) preclude the Commission from bringing an appropriate 
 action or entering into a settlement agreement relating to a 
 violation or alleged violation of this section;
 "(2) permit compliance with this section to be used in any 
 administrative or judicial proceeding as evidence that an 
 ancillary asset is a security;
 "(3) prohibit the offer, sale, or distribution of a 
 digital asset in reliance on an exemption from registration 
 under this Act, other than Regulation Crypto (as adopted 
 pursuant to section 103 of the Lummis-Gillibrand Responsible 
 Financial Innovation Act of 2026); or
 "(4) require more than 1 person to furnish the disclosures 
 required under subsection (d), unless otherwise provided by the 
 Commission by rule.
 "(m) Anti-Evasion.--
 "(1) Anti-evasion.--The Commission may issue such 
 regulations as the Commission considers necessary or 
 appropriate in the public interest or for the protection of 
 investors to administer and prevent willful evasion of--
 "(A) this section;
 "(B) sections 103 and 104 of the Lummis-Gillibrand 
 Responsible Financial Innovation Act of 2026; and
 "(C) with respect to an ancillary asset originator 
 and related persons, the securities laws amended by the 
 Lummis-Gillibrand Responsible Financial Innovation Act 
 of 2026.
 "(2) Considerations.--In adopting rules under this 
 section--
 "(A) the form, label, and written documentation of 
 an agreement, contract, or transaction, or an entity, 
 shall not be dispositive in determining whether the 
 agreement, contract, or transaction, or the entity, has 
 been entered into or structured to willfully evade the 
 requirements of this section;
 "(B) the Commission may consider whether, based on 
 the totality of facts and circumstances, the principal 
 purpose of any arrangement, allocation of rights, 
 interposition of entities, or sequencing of steps is to 
 willfully circumvent the requirements of this section 
 or the restrictions set forth in section 104 of the 
 Lummis-Gillibrand Responsible Financial Innovation Act 
 of 2026, by satisfying the literal terms while 
 defeating the purpose and policy of this section;
 "(C) for purposes of subparagraph (B), factors 
 that may be considered, without being dispositive, in 
 determining whether a principal purpose to willfully 
 circumvent this section exists may include--
 "(i) removal of a disqualifying financial 
 right described in subsection (a)(7)(B) from 
 the instrument coupled with its re-introduction 
 through a substantially equivalent right held 
 by a related person or controlled vehicle, 
 including, by way of example, any nominally 
 independent foundation, decentralized 
 autonomous organization, laboratory, or similar 
 arrangement;
 "(ii) circular or non-commercial flows of 
 value among related persons designed to 
 simulate network utility; and
 "(iii) timing of steps designed to 
 trigger, accelerate, or delay certification or 
 termination of disclosure obligations without a 
 material change in circumstances relating to 
 the asset; and
 "(D) the Commission shall provide that evasion 
 shall not have occurred if an agreement, contract, or 
 transaction is entered into for a legitimate business 
 purpose and is not structured with a principal purpose 
 of willfully circumventing the requirements of this 
 section.
 "(n) Fiduciary Obligations.--
 "(1) Fiduciary duties under state law.--Nothing in this 
 section, or in any rule issued under this section, may be 
 construed to limit, preempt, or otherwise affect any fiduciary 
 duty of an ancillary asset originator, or of any director, 
 officer, or controlling person of an ancillary asset 
 originator, arising under the laws of any State.
 "(2) Preservation of fiduciary and other duties to 
 customers, clients, and shareholders.--Nothing in this section, 
 or in any rule issued under this section, may be construed to 
 limit, preempt, or otherwise affect any fiduciary duty that any 
 person owes to a customer, client, or shareholder under any 
 other provision of Federal or State law, including in 
 connection with the offer, sale, transfer, distribution, or 
 custody of an ancillary asset.
 "(o) Savings Clause.--Except as provided by the Digital Asset 
Market Clarity Act and the amendments made by that Act, nothing in this 
section may be construed to limit the authority of the Commission under 
the securities laws.".
 (b) Rulemaking.--Not later than 360 days after the date of 
enactment of this Act, the Commission shall conduct a notice and 
comment rulemaking as necessary or appropriate to carry out section 4B 
of the Securities Act of 1933, as added by subsection (a).

ANCILLARY ASSETS.

 (a) Adoption of Regulation Crypto.--The Commission shall adopt 
rules under the Securities Act of 1933 (15 U.S.C. 77a et seq.) and the 
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), which shall be 
referred to collectively as "Regulation Crypto", to implement 
subsections (b), (c), and (d) of this section.
 (b) Exemption for Certain Transactions Involving Ancillary 
Assets.--
 (1) Exemption.--
 (A) In general.--Rules adopted by the Commission 
 under this section shall provide that the registration 
 requirements of the Securities Act of 1933 (15 U.S.C. 
 77a et seq.) shall not apply to an offer, sale, or 
 distribution of an investment contract involving an 
 ancillary asset, if the offer, sale, or distribution 
 does not exceed the greater of--
 (i) $50,000,000 in gross proceeds per 
 calendar year for a period of not longer than 4 
 years; or
 (ii) 10 percent of the total dollar value 
 of those ancillary assets that are outstanding, 
 as of the date of that offer, sale, or 
 distribution.
 (B) Continued application of certain provisions.--
 Sections 12(a)(2) and 17 of the Securities Act of 1933 
 (15 U.S.C. 77l(a)(2), 77q) shall apply with respect to 
 an offer, sale, or distribution of an investment 
 contract involving an ancillary asset that is described 
 in subparagraph (A).
 (2) Limitation.--An ancillary asset originator may not 
 raise more than $200,000,000 in total gross proceeds in 
 reliance on the rules adopted under subsection (a).
 (3) Review and adjustment for inflation.--
 (A) In general.--Not later than 2 years after the 
 date of enactment of this Act, and every 2 years 
 thereafter, the Commission shall--
 (i) review the amounts described in 
 paragraphs (1)(A)(i) and (2);
 (ii) adjust the amounts described in 
 paragraphs (1)(A)(i) and (2) to account for 
 inflation; and
 (iii) increase the amounts described in 
 paragraphs (1)(A)(i) and (2) as the Commission 
 determines appropriate, if that action would be 
 in the public interest and consistent with the 
 protection of investors.
 (B) Report.--If the Commission, after conducting a 
 review under subparagraph (A), determines not to 
 increase the amount described in paragraph (1)(A)(i) or 
 (2) (other than to adjust that amount for inflation, as 
 required under subparagraph (A)(ii) of this paragraph), 
 the Commission 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 detailing the reasons that the 
 Commission did not increase that amount.
 (c) Conditions for Exemption.--The following conditions shall apply 
to the exemption provided under subsection (b):
 (1) Initial disclosures.--Not later than 30 days before the 
 date on which the applicable ancillary asset originator, any 
 affiliate of the ancillary asset originator, or any underwriter 
 of an investment contract, offers, sells, or distributes an 
 ancillary asset in reliance on the rules adopted under 
 subsection (a), the ancillary asset originator shall furnish to 
 the Commission the disclosures required under section 4B(d) of 
 the Securities Act of 1933, as added by this Act, subject to 
 the periodic semiannual disclosure requirements of that 
 section.
 (2) Coordinated control.--If the applicable ancillary asset 
 is reliant on a distributed ledger system that, together with 
 that ancillary asset, is subject to coordinated control, 
 including by related persons, the restrictions on disposition 
 under section 104 shall apply.
 (3) Criteria.--The applicable ancillary asset originator 
 may not be--
 (A) a company that is not organized under, and 
 subject to, the laws of a State or territory of the 
 United States or the District of Columbia;
 (B) a development-stage company that either--
 (i) has no specific business plan or 
 purpose; or
 (ii) has indicated that the business plan 
 of the company is to merge with or acquire an 
 unidentified company;
 (C) an investment company (as defined in section 
 3(a) of the Investment Company Act of 1940 (15 U.S.C. 
 80a-3(a))) or a company (as defined in section 2 of 
 that Act (15 U.S.C. 80a-2)) that would be an investment 
 company under section 3(a) of that Act (15 U.S.C. 80a-
 3(a)) but for the exclusions provided from that 
 definition by section 3(c) of that Act (15 U.S.C. 80a-
 3(c)), provided that, solely for the purposes of 
 evaluating eligibility to rely on the exemption 
 provided under subsection (b), an ancillary asset 
 originator shall not be deemed to be an investment 
 company solely by virtue of investing, reinvesting, 
 owning, holding, or trading ancillary assets, including 
 ancillary assets offered for sale by the ancillary 
 asset originator;
 (D) a person issuing fractional undivided interests 
 in other commodities;
 (E) a person that is or has been subject to any 
 order of the Commission entered pursuant to section 
 12(j) of the Securities Exchange Act of 1934 (15 U.S.C. 
 78l(j)) after the date of enactment of this Act and 
 during the 5-year period preceding the offer and sale;
 (F) a person that is or has been disqualified 
 pursuant to section 230.506(d) of title 17, Code of 
 Federal Regulations, or any successor regulation, 
 unless waived by order of the Commission;
 (G) a person that is or has been disqualified 
 pursuant to section 230.251 through 230.263 of title 
 17, Code of Federal Regulations (commonly referred to 
 as "Regulation A"), or any successor regulations, 
 unless waived by order of the Commission; or
 (H) a person convicted of a felony offense 
 involving insider trading, embezzlement, cybercrime, 
 money laundering, financing of terrorism, or financial 
 fraud, within the last 10 years.
 (4) Furnishing notice of reliance.--The applicable 
 ancillary asset originator shall electronically furnish to the 
 Commission a notice of reliance on the rules adopted under 
 subsection (a) not fewer than 30 days before the date on which 
 the ancillary asset originator first offers, sells, or 
 distributes an ancillary asset in reliance on those rules, 
 which shall contain the following information:
 (A) The name of the ancillary asset originator.
 (B) A statement by a person duly authorized by the 
 ancillary asset originator that the conditions of those 
 rules are satisfied.
 (C) The website where the summary documents of the 
 ancillary asset originator, if any, may be found and 
 made available for public consumption.
 (D) An email address at which the ancillary asset 
 originator may be contacted.
 (5) Public availability.--The Commission shall require that 
 the disclosures furnished to the Commission under section 4B(d) 
 of the Securities Act of 1933, as added by this Act, be made 
 publicly available in a manner that provides timely and 
 continuing access.
 (6) Form and manner.--The disclosures furnished to the 
 Commission under section 4B(d) of the Securities Act of 1933, 
 as added by this Act, shall be prepared, furnished, and made 
 public in the form and manner prescribed by the Commission, 
 including through the use of electronic furnishing, web 
 posting, machine-readable formats, and plain-English legends, 
 as the Commission determines necessary or appropriate in the 
 public interest or for the protection of investors.
 (d) Status Under Securities Laws.--
 (1) In general.--A disclosure furnished under section 4B of 
 the Securities Act of 1933, as added by this Act, including an 
 initial or periodic disclosure furnished under subsection (d) 
 of such section 4B, and any other document furnished under the 
 rules adopted under subsection (a) of this section, shall be 
 deemed to be--
 (A) a "prospectus" solely--
 (i) for purposes of section 12(a)(2) of the 
 Securities Act of 1933 (15 U.S.C. 77l(a)(2)); 
 and
 (ii) with respect to the person that is the 
 purchasing party in a transaction made in 
 reliance on the rules adopted under subsection 
 (a); and
 (B) a "statement" solely for purposes of--
 (i) section 17(a) of the Securities Act of 
 1933 (15 U.S.C. 77q(a));
 (ii) section 10(b) of the Securities 
 Exchange Act of 1934 (15 U.S.C. 78j(b)); and
 (iii) section 240.10b-5 of title 17, Code 
 of Federal Regulations, or any successor 
 regulation.
 (2) Registration statement.--
 (A) In general.--A disclosure furnished under 
 section 4B of the Securities Act of 1933, as added by 
 this Act, including an initial or periodic disclosure 
 furnished under subsection (d) of such section 4B, or 
 any other document furnished pursuant to the rules 
 adopted under subsection (a), shall not be deemed to be 
 a "registration statement" for purposes of section 11 
 of the Securities Act of 1933 (15 U.S.C. 77k) or to 
 have been filed under the Securities Exchange Act of 
 1934 (15 U.S.C. 78a et seq.).
 (B) Civil liability.--Liability under section 
 12(a)(2) of the Securities Act of 1933 (15 U.S.C. 
 77l(a)(2)) relating to a disclosure furnished under 
 section 4B of the Securities Act of 1933, as added by 
 this Act, including an initial or periodic disclosure 
 furnished under subsection (d) of such section 4B, or 
 any other document furnished pursuant to the rules 
 adopted under subsection (a), shall only apply to the 
 person making statements in that disclosure or other 
 document, and only a person that purchased an ancillary 
 asset in a transaction involving disclosures provided 
 pursuant to the rules adopted under subsection (a) 
 shall have a claim under such section 12(a)(2).
 (3) Forward-looking statements.--In any action against an 
 ancillary asset originator under this title or the amendments 
 made by this title that is based on an untrue statement of a 
 material fact or omission of a material fact necessary to make 
 the statement not misleading, no liability shall arise with 
 respect to any forward-looking statement (including a statement 
 of plans, objectives, projections, expectations, or assumptions 
 concerning future performance, financial position, development 
 milestones, digital asset utility, system adoption, or market 
 conditions) made in a disclosure, statement, or other document 
 furnished pursuant to section 4B of the Securities Act of 1933, 
 as added by this Act, including an initial or periodic 
 disclosure furnished under subsection (d) of such section 4B, 
 or furnished under this section, if the statement is--
 (A) identified as forward-looking; and
 (B) accompanied by meaningful cautionary language 
 that identifies important factors that could cause 
 actual results to differ materially.

(a) Definitions.--In this section:
 (1) Certification covered party.--The term "certification 
 covered party" means, with respect to an ancillary asset--
 (A) the ancillary asset originator;
 (B) a subsidiary of the ancillary asset originator;
 (C) a related person of the ancillary asset 
 originator; or
 (D) any entity that directly or indirectly controls 
 or is controlled by a common entity with an ancillary 
 asset originator.
 (2) Covered token.--The term "covered token" means any 
 unit of an ancillary asset that was acquired from the ancillary 
 asset originator with respect to that ancillary asset or an 
 agent or underwriter thereof.
 (3) Distributed ledger control person.--The term 
 "distributed ledger control person" means, with respect to a 
 distributed ledger system, any person or group of persons under 
 common control, other than a decentralized governance system, 
 that has the unilateral 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 
 distributed ledger system or a related ancillary asset.
 (b) Coordinated Control.--
 (1) In general.--The Commission shall adopt rules, based on 
 the criteria described in paragraph (2), to define the 
 circumstances under which a distributed ledger system, together 
 with a related ancillary asset, is considered to be under 
 coordinated control.
 (2) Considerations.--In adopting rules under paragraph (1), 
 the Commission shall consider the following criteria as indicia 
 that a distributed ledger system described in that paragraph, 
 together with the related ancillary asset, is considered to be 
 under coordinated control:
 (A) Open digital system.--The extent to which the 
 distributed ledger system is not--
 (i) a distributed ledger, the protocol of 
 which is freely and publicly available;
 (ii) a distributed ledger application the 
 source code of which is--
 (I) freely and publicly available 
 via open-source code; and
 (II) recorded on a distributed 
 ledger described in clause (i); or
 (iii) an analogue to a distributed ledger 
 or distributed ledger application described in 
 clause (i) or (ii), as determined by the 
 Commission by rule or order.
 (B) Permissionless and credibly neutral digital 
 system.--The extent to which a person or group of 
 persons under common control has--
 (i) the unilateral authority, via operation 
 of the distributed ledger system, to restrict, 
 censor, or prohibit use of the distributed 
 ledger system, including any applicable system-
 based user activity; or
 (ii) private permissions, hard-coded 
 privileges, or similar capabilities granted by 
 the source code of the distributed ledger 
 system that provides preferential treatment 
 compared to other similarly situated persons.
 (C) Distributed digital network.--The extent to 
 which a person or group of persons under common control 
 has beneficial ownership of, in the aggregate, more 
 than 49 percent of the total amount of outstanding 
 units of the ancillary asset or voting power with 
 respect to any governance system that relates to the 
 distributed ledger system.
 (D) Autonomous distributed ledger system.--The 
 extent to which--
 (i) the distributed ledger system has not 
 yet reached an autonomous state; and
 (ii) a person or group of persons under 
 common control has the unilateral authority, 
 directly or indirectly, to alter or change the 
 functionality, operation, or rules of consensus 
 or agreement of the distributed ledger system.
 (E) Economic independence.--The extent to which the 
 primary programmatic mechanisms of the distributed 
 ledger system that are intended to facilitate 
 substantial value accrual to the ancillary asset 
 through the functioning of the distributed ledger 
 system are not yet functional.
 (3) Safe harbors.--
 (A) In general.--The Commission shall establish 
 safe harbors under which a distributed ledger system, 
 together with a related ancillary asset, will not be 
 considered to be under coordinated control for the 
 purposes of section 103(c)(2).
 (B) Decentralized governance systems.--
 (i) In general.--For the purposes of this 
 section, a decentralized governance system 
 shall not be considered to be a person or a 
 group of persons under common control.
 (ii) Distributed ledger systems.--For the 
 purposes of this section, a distributed ledger 
 system, together with any related ancillary 
 asset, shall not be precluded from being 
 considered to not be under coordinated control 
 solely based on a functional, administrative, 
 clerical, or ministerial action of a 
 decentralized governance system, including any 
 such action taken by a person acting on behalf 
 of and at the direction of that decentralized 
 governance system, as determined by the 
 Commission and consistent with the protection 
 of investors, maintenance of fair, orderly, and 
 efficient markets, and the facilitation of 
 capital formation.
 (C) Emergency measures.--For the purposes of this 
 section, a pre-defined, temporary, rules-based 
 cybersecurity emergency measure that is exercised by an 
 incident response or security council exclusively in 
 response to a specific and documented cybersecurity 
 incident or imminent threat pursuant to publicly 
 disclosed, on-chain authorization mechanisms, that is 
 strictly limited in scope and duration solely to 
 address that cybersecurity incident or imminent threat, 
 and that is exercised without unilateral control by any 
 single person, shall not alone constitute common 
 control or an agreement to work in concert, if those 
 rules and mechanisms, including the procedures and 
 operational limits governing the emergency measure, are 
 disclosed in publicly available written documentation 
 reasonably available to the applicable Federal agency 
 by a decentralized autonomous organization or similar 
 legal entity sufficiently in advance of any exercise of 
 the emergency measure.
 (D) Nonexclusive.--The safe harbors established 
 under subparagraphs (A), (B), and (C) shall not be 
 exclusive and the Commission shall consider such other 
 circumstances as the Commission finds in the public 
 interest or for the protection of investors.
 (4) Evidence.--The Commission may, in adopting rules under 
 this subsection, require such certifications, third party 
 verifications, or other evidence as the Commission determines 
 necessary or appropriate to determine whether a distributed 
 ledger system is under coordinated control for the purposes of 
 section 103(c)(2).
 (5) Rule of construction.--For purposes of this 
 subsection--
 (A) the existence or termination of coordinated 
 control shall be determined independently of whether 
 entrepreneurial or managerial efforts described in 
 section 4B of the Securities Act of 1933, as added by 
 this Act, have been completed; and
 (B) the elimination of coordinated control shall be 
 a prerequisite to the completion of efforts described 
 in subparagraph (A).
 (c) Special Restrictions on Disposition.--The Commission shall 
adopt rules that provide that, with respect to transactions involving 
an ancillary asset for which disclosures are required pursuant to 
section 4B(d) of the Securities Act of 1933, as added by this Act, when 
a sale of that ancillary asset is made by a related person, the 
following restrictions on that sale shall apply:
 (1) Sales prior to certification.--If the covered token was 
 acquired after the effective date of this Act and principally 
 relies on a distributed ledger system, the covered token may be 
 sold by a related person before that distributed ledger system 
 is certified as not subject to coordinated control, pursuant to 
 subsection (d), if--
 (A) with respect to that distributed ledger system, 
 the disclosures required pursuant to section 4B(d) of 
 the Securities Act of 1933, as added by this Act, have 
 been furnished;
 (B) the holder of the covered token has held the 
 units for not less than 12 months; and
 (C) the amount of covered tokens sold in any 12-
 month period by the related person is--
 (i) not greater than an amount to be 
 determined by the Commission pursuant to notice 
 and comment rulemaking not later than 360 days 
 after the date of enactment of this Act, which 
 rulemaking shall consider what is necessary or 
 appropriate in the public interest, including, 
 among other things, the protection of 
 investors, whether the action will promote 
 efficiency, competition, and capital formation, 
 and how to foster the development of 
 distributed ledger systems that are not subject 
 to coordinated control; and
 (ii) in no case equal to or greater than 
 the amount determined by the Commission 
 pursuant to the rulemaking described in 
 paragraph (2)(C).
 (2) Sales after certification.--If the covered token was 
 acquired after the effective date of this Act and principally 
 relies on a distributed ledger system that is certified as not 
 subject to coordinated control pursuant to subsection (d), the 
 covered token may be sold by a related person, if--
 (A) with respect to that distributed ledger system, 
 the disclosures required pursuant to section 4B(d) of 
 the Securities Act of 1933, as added by this Act, have 
 been furnished;
 (B) the holder of the covered token has held the 
 units for not less than 6 months; and
 (C) the amount of covered tokens sold in any 12-
 month period by the related person is not greater than 
 an amount to be determined by the Commission pursuant 
 to rulemaking that shall not be less than 10 percent of 
 the total amount of outstanding units of such ancillary 
 assets.
 (3) Sales of pre-existing covered tokens.--If the covered 
 token was acquired before the effective date of this Act and 
 principally relies on a distributed ledger system, the covered 
 token may be sold by a related person if--
 (A) in the case that the distributed ledger system 
 has not been certified as not subject to coordinated 
 control pursuant to subsection (d)--
 (i) the disclosures required pursuant to 
 section 4B(d) of the Securities Act of 1933, as 
 added by this Act, have been furnished; and
 (ii) the holder of the covered token has 
 held the units for not less than 12 months; and
 (B) in the case that the distributed ledger system 
 has been certified as not subject to coordinated 
 control pursuant to subsection (d), the holder of the 
 covered token has held the units for not less than 6 
 months.
 (4) Limitations on transactions by distributed ledger 
 control persons.--If the holder of an ancillary asset that 
 principally relies on a distributed ledger system that has been 
 certified as not subject to coordinated control is a 
 distributed ledger control person with respect to that 
 distributed ledger system, that control person may resell that 
 ancillary asset if--
 (A) that control person furnishes notice to the 
 Commission, in a form and manner determined by the 
 Commission, that the person has or intends to obtain an 
 authority described in subparagraph (B) with respect to 
 the distributed ledger system;
 (B) that distributed ledger control person 
 furnishes disclosures to the Commission, in a form and 
 manner determined by the Commission, describing the 
 material activities, as determined by the Commission, 
 of the control person;
 (C) with respect to that distributed ledger system, 
 disclosures have been furnished pursuant to section 
 4B(d) of the Securities Act of 1933, as added by this 
 Act; and
 (D) that control person has satisfied such other 
 requirements applicable to that control person that may 
 be established by the Commission to prevent 
 manipulation or distortion of the value of the 
 ancillary asset, including resale restrictions 
 consistent with those applied to related persons that 
 are not control persons.
 (d) Certification of Non-Control by Related Persons.--
 (1) Submission.--With respect to an ancillary asset, a 
 certification covered party may furnish to the Commission a 
 written certification, in such form and manner as the 
 Commission may specify by rule consistent with subsection (b), 
 stating that the distributed ledger system is not under 
 coordinated control.
 (2) Automatic effectiveness.--A certification furnished 
 under paragraph (1) shall become effective, and the distributed 
 ledger system shall be deemed not to be under coordinated 
 control, on the date that is the earlier of--
 (A) the date on which the Commission notifies the 
 certification covered party in writing that the 
 Commission does not object to the certification; or
 (B) if the Commission has not denied the 
 certification under paragraph (3), the date that is 90 
 days after the date on which the certification is 
 furnished, or such shorter period as the Commission may 
 determine by rule.
 (3) Denial.--
 (A) In general.--The Commission may deny a 
 certification furnished under paragraph (1)--
 (i) only during the 90-day period beginning 
 on the date on which the certification is 
 furnished, or such shorter period as the 
 Commission may determine by rule, or upon 
 determining, based on reasonable evidence, that 
 a material change in circumstances has occurred 
 after the furnishing of the certification; and
 (ii) by providing to the certification 
 covered party 10 days notice of the intent of 
 the Commission to deny that certification.
 (B) Requirements after notice of intent.--After the 
 10-day period described in subparagraph (A)(ii), the 
 Commission shall--
 (i) conduct a hearing; and
 (ii) vote to deny the certification if 
 there is a finding that the applicable 
 ancillary asset does not meet the standard for 
 certification that the operations of the 
 distributed ledger system are not under such 
 coordinated control.
 (C) Final agency action.--Denial under this 
 paragraph constitutes final agency action reviewable 
 under applicable law.
 (4) Verification.--The Commission may, by rule, require 
 appropriate third-party verification of a certification 
 furnished under paragraph (1).
 (e) Disgorgement.--
 (1) In general.--Any profit realized by a related person 
 from the sale of an ancillary asset in violation of the 
 restrictions under subsection (c) shall inure to, and be 
 recoverable by, the holders of the ancillary asset, 
 irrespective of any intention of holding the asset.
 (2) Enforcement.--An action to recover profit described in 
 paragraph (1)--
 (A) may be instituted at law or in equity in any 
 court of competent jurisdiction of the United States 
 by--
 (i) the applicable ancillary asset 
 originator;
 (ii) the owner of any units of the 
 applicable ancillary asset; or
 (iii) the owner of any units of the 
 applicable ancillary asset, in the name and on 
 behalf of the ancillary asset originator, if 
 the ancillary asset originator--
 (I) fails or refuses to bring the 
 action within 60 days after a written 
 request by any owner of not less than 5 
 percent of the total amount of 
 outstanding units of that ancillary 
 asset; or
 (II) fails to diligently prosecute 
 the action; and
 (B) shall be brought not later than 2 years after 
 the date that profit was realized.
 (f) Exemption From Disposition Restrictions.--The Commission shall 
adopt rules that provide for the following exemptions from, or waivers 
to, disposition restrictions described in subsection (c):
 (1) Material hardship exemption.--
 (A) In general.--Subject to subparagraph (B), the 
 Commission shall adopt rules and procedures to exempt 
 parties from related person restrictions with respect 
 to an ancillary asset where those restrictions conflict 
 with an obligation or requirement arising from one of 
 the following material hardships on a related person 
 with respect to the ancillary asset or the ancillary 
 asset originator:
 (i) The death of the related person.
 (ii) The bankruptcy or insolvency of the 
 related person.
 (iii) The dissolution, merger, or 
 acquisition of a corporate person.
 (iv) Tax liability relating to the receipt 
 of the applicable ancillary asset.
 (v) Such other material hardships as may be 
 designated by the Commission.
 (B) Requirements.--The rules and procedures adopted 
 under subparagraph (A) shall be designed to mitigate 
 the risk that parties may seek to structure holdings to 
 evade resale restrictions and exempt or waive the 
 application of resale restrictions only to the extent 
 necessary to address the identified material hardship.
 (2) Liquidity provision exemption.--The Commission shall 
 adopt rules to exempt from disposition restrictions parties 
 buying or selling an ancillary asset through regular two-sided 
 bidding and offering for the purposes of providing market 
 liquidity, provided that such activities are not undertaken for 
 the purpose of evading the requirements of this section.
 (3) Agency exemption.--The Commission shall adopt rules 
 that exempt a party acting as a custodian, trading platform, 
 broker, dealer or other agent from being treated as the owner 
 of customer or client assets or from being restricted in 
 facilitating sales on behalf of a customer or client if the 
 agent is otherwise determined to be a related person.
 (4) Exchange-traded product and passive fund exemption.--
 The Commission shall adopt rules to exempt from disposition 
 restrictions, as appropriate--
 (A) exchange-traded products, the shares of which 
 are created and redeemed by authorized participants and 
 registered with the Commission; and
 (B) passive pooled investment vehicles, whether or 
 not the shares of which are registered with the 
 Commission.
 (g) Related Person Disclosure Requirements.--The Commission shall 
adopt rules that provide for reporting to the Commission certain 
information with respect to ancillary asset holdings or transactions 
relating to ancillary assets by related persons, subject to the 
disposition restrictions provided in subsection (c):
 (1) Disclosure reports.--
 (A) Disclosure of related person status.--Any 
 person, or group of persons under common control, 
 directly or indirectly, that acquire beneficial 
 ownership of 10 percent or more of the total amount of 
 outstanding units of any such ancillary asset, measured 
 as of the end of any calendar quarter, shall furnish 
 initial and continuing reports as determined by the 
 Commission.
 (B) Sales of covered tokens by related person prior 
 to certification of non-control.--Quarterly reports 
 relating to the number of ancillary assets sold by a 
 related person in a form as required by the Commission.
 (C) Sales of covered tokens by related person after 
 certification of non-control.--Quarterly reports 
 relating to the number of ancillary assets sold by a 
 related person that holds, at any point during the 
 applicable calendar quarter, in excess of 5 percent of 
 the total amount of outstanding units of such ancillary 
 asset in a form as required by the Commission.
 (D) Sales of pre-existing covered tokens by related 
 person.--Quarterly reports relating to the number of 
 ancillary assets sold by a related person that holds in 
 excess of 5 percent of the total amount of outstanding 
 units of such ancillary asset in a form as required by 
 the Commission.
 (2) Confidential treatment.--The Commission may provide for 
 confidential treatment of information provided under this 
 subsection, or may exempt certain related persons from the 
 requirement to furnish a report required under this subsection, 
 pursuant to procedures the Commission shall establish and that 
 are modeled on or identical to section 230.406 of title 17, 
 Code of Federal Regulations, or any successor regulation.
 (3) Good-faith furnishing standard.--
 (A) In general.--Any obligation to furnish 
 information under this section applies only to the 
 furnisher acting on its own behalf and is limited to 
 information that is material and known, or reasonably 
 knowable after due inquiry, to that furnisher.
 (B) Reliance.--A furnisher described in 
 subparagraph (A) may reasonably rely on public sources 
 and third-party attestations where appropriate.
 (C) Liability.--Furnishing in good faith pursuant 
 to this section shall not create liability for 
 information outside the furnisher's possession, 
 custody, or control, or for omissions of information 
 the furnisher could not reasonably obtain without 
 breaching legal privilege, contractual confidentiality, 
 or other applicable law.
 (D) Other persons.--Any person other than the 
 furnisher may, in good faith and absent knowledge to 
 the contrary, presume that a report required under 
 paragraph (1) has been timely furnished.
 (4) Life cycle event considerations.--The Commission shall 
 adopt rules establishing streamlined processes for the 
 following life cycle events:
 (A) Successor disclosures in corporate 
 transactions.--The transfer of disclosure obligations 
 under this section to a successor entity in the event 
 of a merger, acquisition, or sale of substantially all 
 assets relating to the ancillary asset activities, 
 including a notice of succession.
 (B) Cessation of work.--The cessation or suspension 
 of ongoing disclosure obligations under this section 
 where the ancillary asset originator or related person 
 no longer engages, and does not reasonably expect to 
 engage, in entrepreneurial or managerial efforts with 
 respect to the ancillary asset or its associated 
 distributed ledger system, including a notice of 
 cessation of work.
 (C) Contractual termination.--The termination of 
 disclosure obligations under this section that attach 
 solely by virtue of a person's status as a related 
 person when a contractual arrangement with the 
 ancillary asset originator or distributed ledger system 
 has concluded, including a notice of cessation of 
 contractual relationship.
 (h) Rule of Construction.--Nothing in this section may be construed 
to--
 (1) limit or impair the anti-fraud or anti-manipulation 
 authorities of the Commission; or
 (2) preclude reliance on Regulation Crypto, as adopted 
 under section 103, or any other effective registration 
 statement or exemption from registration under the Securities 
 Act of 1933 (15 U.S.C. 77a et seq.), as amended by this Act.

(a) In General.--Not later than 1 year after the date of enactment 
of this Act, the Commission shall adopt rules that provide that--
 (1) a network token shall not be considered as providing a 
 disqualifying financial right under section 4B(a)(7)(B) of the 
 Securities Act of 1933, as added by this Act, if the market 
 value of the network token is primarily derived, or is 
 reasonably expected to be primarily derived, from a distributed 
 ledger system or from the broader adoption and use of such a 
 system, including where--
 (A) the mechanisms of the distributed ledger system 
 collect, receive, accrue, or distribute consideration 
 from the functioning of the distributed ledger system;
 (B) the network token provides governance 
 capabilities with respect to a distributed ledger 
 system or a decentralized governance system;
 (C) the value of the network token appreciates or 
 depreciates due to the use of, or in response to the 
 efforts, operations, or financial performance of, the 
 distributed ledger system to which the network token 
 relates or its decentralized governance system; or
 (D) for a network token that meets the definition 
 of an ancillary asset, the value of the network token 
 appreciates or depreciates due to the efforts of the 
 ancillary asset originator or related person; and
 (2) participants in offers or sales of network tokens 
 providing financial interests described in paragraph (1) shall 
 not be precluded from relying on the exemption from 
 registration under section 4B(b) of the Securities Act of 1933, 
 as added by this Act.
 (b) Effect of Rulings and Actions Before Date of Enactment.--
 (1) In general.--If, before the date of enactment of this 
 Act, a court of the United States, in a non-appealable final 
 judgment, found that a digital asset transaction was not an 
 offer, sale, or distribution of a security, a digital asset 
 transferred pursuant to that offer, sale, or distribution shall 
 not be considered to be a security under any provision of law 
 described in subsection (b)(2) of section 4B of the Securities 
 Act of 1933, as added by this Act.
 (2) Network tokens.--A network token shall not be 
 considered to be an ancillary asset, and shall not be 
 considered to be a security under any provision of law 
 described in subsection (b)(2) of section 4B of the Securities 
 Act of 1933, as added by this Act, if, on January 1, 2026, any 
 units of that network token were the principal asset of an 
 exchange-traded product--
 (A) not registered under the Investment Company Act 
 of 1940 (15 U.S.C. 80a-1 et seq.); and
 (B) the shares of which are listed and traded on a 
 national securities exchange registered under section 6 
 of the Securities Exchange Act of 1934 (15 U.S.C. 78f).

(a) Continued Applicability.--Nothing in this Act, or any amendment 
made by this Act, may be construed to amend, limit, impair, or 
otherwise affect the authority of the Commission to grant an exemption 
pursuant to any provision of law that is in effect on the day before 
the date of enactment of this Act, including pursuant to any of the 
following:
 (1) Section 28 of the Securities Act of 1933 (15 U.S.C. 
 77z-3).
 (2) Section 36 of the Securities Exchange Act of 1934 (15 
 U.S.C. 78mm).
 (3) Section 6(c) of the Investment Company Act of 1940 (15 
 U.S.C. 80a-6(c)).
 (4) Section 206A of the Investment Advisers Act of 1940 (15 
 U.S.C. 80b-6a).
 (5) Section 304(d) of the Trust Indenture Act of 1939 (15 
 U.S.C. 77ddd(d)).
 (6) Section 4(g) of the Securities Investor Protection Act 
 of 1970 (15 U.S.C. 78ddd(g)).
 (b) General Exemptive Authority.--Section 28 of the Securities Act 
of 1933 (15 U.S.C. 77z-3) is amended, in the matter preceding the 
matter relating to Schedule A--
 (1) by striking "by rule or regulation" and inserting 
 "by rule, regulation, or order"; and
 (2) by adding at the end the following: "The Commission 
 shall, by rule or regulation, determine the procedures under 
 which an exemptive order under this section shall be granted 
 and may, in the sole discretion of the Commission, decline to 
 entertain any application for an order of exemption under this 
 section.".

The Commission shall adopt rules to modernize the recordkeeping 
requirements under the Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.), the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
seq.), and the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
seq.), including to facilitate the utilization of distributed ledger 
records.

ACTIVITIES.

 (a) Tailoring of Existing Requirements.--The Commission shall--
 (1) amend, rescind, replace, or supplement by rule, order, 
 guidance, exemptive relief, or any other appropriate action 
 (provided such action is consistent with chapter 5 of title 5, 
 United States Code, and other applicable law) each regulation, 
 form, interpretive statement, or other requirement within the 
 jurisdiction of the Commission that is not otherwise amended by 
 this Act (or required to be amended because of a provision of 
 this Act or an amendment made by this Act), to the extent that 
 such provision applies to any digital asset activity, including 
 any activity 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.

(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.

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.".

(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.

(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.

(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.

(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.

(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.

(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.".

(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.

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).

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.

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.".

(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.

(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.

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.

(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.

(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.

(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.

(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).

(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.

(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.

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.

(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.

(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.

(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.

(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.

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.

(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)).

(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.

(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 
 elements, if any, that those agencies could publish or 
 adopt to support the interoperability described in 
 subparagraph (C) in order to ensure consistency and 
 regulatory access;
 (2) recommends pilot programs, guidance, rule changes, or 
 amendments to statutes that would be needed to implement 
 effective automated regulatory compliance approaches and any 
 other related approaches addressed in the study;
 (3) identifies the costs and benefits to issuers of 
 different sizes, secondary market intermediaries, regulators, 
 investors, and other applicable parties, including differential 
 impacts on smaller entities and options to reduce those 
 burdens;
 (4) benchmarks international efforts with respect to 
 automated regulatory compliance mechanisms and consults with 
 any appropriate State, Federal, or foreign regulators; and
 (5) evaluates whether existing (as of the day before the 
 date of enactment of this Act) oversight, enforcement, and 
 liability frameworks are sufficient to--
 (A) ensure accountability, transparency, fairness, 
 and consumer protection; and
 (B) prevent misuse of distributed ledger-based 
 compliance tools.
 (c) Report.--Not later than 1 year after the date of enactment of 
this Act, the Comptroller General of the United States shall make 
publicly available a report that includes the results of the study 
conducted under subsection (b).

(a) Definitions.--In this section:
 (1) Appropriate committees of congress.--The term 
 "appropriate committees of Congress" 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) Federal financial regulator.--The term "Federal 
 financial regulator" means--
 (A) the Board of Governors of the Federal Reserve 
 System;
 (B) the Commodity Futures Trading Commission;
 (C) the Department of the Treasury;
 (D) the Federal Deposit Insurance Corporation;
 (E) the Federal Housing Finance Agency;
 (F) the National Credit Union Administration;
 (G) the Office of the Comptroller of the Currency;
 (H) the Bureau of Consumer Financial Protection; 
 and
 (I) the Commission.
 (b) Requirement.--Not later than 1 year after the date of enactment 
of this Act, and every 3 years thereafter for a total of not fewer than 
12 years after the date of enactment of this Act, each Federal 
financial regulator shall submit to the appropriate committees of 
Congress a report that includes--
 (1) a description of the implementation of this Act and the 
 amendments made by this Act (including the adoption of rules 
 and guidance, and the approval or rejection of applications 
 submitted, under this Act and the amendments made by this Act), 
 where applicable to the Federal financial regulator; and
 (2) any legislative recommendations for the further 
 effective implementation of this Act and the amendments made by 
 this Act.

(a) Definitions.--In this section:
 (1) Tokenization.--The term "tokenization" means the 
 process of creating a digital representation of all rights, 
 obligations, or interests in a tangible or intangible asset on 
 a distributed ledger or comparable technology.
 (2) Tokenized.--The term "tokenized", with respect to an 
 asset, means that the asset has undergone tokenization.
 (b) Sense of Congress.--It is the sense of Congress that States 
should promptly consider and adopt commercial law frameworks under the 
Uniform Commercial Code that provide clear and uniform rules for the 
ownership, control, and enforceability of rights relating to digital 
assets.
 (c) Study.--Not later than 360 days after the date of enactment of 
this Act, the Commission shall conduct a comprehensive study of the 
regulatory treatment of tokenized securities, including custody 
standards, interagency coordination, cross-border coordination, and 
consumer protection.
 (d) Parity in Regulatory Treatment.--
 (1) In general.--Subject to paragraph (2), a tokenized 
 security shall be treated, for all regulatory purposes, as the 
 security that the tokenized security represents, except as 
 otherwise provided by--
 (A) section 106(a); or
 (B) a rule, regulation, or order issued by the 
 Commission.
 (2) Requirement.--A rule, regulation, or order described in 
 paragraph (1)(B) may only be issued by the Commission to adapt 
 the manner in which the applicable regulatory requirements are 
 satisfied, to the extent necessary or appropriate--
 (A) in light of the unique technological or other 
 characteristics of digital assets or substantially 
 similar technology; and
 (B) consistent with--
 (i) what is necessary or appropriate in the 
 public interest; and
 (ii) protecting investors, maintaining 
 fair, orderly, and efficient markets, and 
 facilitating capital formation.
 (e) Prohibition on Misrepresentation.--Any statement or omission 
with respect to any material fact that is made by a person in 
connection with the offer, sale, or other representation regarding a 
tokenized security shall be subject to the securities laws, including 
applicable anti-fraud or anti-manipulation provisions under the 
securities laws.
 (f) Agency Action for Tokenized Securities.--
 (1) In general.--The Commission may issue rules governing 
 tokenized securities pursuant to the requirements of this 
 section.
 (2) Requirements.--Rules issued under this subsection may 
 address, consistent with sections 106 and 107, how requirements 
 applicable to an underlying security apply to custody, books 
 and records, reconciliation with transfer agents or other 
 recordkeepers, auditability, settlement finality, treatment of 
 chain reorganizations, and other operational risks arising from 
 the use of distributed ledger technology or comparable 
 technology.
 (g) Rule of Construction Regarding Enforcement.--Nothing in this 
section may be construed to prevent the Commission from enforcing the 
anti-fraud and anti-manipulation provisions of the securities laws, and 
the rules issued under the securities laws, with respect to tokenized 
securities, provided that the elements of those provisions are 
satisfied.
 (h) Savings Clauses.--
 (1) Tokenized security.--Any asset that is a security under 
 the securities laws shall not cease to be a security solely 
 because the asset is issued, recorded, represented, or 
 transferred using distributed ledger technology or comparable 
 technology.
 (2) Effect on state law.--Nothing in this section may be 
 construed, interpreted, or applied in a manner that preempts, 
 supersedes, invalidates, or otherwise affects any State 
 property transfer rules, laws, regulations, or common law 
 principles relating to the transfer or recording of real 
 tangible or intangible assets or interests therein.
 (3) Rulemakings, orders, and other actions.--
 Notwithstanding any other provision of this section, section 
 106 shall apply to any rulemaking, order, or other action of 
 the Commission under this section.
 (4) No limit of ability to offer or sell.--Nothing in this 
 section, or any rule, regulation, or order promulgated under 
 this section, may be construed to limit the ability of any 
 person to offer or sell any tokenized security, consistent with 
 the securities laws.

TECHNOLOGY POST-QUANTUM CRYPTOGRAPHY STANDARDS.

 (a) 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 Commerce, Science, and 
 Transportation 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 Committee on Energy and Commerce of the 
 House of Representatives.
 (2) Director.--The term "Director" means the Under 
 Secretary of Commerce for Standards and Technology.
 (b) Findings.--Congress finds the following:
 (1) Technical standards with respect to digital assets 
 ensure quality, interoperability, and reliability in products, 
 processes, and services and facilitate innovation.
 (2) The digital asset ecosystem should harness standards to 
 solve coordination problems and foster innovation, not through 
 regulation, but through voluntary, market-driven measures.
 (3) Advances in quantum computing threaten existing (as of 
 the day before the date of enactment of this Act) cryptographic 
 standards and the security of digital assets.
 (c) Voluntary Adoption.--The Director, in consultation with the 
Secretary of Homeland Security and the heads of sector risk management 
agencies, as appropriate, shall promote the voluntary adoption and 
deployment of post-quantum cryptography standards, including by--
 (1) disseminating and making publicly available guidance 
 and resources to help organizations adopt and deploy those 
 standards;
 (2) providing technical assistance, as practicable, to 
 entities that are at high risk of quantum cryptography analytic 
 attacks, such as entities determined to be critical 
 infrastructure or digital infrastructure providers; and
 (3) conducting such other activities determined necessary 
 by the Director to promote the adoption and deployment of those 
 standards across the United States.
 (d) Industry Consultation.--In implementing subsection (c), the 
Director shall, at a minimum--
 (1) solicit regular input from a broad range of industry 
 stakeholders regarding the feasibility and practical challenges 
 of adopting the standards described in that subsection;
 (2) facilitate ongoing dialogue between the National 
 Institute of Standards and Technology and industry participants 
 to identify, assess, and address barriers to the adoption of 
 the standards described in that subsection;
 (3) not later than 2 years after the date of enactment of 
 this Act, and biennially thereafter until 2035, submit to the 
 appropriate congressional committees a report on the 
 implementation of that subsection, including stakeholder 
 engagement with respect to those actions and continued 
 challenges in adopting the standards described in that 
 subsection; and
 (4) not later than 5 years after the date of enactment of 
 this Act, make available to the public a report on stakeholder 
 engagement and lessons learned in implementing that subsection.

FINANCE.

 (a) Definition.--In this section, the term "Strategy" means the 
National Strategy to Combat International Digital Asset Illicit Finance 
submitted under subsection (d).
 (b) Interagency Initiative.--The Secretary of the Treasury, in 
coordination with the Secretary of State, the Attorney General, the 
Secretary of Homeland Security, and the heads of such other Federal 
departments and agencies as the President may designate, shall lead an 
interagency initiative to strengthen international cooperation to 
prevent the misuse of digital assets for illicit finance, sanctions 
evasion, terrorist financing, or other national-security threats.
 (c) Objectives.--The initiative established under subsection (b) 
shall--
 (1) engage foreign counterparts, including finance 
 ministries, central banks, and financial intelligence units, to 
 promote anti-money-laundering, sanctions evasion, and counter-
 terrorist financing standards applicable to digital asset 
 activities, consistent with United States standards and the 
 framework established under the Strategy;
 (2) encourage the adoption and enforcement of effective 
 regulatory and supervisory frameworks for digital asset service 
 providers to ensure transparency and prevent illicit use;
 (3) identify and prioritize jurisdictions of concern that 
 present significant risk of facilitating illicit digital asset 
 activity and develop coordinated diplomatic, economic, and law 
 enforcement strategies to address those risks;
 (4) support technical assistance and capacity-building 
 programs for partner jurisdictions to enhance anti-money 
 laundering, sanctions evasion, and counter-terrorist financing 
 supervision, enforcement, and information sharing relating to 
 digital assets; and
 (5) report annually to Congress on progress made toward the 
 objectives described in paragraphs (1) through (4), including a 
 list of cooperative and non-cooperative jurisdictions and any 
 recommendations for additional actions or sanctions.
 (d) National Strategy to Combat International Digital Asset Illicit 
Finance.--Not later than 270 days after the date of enactment of this 
Act, the Secretary of the Treasury, in coordination with the Secretary 
of State, the Attorney General, and the Director of National 
Intelligence, shall submit to the Committee on Banking, Housing, and 
Urban Affairs, the Committee on Foreign Relations, and the Committee on 
Homeland Security and Governmental Affairs of the Senate, and the 
Committee on Financial Services, the Committee on Foreign Affairs, and 
the Committee on Homeland Security of the House of Representatives a 
National Strategy to Combat International Digital Asset Illicit 
Finance, which shall--
 (1) assess global vulnerabilities with respect to the 
 digital assets framework set out in the Strategy;
 (2) set measurable goals and timelines for multilateral 
 engagement with respect to digital assets;
 (3) recommend resource and staffing requirements for 
 Treasury attaches, financial intelligence liaisons, and other 
 personnel necessary to implement the Strategy; and
 (4) identify standards for combating money laundering, 
 sanctions evasion, and terrorist financing with respect to 
 digital asset activities applicable to foreign jurisdictions, 
 which shall be informed by United States law, regulation, and 
 supervisory standards, including standards relating to--
 (A) anti-money laundering and countering the 
 financing of terrorism laws and regulations that 
 identify, prioritize, and mitigate illicit finance 
 threats, including preventive measures for financial 
 institutions and other entities covered by those laws 
 and regulations, including measures relating to 
 customer due diligence, recordkeeping, internal 
 controls, and the reporting of suspicious transactions;
 (B) money laundering offenses, asset seizure, and 
 confiscation to recover proceeds of crime;
 (C) terrorist financing and proliferation-financing 
 offenses and related targeted financial sanctions; and
 (D) regulation, supervision, and enforcement by 
 competent authorities, including financial 
 intelligence, law enforcement, and sanctions measures.

COMPLIANCE WITH UNITED STATES STANDARDS AND REMEDIATION 
 ACTIONS.

 (a) In General.--Not later than 1 year after the date of enactment 
of this Act, and annually thereafter for a period of 4 years, 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--
 (1) lists the top 20 foreign jurisdictions by volume of 
 digital asset trading activity on foreign digital asset service 
 providers during the calendar year immediately preceding the 
 year of the report;
 (2) assesses the degree to which each foreign jurisdiction 
 listed under paragraph (1) has implemented anti-money 
 laundering, sanctions evasion, and counter-terrorist financing 
 laws, regulations, or standards applicable to digital asset 
 activities consistent with the standards and framework 
 identified under the National Strategy to Combat International 
 Digital Asset Illicit Finance submitted under section 507; and
 (3) identifies foreign jurisdictions with--
 (A) material deficiencies in the implementation or 
 enforcement of the standards described in paragraph 
 (2); and
 (B) trading volumes that present systemic illicit 
 finance risk to the United States.
 (b) Form.--Each report required under subsection (a) shall be 
submitted in unclassified form, but may include a classified annex, as 
appropriate.
 (c) Remediation and Engagement Report.--For each foreign 
jurisdiction identified pursuant to subsection (a)(3), the Secretary of 
the Treasury shall include in the applicable report--
 (1) a description of bilateral diplomatic, regulatory, or 
 law enforcement engagements undertaken during the calendar year 
 immediately preceding the year in which the report is submitted 
 to remedy the deficiencies of the foreign jurisdiction;
 (2) a summary of actions taken by the United States 
 individually, or in conjunction with any applicable 
 international body, to identify high-risk or non-cooperative 
 jurisdictions with respect to digital asset illicit finance, 
 including public statements identifying those jurisdictions and 
 measures to support their remediation;
 (3) any commitments obtained from the foreign jurisdiction 
 to address identified deficiencies, including timeliness and 
 benchmarks; and
 (4) an assessment of progress made toward full 
 implementation of the standards identified under the National 
 Strategy to Combat International Digital Asset Illicit Finance 
 submitted under section 507.

(a) Definitions.--
 (1) AI test project.--The term "AI test project" means a 
 financial product, service, or activity--
 (A) that makes substantial use of artificial 
 intelligence;
 (B) that is, or may be, subject to a Federal 
 regulation or Federal statute; and
 (C) for which a regulated entity submits an 
 application for the waiver or modification of an 
 applicable regulation subject to an alternative 
 compliance strategy.
 (2) Appropriate financial regulatory agency.--The term 
 "appropriate financial regulatory agency" means--
 (A) the appropriate Federal banking agency, as 
 defined in section 3 of the Federal Deposit Insurance 
 Act (12 U.S.C. 1813), with respect to an institution 
 described in subsection (q) of that section;
 (B) the Bureau of Consumer Financial Protection, 
 with respect to a covered person, as defined in section 
 1002 of the Consumer Financial Protection Act of 2010 
 (12 U.S.C. 5481), that does not have an appropriate 
 financial regulatory agency under subparagraph (A), 
 (C), or (D) of this paragraph;
 (C) the National Credit Union Administration, with 
 respect to an insured credit union, as defined in 
 section 101 of the Federal Credit Union Act (12 U.S.C. 
 1752); and
 (D) the Federal Housing Finance Agency, with 
 respect to--
 (i) a Federal Home Loan Bank;
 (ii) the Federal Home Loan Bank System;
 (iii) the Federal National Mortgage 
 Association; and
 (iv) the Federal Home Loan Mortgage 
 Corporation.
 (3) Artificial intelligence; ai.--The terms "artificial 
 intelligence" and "AI" have the meaning given the term 
 "artificial intelligence" in section 5002 of the National 
 Artificial Intelligence Initiative Act of 2020 (15 U.S.C. 
 9401).
 (4) Financial product or service.--The term "financial 
 product or service"--
 (A) has the meaning given the term in section 1002 
 of the Consumer Financial Protection Act of 2010 (12 
 U.S.C. 5481);
 (B) includes--
 (i) activities that are financial in 
 nature, as defined in section 4(k)(4) of the 
 Bank Holding Company Act of 1956 (12 U.S.C. 
 1843(k)(4)); and
 (ii) any financial product or service 
 provided by a person regulated by the 
 Commission, as defined in section 1002 of the 
 Consumer Financial Protection Act of 2010 (12 
 U.S.C. 5481); and
 (C) does not include the business of insurance.
 (5) Financial regulatory agency.--The term "financial 
 regulatory agency" means--
 (A) the Board of Governors of the Federal Reserve 
 System;
 (B) the Federal Deposit Insurance Corporation;
 (C) the Office of the Comptroller of the Currency;
 (D) the Bureau of Consumer Financial Protection;
 (E) the National Credit Union Administration; and
 (F) the Federal Housing Finance Agency.
 (6) Regulated entity.--The term "regulated entity" means 
 an entity regulated by any financial regulatory agency.
 (b) Use of Artificial Intelligence by Regulated Financial 
Entities.--
 (1) AI innovation labs.--
 (A) Establishment.--Each financial regulatory 
 agency shall establish, or identify an office, 
 division, or department of the agency that shall serve 
 as, an AI Innovation Lab to enable regulated entities 
 to experiment with AI test projects without unnecessary 
 or unduly burdensome regulation or expectation of 
 enforcement actions, pursuant to the approval of an 
 application under subparagraph (B).
 (B) Applications.--
 (i) Submission.--
 (I) In general.--On and after the 
 date that is 1 year after the date of 
 enactment of this Act, a regulated 
 entity may submit to the appropriate 
 financial regulatory agency an 
 application, on a form determined by 
 the appropriate financial regulatory 
 agency, to engage in an AI test project 
 through the AI Innovation Lab 
 established or identified under 
 subparagraph (A).
 (II) Contents.--An application 
 submitted under subclause (I) shall 
 include--
 (aa) a description of the 
 AI test project proposed to be 
 carried out by the regulated 
 entity;
 (bb) an alternative 
 compliance strategy that--

 (AA) identifies a 
 regulation issued by 
 the appropriate 
 financial regulatory 
 agency that the 
 regulated entity 
 requests be waived or 
 modified; and

 (BB) proposes an 
 alternative method for 
 the regulated entity to 
 comply with the 
 regulation, including 
 an explanation as to 
 why the alternative 
 method is essential to 
 the operation of the 
 entity and how the 
 regulated entity would 
 effectively manage 
 risks associated with 
 the AI test project;

 (cc) an explanation of how 
 under the strategy described in 
 item (aa), the AI test 
 project--

 (AA) would serve 
 the public interest, 
 improve consumer or 
 investor access to a 
 financial product or 
 service, or promote 
 consumer or investor 
 protection;

 (BB) would enhance 
 efficiency or 
 operations, foster 
 innovation or 
 competitiveness, 
 improve risk management 
 and security, or 
 enhance regulatory 
 compliance;

 (CC) would not 
 present a systemic risk 
 to the financial system 
 of the United States;

 (DD) is consistent 
 with the purposes of 
 the anti-money 
 laundering and 
 countering the 
 financing of terrorism 
 obligations under 
 subchapter II of 
 chapter 53 of title 31, 
 United States Code; and

 (EE) would not 
 present a national 
 security risk to the 
 United States;

 (dd) a proposed date on 
 which the AI test project would 
 terminate and an explanation as 
 to why such termination date 
 would be appropriate;
 (ee) proposed limitations 
 on the size, scope, and growth 
 of the AI test project;
 (ff) a detailed business 
 plan; and
 (gg) an estimate of the 
 economic impact of the AI test 
 project if approved.
 (III) Joint applications.--Two or 
 more regulated entities may submit a 
 joint application to the same financial 
 regulatory agency under subclause (I).
 (IV) Regulations of other 
 agencies.--
 (aa) In general.--A 
 regulated entity may submit an 
 application under this 
 subparagraph that includes an 
 alternative compliance strategy 
 for a regulation issued or 
 enforced by a financial 
 regulatory agency that is not 
 the appropriate financial 
 regulatory agency for the 
 regulated entity.
 (bb) Requirements.--An 
 application described in item 
 (aa) shall be subject to the 
 same requirements as an 
 application described in 
 subclause (II), except that--

 (AA) the regulated 
 entity shall submit the 
 application to the 
 appropriate financial 
 regulatory agency and 
 the financial 
 regulatory agency that 
 issued or enforces the 
 regulation that is the 
 subject of the 
 alternative compliance 
 strategy; and

 (BB) the AI test 
 project may not take 
 effect unless the 
 appropriate financial 
 regulatory agency and 
 any other financial 
 regulatory agency that 
 issued or enforces the 
 regulation that is the 
 subject of the 
 alternative compliance 
 strategy jointly 
 approve the application 
 using the process 
 described in clause 
 (ii).

 (V) Notice.--A regulated entity 
 that is regulated or supervised by more 
 than 1 financial regulatory agency 
 shall provide notice of any application 
 submitted to the appropriate financial 
 regulatory agency under this section to 
 each financial regulatory agency by 
 which it is regulated or supervised not 
 later than 5 business days after the 
 entity submits the application to the 
 appropriate financial regulatory 
 agency.
 (ii) Agency review.--
 (I) In general.--Except as provided 
 in subclause (IV), not later than 120 
 days after the date on which an 
 application is submitted to the 
 appropriate financial regulatory agency 
 under clause (i), the appropriate 
 financial regulatory agency shall--
 (aa) review the 
 application; and
 (bb) submit to the 
 applicant in writing a 
 determination of the agency.
 (II) Approval.--
 (aa) In general.--If the 
 applicant shows that it is more 
 likely than not that the 
 application meets the 
 requirements for establishing 
 an alternative compliance 
 strategy and satisfies the 
 standards described in items 
 (bb) and (cc) of clause 
 (i)(II), the agency shall 
 approve the application and 
 notify the applicant in writing 
 of--

 (AA) the regulation 
 that is the subject of 
 the alternative 
 compliance strategy;

 (BB) the terms of 
 the alternative 
 compliance strategy for 
 the AI test project;

 (CC) the date on 
 which the AI test 
 project will terminate;

 (DD) any 
 limitations on the 
 size, scope, or growth 
 of the AI test project; 
 and

 (EE) any additional 
 limitations or 
 conditions on the AI 
 test project, as 
 determined by the 
 appropriate financial 
 regulatory agency.

 (bb) Effect of approval.--
 With respect to an AI test 
 project, except as provided in 
 item (cc), beginning on the 
 date on which an application 
 submitted under clause (i) is 
 approved and ending on the date 
 described in item (aa)(CC)--

 (AA) the 
 appropriate financial 
 regulatory agency may 
 enforce a regulation 
 described in item 
 (aa)(AA) only in the 
 manner set out in the 
 alternative compliance 
 strategy described in 
 item (aa)(BB); and

 (BB) except as 
 provided in subclause 
 (III), a financial 
 regulatory agency that 
 is not the appropriate 
 financial regulatory 
 agency may not enforce 
 a regulation described 
 in item (aa)(AA).

 (cc) Enforcement by another 
 financial regulatory agency.--
 With respect to an AI test 
 project, a financial regulatory 
 agency other than the 
 appropriate financial 
 regulatory agency that approves 
 an application under clause 
 (i)(IV) may enforce a 
 regulation described in item 
 (aa)(AA) if the alternative 
 compliance strategy described 
 in item (aa)(BB) provides for 
 enforcement by such financial 
 regulatory agency.
 (dd) Rule of 
 construction.--Nothing in this 
 clause may be construed to 
 limit the authority of a 
 financial regulatory agency to 
 take an enforcement action 
 against a regulated entity with 
 respect to fraud or market 
 manipulation or for engaging in 
 an unsafe or unsound practice 
 relating to an AI test project.
 (III) Denial.--
 (aa) In general.--If an 
 agency denies an application 
 submitted under clause (i), the 
 agency--

 (AA) shall submit 
 to the applicant a 
 written notice 
 explaining the reason 
 for denial; and

 (BB) may not take 
 an enforcement action 
 related to the proposed 
 AI test project against 
 the applicant earlier 
 than the date that is 
 30 days after the date 
 on which the agency 
 submits the written 
 notice described in 
 subitem (AA).

 (bb) Resubmittals.--Each 
 time an application submitted 
 under clause (i) is denied, the 
 regulated entity--

 (AA) may submit an 
 amended application 
 after receiving 
 feedback from the 
 agency making such 
 denial; and

 (BB) may not 
 resubmit more than 2 
 applications that are 
 substantially similar 
 to the denied 
 application.

 (cc) Injunctive relief.--
 Notwithstanding item (aa)(BB), 
 a financial regulatory agency, 
 by and through its own 
 attorneys, may file a civil 
 action in an appropriate United 
 States district court to enjoin 
 an active AI test project if 
 the agency determines that the 
 AI test project presents an 
 immediate danger to consumers 
 or investors or presents a 
 risk--

 (AA) to financial 
 markets;

 (BB) in the case of 
 an AI test project 
 engaged in by an 
 insured depository 
 institution or an 
 insured credit union, 
 of loss to a Federal 
 deposit or share 
 insurance fund;

 (CC) of a violation 
 of anti-money 
 laundering and 
 countering the 
 financing of terrorism 
 obligations under 
 subchapter II of 
 chapter 53 of title 31, 
 United States Code; or

 (DD) to the 
 national security of 
 the United States.

 (IV) Extension.--If the financial 
 regulatory agency needs additional 
 time, the agency may extend the 
 approval deadline by 120 days. After 
 the expiration of the 120-day extension 
 period, if the agency has not made a 
 determination on the application, the 
 application will automatically be 
 deemed approved and effective.
 (V) Additional information.--Not 
 later than the initial or extended 
 approval deadline, as applicable, a 
 financial regulatory agency may request 
 additional information from the 
 applicant.
 (iii) Data security.--All data supplied by 
 sponsors of AI test projects to a financial 
 regulatory agency submitted under this section 
 shall be stored and maintained in a secure 
 manner by the financial regulatory agency, 
 consistent with applicable data security 
 standards.
 (iv) Regulations.--Not later than 180 days 
 after the date of enactment of this Act, each 
 financial regulatory agency shall promulgate 
 regulations that--
 (I) shall be published in the 
 Federal Register and provide a 60-day 
 period for public notice and comment;
 (II) include--
 (aa) procedures for 
 modifying the AI test projects 
 that are approved by the 
 agency;
 (bb) consequences for 
 failure to comply with the 
 terms of an alternative 
 compliance strategy;
 (cc) a requirement that an 
 AI test project will terminate 
 not earlier than 1 year after 
 the AI test project is 
 approved;
 (dd) procedures to extend 
 the termination date described 
 in item (cc);
 (ee) procedures for 
 confidentiality; and
 (ff) procedures for 
 coordinating decisions relating 
 to applications submitted 
 jointly by multiple regulated 
 entities or applications 
 submitted to more than one 
 financial regulatory agency.
 (2) Report.--Not later than 2 years after the date of 
 enactment of this Act, and each year for 7 years thereafter, 
 each financial regulatory agency 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 
 an annual report on the outcomes of AI test projects. A report 
 under this subsection may not include the names of 
 participating entities or any proprietary or confidential 
 business information. A report under this subsection shall 
 include aggregated findings, trends, and lessons learned from 
 the AI test projects.
 (3) Rule of construction.--Nothing in this section may be 
 construed to limit the authority of a financial regulatory 
 agency to take an enforcement action against a regulated entity 
 with respect to fraud or market manipulation relating to an AI 
 test project.

(a) Amendment to the Securities Act of 1933.--The Securities Act of 
1933 (15 U.S.C. 77a et seq.) is amended by inserting after section 27B 
(15 U.S.C. 77z-2a) the following:

"SEC. 27C. APPLICATION TO SOFTWARE DEVELOPERS.

 "(a) Distributed Ledger System Defined.--In this section, the term 
`distributed ledger system' has the meaning given the term in section 2 
of the Digital Asset Market Clarity Act.
 "(b) Application to Software Developers.--Notwithstanding any 
other provision of this Act, a person shall not be subject to this Act 
and the regulations promulgated under this Act solely based on the 
person engaging in any of the following activities, whether singly or 
in combination, in relation to the operation of a distributed ledger 
system or any component thereof:
 "(1) Compiling network transactions or relaying, 
 searching, sequencing, validating, or acting in a similar 
 capacity.
 "(2) Providing computational work, operating a node or 
 oracle service, or procuring, offering, or utilizing network 
 bandwidth, or providing other similar incidental services.".
 (b) Amendment to the Securities Exchange Act of 1934.--The 
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by 
inserting after section 15G (15 U.S.C. 78o-11) the following:

"SEC. 15H. APPLICATION TO SOFTWARE DEVELOPERS.

 "(a) Definitions.--In this section:
 "(1) Constitute.--The term `constitute' means to compile, 
 assemble, integrate, or otherwise combine software components 
 into a complete software system.
 "(2) Decentralized finance trading protocol.--
 "(A) In general.--The term `decentralized finance 
 trading protocol' means a distributed ledger system 
 through which multiple participants can execute a 
 financial transaction--
 "(i) in accordance with an automated rule 
 or algorithm that is predetermined and non-
 discretionary; and
 "(ii) without reliance on a person other 
 than the user to maintain custody or control of 
 the digital assets subject to the financial 
 transaction.
 "(B) Exclusions.--
 "(i) In general.--The term `decentralized 
 finance trading protocol' does not include a 
 distributed ledger system if--
 "(I) a person or group of persons 
 under common control or acting pursuant 
 to an agreement 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 
 distributed ledger system;
 "(II) the distributed ledger 
 system 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; or
 "(III) a person or group of 
 persons under common control has the 
 unilateral authority, via operation of 
 the distributed ledger system, to 
 restrict, censor, or prohibit the use 
 of the distributed ledger system, 
 including any applicable system-based 
 user activity.
 "(ii) Special rule.--For purposes of 
 clause (i), a 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 to act in concert.
 "(3) Deploy.--The term `deploy' means to bring software or 
 hardware onto a distributed ledger system for active use.
 "(4) Digital asset; distributed ledger application; 
 distributed ledger system; distributed ledger protocol; 
 decentralized governance system; smart contract.--The terms 
 `digital asset', `distributed ledger application', `distributed 
 ledger system', `distributed ledger protocol', `decentralized 
 governance system', and `smart contract' have the meanings 
 given those terms in section 2 of the Digital Asset Market 
 Clarity Act.
 "(5) Decentralized finance messaging system.--
 "(A) In general.--The term `decentralized finance 
 messaging system' means a software application that 
 provides a user with the ability to create or submit an 
 instruction, communication, or message to a 
 decentralized finance trading protocol.
 "(B) Additional requirements.--The term 
 `decentralized finance messaging system' does not 
 include any system that provides any person other than 
 the user with--
 "(i) control over the funds of the user; 
 or
 "(ii) the authority to execute any of the 
 transaction of the user.
 "(b) Application to Software Developers.--Notwithstanding any 
other provision of this Act, a person shall not be subject to this Act 
and the regulations promulgated under this Act solely based on the 
person engaging in any of the following activities, whether singly or 
in combination, in relation to the operation of a distributed ledger 
system or any component thereof:
 "(1) Compiling network transactions or relaying, 
 searching, sequencing, validating, or acting in a similar 
 capacity.
 "(2) Providing computational work, operating a node or 
 oracle service, or procuring, offering, or utilizing network 
 bandwidth, or providing other similar incidental services.
 "(3) Developing, publishing, or constituting--
 "(A) a distributed ledger system; or
 "(B) software or systems that create or utilize 
 hardware or software, including wallets or other 
 systems, that facilitate the ability of a user to keep, 
 safeguard, or have custody of the digital assets or 
 private keys of the user.
 "(c) Rule of Construction.--Subsection (b)(3) does not extend to 
any activity covered in any of the activities described in 
subparagraphs (A) through (D) of subsection (d)(1), including activity 
taken following deployment of such software or hardware.
 "(d) Clarification.--
 "(1) In general.--The Commission shall, pursuant to notice 
 and comment rulemaking, clarify the circumstances under which a 
 person shall not be subject to this Act by reason of engaging 
 solely in 1 or more of the following activities in relation to 
 the operation of a decentralized finance trading protocol or 
 any component thereof:
 "(A) Providing a user interface that enables a 
 user to read and access data.
 "(B) Administering, maintaining, or otherwise 
 distributing a decentralized governance system relating 
 to a decentralized finance trading protocol, or a 
 decentralized finance trading protocol.
 "(C) Administering, maintaining, or otherwise 
 distributing a decentralized finance messaging system 
 or operating or participating in a smart contract-based 
 liquidity pool in a decentralized finance trading 
 protocol.
 "(D) Administering, maintaining, or otherwise 
 distributing software or systems that create or deploy 
 hardware or software, including wallets or other 
 systems, that facilitate the ability of a user to keep, 
 safeguard, or maintain custody of the digital assets or 
 related private keys of the user.
 "(2) Considerations.--In providing the clarification under 
 paragraph (1) the Commission shall--
 "(A) ensure that the rules 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) provide that section 108(a) of the Lummis-
 Gillibrand Responsible Financial Innovation Act of 2026 
 shall apply to such rules;
 "(C) 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; and
 "(D) 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.
 "(3) Rule of construction.--Nothing in this subsection may 
 be construed to grant the Commission authority over persons, 
 systems, software, or activities that do not otherwise fall 
 within the jurisdiction of the Commission under this Act, or to 
 create a presumption that any such activity is subject to this 
 Act.
 "(e) Anti-Fraud, Anti-Manipulation, and False Reporting.--The 
determination that a person is not subject to this Act under 
subsections (b) and (d) shall not apply to the anti-fraud, anti-
manipulation, or false reporting enforcement authorities of the 
Commission.
 "(f) Rule of Construction.--Nothing in this Act or the rules and 
regulations promulgated under this Act may be construed to apply any 
requirement of the securities laws to a digital commodity, as defined 
in section 2 of the Digital Asset Market Clarity Act, or expand the 
authority of the Commission beyond that which the Commission had before 
the date of enactment of the Digital Asset Market Clarity Act to 
regulate the activities described in subsection (d)(1).
 "(g) Federal Preemption.--
 "(1) In general.--Notwithstanding any other provision of 
 law, no securities, commodities, or digital assets law of any 
 State (or of any political subdivision of a State) shall apply 
 to an activity described in subsection (b).
 "(2) Rule of construction.--Nothing in paragraph (1) may 
 be construed to apply to the anti-money laundering, anti-fraud, 
 or anti-manipulation authorities of a State (or of any 
 political subdivision of a State).".
 (c) Applicability.--This section, and the amendments made by this 
section, shall apply to conduct occurring before, on, or after the date 
of enactment of this Act.

(a) Definitions.--In this section:
 (1) Nonfungible token.--The term "nonfungible token" 
 means a digital asset recorded on a distributed ledger that--
 (A) is individually identifiable and 
 distinguishable from any other digital asset;
 (B) represents ownership of, or rights in, a work 
 of authorship, art, a collectible, a membership, an 
 access credential, a certificate of authenticity, an 
 in-game or in-application item, or another similar 
 specific item or discrete digital or physical good, 
 service, or benefit;
 (C) is not interchangeable on a 1-to-1 basis with 
 any other token or digital asset; and
 (D) may be bought, sold, or transferred for 
 consideration.
 (2) Promoter.--The term "promoter" means a person or 
 group that manages, controls, or operates an enterprise in 
 which capital is invested, or any person or group acting on 
 behalf of such a person or group with respect to such an 
 enterprise, including an affiliate, agent, or coordinated actor 
 that contributes to the capital raising efforts of the 
 enterprise.
 (b) Safe Harbor.--
 (1) In general.--Except as provided in paragraph (3), the 
 offer, sale, resale, transfer, or conveyance of a nonfungible 
 token shall not be deemed to constitute an offer, sale, or 
 distribution of a security or investment contract under the 
 Securities Act of 1933 (15 U.S.C. 77a et seq.), the Securities 
 Exchange Act of 1934 (15 U.S.C. 78a et seq.), or any equivalent 
 State law, unless the transaction, in substance, involves all 
 of the elements of an investment contract.
 (2) Rules of construction.--Neither of the following shall 
 be considered to be a security under the Securities Act of 1933 
 (15 U.S.C. 77a et seq.) or the Securities Exchange Act of 1934 
 (15 U.S.C. 78a et seq.):
 (A) The resale or secondary market transfer of a 
 nonfungible token, where the payment for that resale or 
 transfer does not flow to a promoter or is not used to 
 raise new capital for an enterprise.
 (B) A nonfungible token that serves as a 
 collectible, membership right, event ticket, access 
 credential, or other non-investment-based use case 
 solely because the nonfungible token may appreciate in 
 value or depend in part on the continued efforts or the 
 reputation of the creator or issuer of the nonfungible 
 token.
 (3) Exceptions.--The safe harbor under paragraph (1) shall 
 not apply to--
 (A) a mass-minted series of items with 
 substantially similar or nearly identical traits that 
 are marketed or sold interchangeably;
 (B) a fractionalized interest in a nonfungible 
 token; or
 (C) an interest representing a beneficial or 
 economic claim on a nonfungible token or an asset that 
 a nonfungible token represents.
 (4) Reliance; prospective effect.--
 (A) Reliance.--A person, other than an originator 
 or related person, that reasonably and in good faith 
 relies on the safe harbor under this subsection shall 
 not be subject to any civil or administrative 
 penalties.
 (B) Prospective effect.--Any determination by the 
 Commission that the safe harbor under this subsection 
 does not apply to a particular circumstance shall--
 (i) be prospective only; and
 (ii) take effect not earlier than 60 days 
 after the date on which the Commission publicly 
 posts that determination.

(a) Definition.--In this section, the term "nonfungible token" 
has the meaning given the term in section 602.
 (b) Study.--The Comptroller General of the United States shall 
carry out a study of nonfungible tokens that analyzes--
 (1) the nature, size, role, purpose, and use of nonfungible 
 tokens;
 (2) the similarities and differences between nonfungible 
 tokens and other digital commodities, including digital 
 commodities and payment stablecoins, and how the markets for 
 those digital commodities intersect;
 (3) how nonfungible tokens are minted by issuers and 
 subsequently distributed to purchasers;
 (4) how nonfungible tokens are stored after being purchased 
 by a consumer;
 (5) the interoperability of nonfungible tokens between 
 different distributed ledger systems;
 (6) the scalability of different nonfungible token 
 marketplaces;
 (7) the benefits of nonfungible tokens, including 
 verifiable digital ownership;
 (8) the risks of nonfungible tokens, including--
 (A) the infringement of intellectual property 
 rights;
 (B) cybersecurity risks; and
 (C) market risks;
 (9) whether and how nonfungible tokens have been, or could 
 be, integrated with traditional marketplaces, including 
 marketplaces for music, real estate, gaming, events, and 
 travel;
 (10) whether and how nonfungible tokens have been, or could 
 be, used to facilitate commerce or other activities through the 
 representation of documents, identification, contracts, 
 licenses, and other commercial, governmental, or personal 
 records;
 (11) any risks to traditional markets from the integration 
 described in paragraph (9); and
 (12) the levels and types of illicit activity in 
 nonfungible token markets.
 (c) Report.--Not later than 1 year after the date of enactment of 
this Act, the Comptroller General of the United States shall make 
publicly available a report that includes the results of the study 
required under subsection (b).

(a) Short Title.--This section may be cited as the "Blockchain 
Regulatory Certainty Act".
 (b) Definitions.--In this section:
 (1) Developer or provider.--The term "developer or 
 provider" means any person or business that creates or 
 publishes software to facilitate the creation of, or provide 
 maintenance to, a distributed ledger, or a service associated 
 with a distributed ledger.
 (2) Distributed ledger service.--The term "distributed 
 ledger service" means any information, transaction, or 
 computing service or system that provides or enables access to 
 a distributed ledger system by multiple users, including a 
 service or system that enables users to send, receive, 
 exchange, or store digital assets described by distributed 
 ledger systems.
 (3) Non-controlling developer or provider.--The term "non-
 controlling developer or provider" means a developer or 
 provider of a distributed ledger service that, in the regular 
 course of operations, does not have the legal right or the 
 unilateral and independent ability to control, initiate upon 
 demand, or effectuate transactions involving digital assets to 
 which users are entitled, without the approval, consent, or 
 direction of any third party.
 (c) Treatment.--Notwithstanding any other provision of law, a non-
controlling developer or provider--
 (1) shall not be treated as--
 (A) a money transmitting business, as defined in 
 section 5330 of title 31, United States Code, and the 
 regulations promulgated under that section; or
 (B) engaged in money transmitting, as defined in 
 section 1960 of title 18, United States Code; and
 (2) on or after the date of enactment of this Act, shall 
 not be otherwise subject to any registration requirement that 
 is substantially similar to a requirement (as in effect on the 
 day before the date of enactment of this Act) that applies to 
 an entity described in subparagraph (A) or (B) of paragraph 
 (1), solely on the basis of--
 (A) creating or publishing software to facilitate 
 the creation of, or providing maintenance services to, 
 a distributed ledger or a service associated with a 
 distributed ledger;
 (B) providing hardware or software to facilitate a 
 customer's own custody or safekeeping of the digital 
 assets of the customer; or
 (C) providing infrastructure support to maintain a 
 distributed ledger service.
 (d) Clarification of Treatment.--Subsection (c) shall not modify 
the application of section 1960(b)(1)(C) of title 18, United States 
Code, to any person (referred to in this subsection as the "initial 
person") that acts with the specific intent to transfer, on behalf of 
another person, funds that are known by the initial person to be--
 (1) derived from a criminal offense; or
 (2) intended to be used to promote or support unlawful 
 activity.
 (e) Rules of Construction.--Nothing in this section may be 
construed--
 (1) to affect whether a developer or provider of a 
 distributed ledger service is otherwise subject to 
 classification or treatment as a money transmitter, or as 
 engaged in money transmitting, under applicable Federal or 
 State law, including laws relating to anti-money laundering or 
 countering the financing of terrorism, based on conduct outside 
 the scope of subsection (c);
 (2) to affect whether a developer or provider is otherwise 
 subject to classification or treatment as a financial 
 institution under subchapter II of chapter 53 of title 31, 
 United States Code, this Act, any amendment made by this Act, 
 or any Act enacted after the date of enactment of this Act, 
 based on conduct outside the scope of subsection (c);
 (3) to limit or expand any law pertaining to intellectual 
 property;
 (4) to prevent any State from enforcing any State law that 
 is consistent with this section; or
 (5) to create a cause of action or impose liability under 
 any State or local law that is inconsistent with this section.

(a) Short Title.--This section may be cited as the "Keep Your 
Coins Act".
 (b) Definitions.--In this section:
 (1) Covered user.--The term "covered user" means a United 
 States individual who obtains digital assets to purchase goods 
 or services on behalf of that individual, without regard to the 
 method in which that individual obtained those digital assets.
 (2) 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.
 (c) Self-Custody.--A Federal agency may not prohibit, restrict, or 
otherwise impair the ability of a covered user to self-custody digital 
assets using a self-hosted wallet or other means to conduct 
transactions for any lawful purpose.
 (d) Rule of Construction.--Nothing in this section may be construed 
to limit the authority of the Secretary of the Treasury, the 
Commission, the Commodity Futures Trading Commission, the Board of 
Governors of the Federal Reserve System, the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation, or the National 
Credit Union Administration to carry out any enforcement action or 
special measure authorized under applicable law, including--
 (1) the Bank Secrecy Act, section 9714 of the Combating 
 Russian Money Laundering Act (31 U.S.C. 5318A note), and 
 section 7213A of the Fentanyl Sanctions Act (21 U.S.C. 2313a); 
 or
 (2) any other law relating to illicit finance, money 
 laundering, terrorism financing, or United States sanctions.

DIGITAL COMMODITIES IN BANKRUPTCY.

 (a) Definitions for Stockbroker Liquidation.--
 (1) In general.--Section 741 of title 11, United States 
 Code, is amended--
 (A) by redesignating paragraphs (5) through (9) as 
 paragraphs (7) through (11), respectively;
 (B) by redesignating paragraphs (1) through (4) as 
 paragraphs (2) through (5), respectively;
 (C) by inserting before paragraph (2), as so 
 redesignated, the following:
 "(1) `ancillary asset' has the meaning given that term in 
 section 2 of the Digital Asset Market Clarity Act;";
 (D) in paragraph (3), as so redesignated--
 (i) in subparagraph (A)(vi), by striking 
 "and" at the end;
 (ii) by redesignating subparagraph (B) as 
 subparagraph (C);
 (iii) by inserting after subparagraph (A) 
 the following:
 "(B) entity with whom a person deals as principal 
 or agent and that has a claim against such person on 
 account of a digital commodity or an ancillary asset 
 received, acquired, or held by such person from or for 
 the securities account or accounts of such entity for 1 
 or more of the purposes identified in clauses (i) 
 through (vi) of subparagraph (A) of this paragraph; 
 and"; and
 (iv) in subparagraph (C), as so 
 redesignated--
 (I) in clause (i)--
 (aa) by inserting ", 
 ancillary asset, or digital 
 commodity" after "security"; 
 and
 (bb) by inserting "or 
 (B)" after "subparagraph 
 (A)"; and
 (II) in clause (ii), by inserting 
 "an ancillary asset, a digital 
 commodity," after "a security,";
 (E) in paragraph (5), as so redesignated, in the 
 matter preceding subparagraph (A), by inserting 
 "ancillary asset, digital commodity," after "cash, 
 security," each place it appears;
 (F) by inserting after paragraph (5), as so 
 redesignated, the following:
 "(6) `digital commodity' has the meaning given that term 
 in section 2 of the Digital Asset Market Clarity Act;"; and
 (G) in paragraph (8), as so redesignated, in 
 subparagraph (A)(i), by inserting ", ancillary asset 
 positions, and digital commodities positions" after 
 "securities positions".
 (b) Extent of Customer Claims.--Section 746(b) of title 11, United 
States Code, is amended, in the matter preceding paragraph (1), by 
striking "cash or a security" and inserting "cash, a security, an 
ancillary asset, or a digital commodity".
 (c) Technical and Conforming Amendments.--
 (1) Section 546(e) of title 11, United States Code, is 
 amended--
 (A) by striking "section 741(7)" and inserting 
 "section 741"; and
 (B) by striking "section 761(4)" and inserting 
 "section 761".
 (2) Section 561(a) of title 11, United States Code, is 
 amended--
 (A) in paragraph (1), by striking "section 
 741(7)" and inserting "section 741"; and
 (B) in paragraph (2), by striking "section 
 761(4)" and inserting "section 761".
 (3) Section 752(c) of title 11, United States Code, is 
 amended by striking "section 741(4)(B)" and inserting 
 "section 741(5)(B)".
 (d) Clarifications.--For the avoidance of doubt--
 (1) nothing in this section or an amendment made by this 
 section may be construed to apply to securities or cash held by 
 a broker-dealer and such assets and related claims shall be 
 governed exclusively by the Securities Investor Protection Act 
 of 1970 (15 U.S.C. 78aaa et seq.);
 (2) nothing in this section or an amendment made by this 
 section may be construed to apply to deposits held by a bank or 
 commodity contracts, which shall be governed by the relevant 
 applicable law; and
 (3) in any liquidation proceeding under subchapter III or 
 IV of chapter 7 of title 11, United States Code, those 
 provisions shall be construed to treat ancillary assets and 
 digital commodities held for customers as customer property 
 governed by title 11, United States Code, and required to be 
 distributed according to such title.

(a) Definitions.--In this section:
 (1) Commodity broker; financial institution; financial 
 participant; securities clearing agency; stockbroker.--The 
 terms "commodity broker", "financial institution", 
 "financial participant", "securities clearing agency", and 
 "stockbroker" have the meanings given those terms in section 
 101 of title 11, United States Code.
 (2) Commodity contract.--The term "commodity contract" 
 means a commodity contract described in paragraph (4)(A) of 
 section 761 of title 11, United States Code.
 (b) Safe Harbor.--A purchase, sale, or loan of, a margin loan or 
other extension of credit on, or a repurchase, reverse repurchase, or 
other transaction involving, a unit of a digital commodity occurring 
with a commodity broker, stockbroker, financial institution, financial 
participant, or securities clearing agency shall be deemed to be--
 (1) a commodity contract for purposes of--
 (A) sections 362(b)(6), 362(o), 546(e), 553, 556, 
 561, and 562 of title 11, United States Code;
 (B) section 11 of the Federal Deposit Insurance Act 
 (12 U.S.C. 1821);
 (C) section 210 of the Dodd-Frank Wall Street 
 Reform and Consumer Protection Act (12 U.S.C. 5390); 
 and
 (D) section 5(b)(2)(C) of the Securities Investor 
 Protection Act of 1970 (15 U.S.C. 78eee(b)(2)(C)); and
 (2) a margin payment for purposes of section 548(d)(2)(B) 
 of title 11, United States Code.

The Commission and the Commodity Futures Trading Commission shall 
require digital asset intermediaries to provide clear and accessible 
educational materials to the public, including--
 (1) an overview of how distributed ledger systems function;
 (2) a description of common risks associated with digital 
 assets;
 (3) a description of the differences between digital asset 
 markets and traditional financial markets;
 (4) information on reporting and disclosure requirements 
 related to digital asset transactions and securities which may 
 be accompanied by network tokens or ancillary assets; and
 (5) guidance on recognizing fraudulent schemes and 
 instructions for reporting suspected fraud.

(a) Definitions.--In this section:
 (1) Digital consumer token.--The term "digital consumer 
 token" means a digital asset that is primarily acquired for a 
 consumptive purpose, including redemption for a specified good 
 or service at the time of sale or within a reasonable time 
 after sale, as defined by the Federal Trade Commission pursuant 
 to rule.
 (2) Nonfungible token.--The term "nonfungible token" 
 means a digital asset recorded on a distributed ledger that--
 (A) is individually identifiable and 
 distinguishable from any other digital asset;
 (B) represents ownership of, or rights in, a work 
 of authorship, art, a collectible, a membership, an 
 access credential, a certificate of authenticity, an 
 in-game or in-application item, or another similar 
 specific item or discrete digital or physical good, 
 service, or benefit;
 (C) is not interchangeable on a 1-to-1 basis with 
 any other token or digital asset; and
 (D) may be bought, sold, or transferred for 
 consideration.
 (b) Federal Trade Commission.--Nothing in this Act, or any 
amendment made by this Act, may be construed as limiting or abridging 
the jurisdiction of the Federal Trade Commission with respect to--
 (1) investigations or enforcement actions under the Federal 
 Trade Commission Act (15 U.S.C. 41 et seq.) relating to unfair 
 or deceptive acts or practices by persons relating to commerce 
 in nonfungible tokens or digital consumer tokens, including 
 deceptive acts with respect to advertising and endorsements 
 relating to nonfungible tokens and digital consumer tokens;
 (2) highlighting best practices relating to commerce in 
 nonfungible tokens or digital consumer tokens;
 (3) promoting responsible innovation;
 (4) consumer education relating to fraudulent digital asset 
 activity; or
 (5) investigating unlawful restraints of trade in the 
 digital asset industry.
 (c) Rule of Construction.--Nothing in this Act, or any amendment 
made by this Act, may be construed to expand, contract, or otherwise 
affect the jurisdiction or authority with respect to the Federal 
consumer financial laws under the Consumer Financial Protection Act of 
2010 (12 U.S.C. 5481 et seq.), as in effect on the day before the date 
of enactment of this Act, including with respect to subsection (i) or 
(j) of section 1027 of the Consumer Financial Protection Act of 2010 
(12 U.S.C. 5517).

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

DISCLOSURES TO INVESTORS CONCERNING THE STATUS OF PAYMENT 
 STABLECOINS AND DIGITAL COMMODITIES.

 (a) Definition.--In this section, the term "payment stablecoin" 
has the meaning given the term in section 2 of the GENIUS Act (12 
U.S.C. 5901).
 (b) Rules.--Not later than 270 days after the date of enactment of 
this Act, the Commission, after consultation with the Commodity Futures 
Trading Commission and the Securities Investor Protection Corporation, 
shall issue rules requiring written disclosures regarding the treatment 
of customer assets in the event of an insolvency, resolution, or 
liquidation proceeding to be provided by a registered broker or dealer 
to an investor--
 (1) before a digital commodity, a payment stablecoin, or a 
 security involving a unit of a digital commodity is received, 
 acquired, or held by the broker or dealer for the account of 
 the investor; and
 (2) after the provision of the disclosures under paragraph 
 (1), at such frequency as the Commission may prescribe.
 (c) Contents.--The rules issued under subsection (b) shall include, 
as necessary or appropriate for the protection of investors--
 (1) a description of the manner in which any digital 
 commodity, payment stablecoin, or security involving a unit of 
 a digital commodity received, acquired, or held by a broker or 
 dealer for the account of an investor would be treated in an 
 insolvency, resolution, or liquidation proceeding with respect 
 to the broker or dealer under--
 (A) title II of the Dodd-Frank Wall Street Reform 
 and Consumer Protection Act (12 U.S.C. 5381 et seq.);
 (B) the Securities Investor Protection Act of 1970 
 (15 U.S.C. 78aaa et seq.); or
 (C) as applicable, chapter 7 or 11 of title 11, 
 United States Code; and
 (2) how the treatment described in paragraph (1) differs 
 from the treatment of securities and cash received, acquired, 
 or held by the broker or dealer for the account of the 
 applicable investor in the event of an insolvency, resolution, 
 or liquidation proceeding with respect to the broker or dealer 
 under each provision of law described in subparagraph (A), (B), 
 and (C) of paragraph (1).

(a) Establishment.--The Commodity Futures Trading Commission and 
the Commission (referred to collectively in this section as the 
"Commissions") shall jointly establish the Joint Advisory Committee 
on Digital Assets (referred to in this section as the "Committee").
 (b) Purpose.--
 (1) In general.--The Committee shall--
 (A) provide the Commissions with official findings 
 and nonbinding recommendations on--
 (i) the rules, regulations, oversight, and 
 other matters of the Commissions relating to 
 digital assets, including with respect to 
 regulatory harmonization between the 
 Commissions;
 (ii) how to further the regulatory 
 harmonization of digital asset policy between 
 the Commissions or areas in which that 
 harmonization should occur; and
 (iii) the implementation by the Commissions 
 of this Act, and the amendments made by this 
 Act, including with respect to regulatory 
 harmonization between the Commissions, 
 memoranda of understanding, and the CFTC-SEC 
 Micro-Innovation Sandbox established pursuant 
 to section 501;
 (B) develop and share objective methods and best 
 practices for evaluating digital asset networks and 
 activities, including, as appropriate, technical 
 features, economic design, and implications for market 
 integrity, investor protection, and operational 
 resilience; and
 (C) issue nonbinding recommendations to assist in 
 resolving disputes between the Commissions.
 (c) Review by the Commissions.--Each of the Commissions shall--
 (1) review the findings and nonbinding recommendations 
 provided under subsection (b)(1)(A);
 (2) promptly publish a public statement each time the 
 Committee submits a finding or nonbinding recommendation to the 
 applicable Commission under subsection (b)(1)(A) that--
 (A) assesses the finding or recommendation; and
 (B) if applicable, discloses the action or decision 
 not to take action; and
 (3) provide the Committee with a formal written response 
 not later than 90 days after the date of submission of a 
 finding or nonbinding recommendation under subsection 
 (b)(1)(A).
 (d) Membership and Leadership.--
 (1) Non-federal members; size and composition.--
 (A) In general.--The Commissions shall appoint to 
 the Committee not more than 14 nongovernmental voting 
 members who--
 (i) represent a broad spectrum of 
 interests, equally divided between the 
 Commissions; and
 (ii) serve at the pleasure of the 
 appointing Commission.
 (B) Specific members.--For each of the Commissions, 
 the appointees under subparagraph (A) of this paragraph 
 shall include--
 (i) 2 individuals described in paragraph 
 (2)(A);
 (ii) 2 individuals described in paragraph 
 (2)(B);
 (iii) 1 individual described in paragraph 
 (2)(C);
 (iv) 2 individuals described in paragraph 
 (2)(D); and
 (v) 1 individual described in paragraph 
 (2)(E).
 (2) Members described.--A member described in this 
 paragraph is--
 (A) an individual who is employed by, or is a 
 related person with respect to, a digital asset market 
 participant;
 (B) a person registered with either of the 
 Commissions and that is engaged in activities relating 
 to digital assets;
 (C) an individual engaged in academic research 
 relating to digital assets;
 (D) a retail user of digital assets; and
 (E) a State securities regulator.
 (3) NIST.--The Director of the National Institute of 
 Standards and Technology, or the designee of the Director, 
 shall serve in an advisory capacity as a nonvoting, ex officio 
 member of the Committee, and shall not be excluded from any 
 proceedings, meetings, discussions, or deliberations of the 
 Committee, except that the chair of the Committee, upon an 
 affirmative vote of the Committee, may exclude the Director or 
 the designee from any proceedings, meetings, discussions, or 
 deliberations of the Committee when necessary to safeguard and 
 promote the free exchange of confidential information.
 (4) Co-designated federal officers; commissioner support.--
 (A) Co-designated federal officers.--
 (i) In general.--Each Commission shall 
 designate 1 Federal officer to serve as a co-
 designated Federal officer of the Committee.
 (ii) Shared duties.--The duties required by 
 section 1009(e) of title 5, United States Code, 
 to be carried out by a designated officer or 
 employee of the Federal Government with respect 
 to the Committee shall be shared by the Federal 
 officers of the Committee who are co-designated 
 under clause (i).
 (B) Commissioner support.--
 (i) In general.--Commissioners of the 
 Commissions may be supported by officers or 
 employees of the respective Commission who may 
 prepare or transmit materials, coordinate with 
 agency staff, liaise with Committee leadership, 
 propose agenda items, gather information, and 
 otherwise support the participation of that 
 commissioner in Committee business, in an ex 
 officio, nonvoting capacity.
 (ii) Rule of construction.--An officer or 
 employee described in clause (i) shall not be 
 considered to be a member of the Committee for 
 purposes of chapter 10 of title 5, United 
 States Code.
 (C) Information sharing.--The co-designated Federal 
 officers under subparagraph (A) and the officers or 
 employees of the respective Commissions providing 
 support under subparagraph (B) shall share information 
 about digital asset activities under this Act, in 
 accordance with section 902, including with regard to 
 preventing insider trading.
 (5) Committee leadership.--The members of the Committee 
 shall elect, from among the membership of the Committee, a 
 secretary and an assistant secretary.
 (6) Rotating chair.--The chair and vice chair of the 
 Committee shall rotate annually between the Commissions, with 
 the Commission designating the chair in even-numbered calendar 
 years, the Commodity Futures Trading Commission designating the 
 chair in odd-numbered calendar years, the Commission 
 designating the vice chair in odd-numbered calendar years, and 
 the Commodity Futures Trading Commission designating the vice 
 chair in even-numbered calendar years.
 (7) Terms; vacancies; holdover.--
 (A) In general.--Each non-Federal member of the 
 Committee shall be appointed for a term of 4 years.
 (B) Service until new appointment.--A member of the 
 Committee may continue to serve after the expiration of 
 the term of the member until a successor is appointed.
 (C) Vacancies.--A vacancy with respect to 
 membership in the Committee shall be filled only for 
 the remainder of the applicable term.
 (D) Reappointment.--A member of the Committee may 
 be reappointed.
 (8) Status of members.--A member of the Committee appointed 
 under paragraph (1) shall not be deemed to be an employee or 
 agent of either of the Commissions solely by reason of 
 membership on the Committee.
 (e) No Compensation for Committee Members.--
 (1) Non-federal members.--All Committee members appointed 
 under subsection (d)(1) shall--
 (A) serve without compensation; and
 (B) while away from the home or regular place of 
 business of the member in the performance of services 
 for the Committee, be allowed travel expenses, 
 including per diem in lieu of subsistence, in the same 
 manner as persons employed intermittently in Government 
 service are allowed expenses under section 5703 of 
 title 5, United States Code.
 (2) No compensation for co-designated federal officers.--
 The Federal officers co-designated under subsection (d)(4)(A) 
 shall serve without compensation in addition to that received 
 for their services as officers or employees of the United 
 States.
 (f) Frequency of Meetings.--The Committee shall meet--
 (1) not less frequently than twice annually; and
 (2) at such other times as either of the Commissions may 
 request.
 (g) Procedures; Advisory Nature.--
 (1) In general.--The Committee shall operate pursuant to 
 chapter 10 of title 5, United States Code, except as otherwise 
 expressly provided by this section.
 (2) Advisory nature of recommendations.--The 
 recommendations of the Committee are advisory in nature, shall 
 not create any legal rights or obligations, and shall not limit 
 or delay the independent authority of either of the 
 Commissions.
 (h) Time Limits.--The Commissions shall--
 (1) not later than 90 days after the date of enactment of 
 this Act, adopt a joint charter for the Committee;
 (2) not later than 120 days after the date of enactment of 
 this Act, make the appointments required under subsection 
 (d)(1); and
 (3) not later than 180 days after the date of enactment of 
 this Act, hold the initial meeting of the Committee.
 (i) Funding.--Subject to the availability of funds, the Commissions 
shall jointly fund the Committee.
 (j) Duration and Renewal.--
 (1) Initial period.--The Committee shall remain in effect 
 for 10 years beginning on the date of enactment of this Act.
 (2) Renewal thereafter.--At the conclusion of the 10-year 
 period described in paragraph (1)--
 (A) the Committee shall be subject to subsections 
 (a) and (b) of section 1013 of title 5, United States 
 Code; and
 (B) the Commissions may renew the Committee for 
 successive 2-year periods by publishing a notice in the 
 Federal Register, consistent with chapter 10 of title 
 5, United States Code.

(a) Memorandum of Understanding.--The Commission shall enter into a 
memorandum of understanding with the Commodity Futures Trading 
Commission to ensure--
 (1) coordinated supervision and enforcement with respect to 
 registrants of the Commission and the Commodity Futures Trading 
 Commission, including with regard to--
 (A) the anti-fraud and anti-manipulation 
 authorities of the Commission, such as with regard to 
 insider trading; and
 (B) the market integrity authorities of the 
 Commodity Futures Trading Commission; and
 (2) appropriate information sharing between the Commission 
 and the Commodity Futures Trading Commission to further the 
 purposes of and compliance with this Act, the amendments made 
 by this Act, 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), and the 
 Commodity Exchange Act (7 U.S.C. 1 et seq.).
 (b) Rule of Construction.--Nothing in this section may be construed 
to limit the anti-fraud, anti-manipulation, or false reporting 
enforcement authorities of the Commodity Futures Trading Commission 
with respect to a contract of sale of a commodity and persons effecting 
such contracts.
 (c) Rule of Construction.--Nothing in this Act, or any amendment 
made by this Act, may be construed to limit or prevent the continued 
application of applicable law regarding the insider trading of 
securities, including digital asset securities, including section 21A 
of the Securities Exchange Act of 1934 (15 U.S.C. 78u-1).

(a) Authorization of Appropriations.--For the purposes of 
developing policy relating to digital assets, acquiring information 
technology resources, funding the operations described in sections 202 
and 203 of this Act, and enforcement of the laws within its 
jurisdiction relating to digital assets, there is authorized to be 
appropriated to the Financial Crimes Enforcement Network of the 
Department of the Treasury the following:
 (1) $30,000,000 for fiscal year 2026, to remain available 
 until September 30, 2027.
 (2) $30,000,000 for fiscal year 2027, to remain available 
 until September 30, 2028.
 (3) $30,000,000 for fiscal year 2028, to remain available 
 until September 30, 2029.
 (4) $30,000,000 for fiscal year 2029, to remain available 
 until September 30, 2030.
 (5) $30,000,000 for fiscal year 2030, to remain available 
 until September 30, 2031.
 (b) Incentive Premium for Highly Qualified Individuals.--
Notwithstanding any other provision of law or regulation, the Director 
of the Financial Crimes Enforcement Network of the Department of the 
Treasury may pay an annual incentive premium of not more than 20 
percent of the annual rate of basic pay for a position if necessary to 
attract highly qualified individuals for positions that the Director 
has certified to the Director of the Office of Personnel Management 
reflect the needs of the Financial Crimes Enforcement Network.

(a) Definitions.--In this section:
 (1) Covered recipient.--The term "covered recipient" 
 means a metropolitan city or urban county, as those terms are 
 defined in section 102 of the Housing and Community Development 
 Act of 1974 (42 U.S.C. 5302), that receives funds under section 
 106.
 (2) Current annual growth rate.--The term "current annual 
 growth rate", with respect to an eligible recipient and a 
 fiscal year, means the average annual percentage increase in 
 the number of housing units in the jurisdiction of the eligible 
 recipient, as calculated by the Secretary, during the period--
 (A) beginning with the third quarter of the sixth 
 preceding fiscal year; and
 (B) ending with the third quarter of the preceding 
 fiscal year.
 (3) Eligible recipient.--The term "eligible recipient" 
 means any covered recipient unless--
 (A)(i) the median Small Area Fair Market Rent in 
 the jurisdiction of the covered recipient is at or 
 below the 60th percentile of median Small Area Fair 
 Market Rents in the jurisdictions of all covered 
 recipients; and
 (ii) the median home value in the jurisdiction of 
 the covered recipient is below the median home value 
 for the United States;
 (B) the annual rental vacancy rate in the 
 jurisdiction of the covered recipient is greater than 
 the national annual rental vacancy rate for the most 
 recent year available, as published by the Bureau of 
 the Census;
 (C) during the 1-year period preceding the date on 
 which the Secretary allocates funds under section 106, 
 the jurisdiction of the covered recipient has been the 
 subject of a major disaster or emergency declaration 
 under section 401 or 501, respectively, of the Robert 
 T. Stafford Disaster Relief and Emergency Assistance 
 Act (42 U.S.C. 5170, 5191); or
 (D) the covered recipient lacks the legal authority 
 to enact or update zoning and permitting ordinances.
 (4) Extremely high-growth recipient.--The term "extremely 
 high-growth recipient" means an eligible recipient for which 
 the current annual growth rate is at or above 4 percent.
 (5) Housing growth improvement rate.--The term "housing 
 growth improvement rate", with respect to an eligible 
 recipient and a fiscal year, means the quotient of--
 (A)(i) the current annual growth rate of the 
 eligible recipient, minus
 (ii) the prior annual growth rate of the eligible 
 recipient; and
 (B) the sum obtained by adding the absolute values 
 of the current annual growth rate and the prior annual 
 growth rate of the eligible recipient.
 (6) Prior annual growth rate.--The term "prior annual 
 growth rate", with respect to an eligible recipient and a 
 fiscal year, means the average annual percentage increase in 
 the number of housing units in the jurisdiction of the eligible 
 recipient, as calculated by the Secretary, during the period--
 (A) beginning with the third quarter of the 11th 
 preceding fiscal year; and
 (B) ending with the third quarter of the sixth 
 preceding fiscal year.
 (7) Secretary.--The term "Secretary" means the Secretary 
 of Housing and Urban Development.
 (8) Section 106.--The term "section 106" means section 
 106 of the Housing and Community Development Act of 1974 (42 
 U.S.C. 5306).
 (b) Adjustments to Community Development Block Grant Allocations.--
 (1) In general.--In allocating amounts to an eligible 
 recipient under section 106 for a fiscal year, the Secretary 
 shall adjust the allocation based on the housing growth 
 improvement rate of the eligible recipient, in accordance with 
 paragraph (2) of this subsection.
 (2) Adjustments.--
 (A) Housing growth improvement rate at or above 
 median; extremely high-growth recipients.--
 (i) In general.--If, with respect to a 
 fiscal year for which the allocation under 
 section 106 is being determined, the housing 
 growth improvement rate for an eligible 
 recipient is at or above the median housing 
 growth improvement rate for all eligible 
 recipients other than extremely high-growth 
 recipients, or if an eligible recipient is an 
 extremely high-growth recipient, the Secretary 
 shall allocate to the eligible recipient for 
 that fiscal year, in addition to the amount 
 that would otherwise be allocated to the 
 eligible recipient under section 106, a bonus 
 amount, as determined under clause (ii) of this 
 subparagraph.
 (ii) Bonus amount.--For purposes of clause 
 (i), the bonus amount for an eligible recipient 
 for a fiscal year shall be equal to the product 
 of--
 (I) the aggregate amount by which 
 allocations to eligible recipients are 
 decreased under subparagraph (B) for 
 that fiscal year; and
 (II) the quotient of--
 (aa) the number of housing 
 units, as of the third quarter 
 of the preceding fiscal year, 
 in the jurisdiction of the 
 eligible recipient, as 
 calculated by the Secretary; 
 and
 (bb) the number of housing 
 units, as of the third quarter 
 of the preceding fiscal year, 
 in the jurisdictions of all 
 eligible recipients that 
 receive a bonus amount under 
 this paragraph, as calculated 
 by the Secretary.
 (B) Housing growth improvement rate below median.--
 If, with respect to a fiscal year for which the 
 allocation under section 106 is being determined, the 
 housing growth improvement rate for an eligible 
 recipient is below the median housing growth 
 improvement rate for all eligible recipients other than 
 extremely high-growth recipients, the Secretary shall 
 decrease the amount that would otherwise be allocated 
 to the eligible recipient under section 106 for that 
 fiscal year by 10 percent.
 (c) Calculation of Housing Units.--
 (1) Housing and urban development requirements.--In 
 calculating the number of housing units in the jurisdiction of 
 an eligible recipient under any provision of this section, the 
 Secretary shall--
 (A) use the Current Address Count Listing Files and 
 other data products, as needed, of the Bureau of the 
 Census tabulated from the Master Address File; and
 (B) make calculations at the block level, using 
 boundaries that reflect the most current boundaries.
 (2) Census bureau and postal service requirements.--The 
 Bureau of the Census and the United States Postal Service shall 
 provide any relevant data to the Secretary upon request to 
 assist the Secretary in making a calculation described in 
 paragraph (1).
 (3) Adjustment of calculation periods.--The Secretary may 
 adjust the calculation periods under subparagraphs (A) and (B) 
 of subsection (a)(2), subparagraphs (A) and (B) of subsection 
 (a)(6), and items (aa) and (bb) of subsection (b)(2)(A)(ii)(II) 
 by not more than 2 months to achieve alignment with the data 
 provided by the Bureau of the Census.
 (d) Annual Report on Housing Growth Improvement Rate.--Before 
allocating funds under section 106 for a fiscal year, the Secretary 
shall publish a report that--
 (1) includes the housing growth improvement rate for each 
 eligible recipient; and
 (2) lists, for the most recent fiscal year for which 
 allocations were made under section 106--
 (A) the eligible recipients that received a bonus 
 amount under subsection (b)(2)(A) of this section; and
 (B) the eligible recipients for which the 
 allocation under section 106 was decreased under 
 subsection (b)(2)(B) of this section.
 (e) Notification; Implementation Dates.--
 (1) Notification.--
 (A) In general.--Not later than 60 days after the 
 date of enactment of this Act, the Secretary shall 
 notify each eligible recipient of the recipient's 
 housing growth improvement rate and whether that 
 housing growth improvement rate is above, at, or below 
 the median housing growth improvement rate for all 
 eligible recipients other than extremely high-growth 
 recipients.
 (B) Guidance.--As part of the notification under 
 subparagraph (A), the Secretary shall share guidance, 
 including resources developed by the Department of 
 Housing and Urban Development, on best practices and 
 recommendations for policies to reduce regulatory 
 barriers to housing and increase housing supply.
 (2) Implementation dates.--Subsection (b) shall take effect 
 beginning with the third full fiscal year after the date of 
 enactment of this Act and remain in effect through fiscal year 
 2043.
 (3) No effect on previous appropriations.--This section 
 shall not apply to amounts appropriated before the date of 
 enactment of this Act.

Except as otherwise provided, not later than 1 year after the date 
of enactment of this Act, each applicable regulator shall adopt rules 
to carry out this Act, and the amendments made by this Act, through 
appropriate notice and comment rulemaking.

This Act, and the amendments made by this Act, shall take effect on 
the date that is 360 days after the date of enactment of this Act, 
except that, if a provision of this Act, or an amendment made by this 
Act, requires a rulemaking, that provision shall take effect on the 
later of--
 (1) the date that is 360 days after the date of enactment 
 of this Act; or
 (2) the date that is 60 days after the publication in the 
 Federal Register of the final rule implementing the provision.
 Calendar No. 423

119th CONGRESS

 2d Session

 H. R. 3633

_______________________________________________________________________

 AN ACT

To provide for a system of regulation of the offer and sale of digital 
commodities by the Securities and Exchange Commission and the Commodity 
 Futures Trading Commission, to amend the Federal Reserve Act to 
 prohibit the Federal reserve banks from offering certain products or 
services directly to an individual, to prohibit the use of central bank 
 digital currency for monetary policy, and for other purposes.

_______________________________________________________________________

 June 1, 2026

 Reported with an amendment