Sec. 4. Digital commodity platforms
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The Commodity Exchange Act is amended by inserting after section 5h ( 7 U.S.C. 7b–3 ) the following: It shall be unlawful for any person to act as any category of digital commodity platform unless the person is registered under this section as that category of digital commodity platform. A person desiring to register as any category of digital commodity platform shall submit to the Commission an application in such form and containing such information as the Commission may require for the purpose of determining whether the applicant is in compliance with subsection
(b)and the other requirements of this Act. As appropriate to further the purposes of this Act and avoid duplicative or unnecessary requirements, and taking into consideration potential conflicts of interest or other risks, the Commission may prescribe rules or regulations permitting, or may otherwise authorize— registration by a person in more than 1 category of digital commodity platform; a registered entity, a swap dealer, or a futures commission merchant registered under this Act to register under this section in 1 or more categories of digital commodity platform; and exemptions or additional requirements applicable to persons with multiple registrations under this Act. To be registered, and maintain registration, as a digital commodity platform, the digital commodity platform shall comply with— the core principles described in this subsection; and any requirement that the Commission may impose by rule or regulation. Unless otherwise determined by the Commission by rule or regulation, a digital commodity platform described in subparagraph
(A)shall have reasonable discretion in establishing the manner in which the digital commodity platform complies with the core principles described in this subsection. A digital commodity trading facility shall— establish and enforce compliance with any rule of the digital commodity trading facility, including— the terms and conditions of the transactions in digital commodities traded or processed on or through the digital commodity trading facility; and any limitation on access to the digital commodity trading facility; establish and enforce trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means— to provide market participants with impartial access to the market; and to capture information that may be used in establishing whether rule violations have occurred; and establish rules governing the operation of the digital commodity trading facility. A digital commodity trading facility shall permit trading only in transactions in digital commodities that are not readily susceptible to manipulation. A digital commodity trading facility shall provide a competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process of trading on the digital commodity trading facility. A digital commodity trading facility shall provide a centralized market for executing transactions. A digital commodity trading facility shall establish and enforce rules— to protect markets and market participants from abusive practices committed by any party, including abusive practices committed by a party acting as an agent for a participant; and to promote fair and equitable trading on the digital commodity trading facility. A digital commodity trading facility shall— establish and enforce rules or terms and conditions defining, or specifications detailing— trading procedures to be used in entering and executing orders traded on or through the facilities of the digital commodity trading facility; and procedures for trade processing of digital commodities on or through the facilities of the digital commodity trading facility; and monitor trading in digital commodities to prevent manipulation, price distortion, and disruptions of the delivery or settlement process through surveillance, compliance, and disciplinary practices and procedures, including investigations, sanctions, and methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions. A digital commodity trading facility shall— establish and enforce rules that will allow the digital commodity trading facility to obtain any necessary information to perform any of the functions described in this section; provide the information to the Commission on request; and have the capacity to carry out such international information-sharing agreements as the Commission may require. A digital commodity trading facility shall establish and enforce rules and procedures for ensuring the financial integrity of digital commodity trades entered on or through the facilities of the digital commodity trading facility. A digital commodity trading facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, as is necessary and appropriate, including the authority to liquidate or transfer open positions in any digital commodity or to suspend or curtail trading in a digital commodity. A digital commodity trading facility shall make public timely information on price, trading volume, and other trading data on digital commodities to the extent prescribed by the Commission. A digital commodity trading facility shall be required to have the capacity to electronically capture and transmit trade information with respect to transactions executed on the digital commodity trading facility. A digital commodity trading facility shall make available to market authorities, market participants, and the public accurate information concerning— the terms and conditions of the contracts for transactions in digital commodities; the rules and mechanisms for executing digital commodity trades on or through the facilities of the digital commodity trading facility; and the rules and specifications describing the operation of the electronic matching platform or trade execution facility of the digital commodity trading facility. A digital commodity trading facility shall establish and enforce— disciplinary procedures that authorize the digital commodity trading facility to discipline, suspend, or expel market participants that violate the rules of the digital commodity trading facility; or similar methods for performing the functions described in clause (i), including delegation to third parties. A digital commodity trading facility shall establish and enforce rules regarding, and provide facilities for alternative dispute resolution, as appropriate, for, market participants and market intermediaries. A digital commodity dealer or digital commodity broker— shall establish prices fairly and objectively; shall disclose the basis for those prices; and shall not disrupt market functioning or hinder the price discovery process. A digital commodity dealer or digital commodity broker shall keep full, complete, and systematic records (including all pertinent data and memoranda) of all transactions relating to its business of dealing or brokerage in digital commodity transactions. A digital commodity dealer or digital commodity broker shall keep all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a digital commodity. A digital commodity dealer or digital commodity broker shall conform with such business conduct standards as may be prescribed by the Commission by rule or regulation that relate to— fraud, manipulation, and other abusive practices involving digital commodity trades (including digital commodity trades that are offered but not entered into); diligent supervision of the business of the digital commodity dealer or digital commodity broker; and such other matters as the Commission determines to be appropriate. A digital commodity dealer or digital commodity broker shall comply with the following requirements: The digital commodity dealer or digital commodity broker shall establish robust and professional risk management systems adequate for managing the day-to-day business of the digital commodity dealer or digital commodity broker. The digital commodity dealer or digital commodity broker shall disclose to the Commission, as applicable, information concerning— terms and conditions of its digital commodity trades; trading operations, mechanisms, and practices; financial integrity protections relating to transactions in digital commodity trades; and other information relevant to its digital commodity trades. A digital commodity dealer or digital commodity broker shall— establish and enforce internal systems and procedures to obtain any necessary information to perform any of the functions described in this section; and provide the information described in clause
(i)to the Commission on request. A digital commodity platform shall— maintain records of all activities relating to the business of the digital commodity platform, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years; and keep the records described in subclause
(I)open to inspection by the Commission; provide to the Commission, in a form and manner acceptable to the Commission, such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under this Act; and make such reports as are required by the Commission relating to the transactions and positions of the customers of the digital commodity platform. Unless necessary or appropriate to achieve the purposes of this Act, a digital commodity platform shall not— adopt any rules or take any actions that result in any unreasonable restraint of trade; or impose any material anticompetitive burden on trading or custody. The Commission shall require conflict of interest systems and procedures that— establish structural and institutional safeguards— to minimize conflicts of interest that might potentially bias the judgment or supervision of a digital commodity platform and contravene the core principles of fair and equitable trading and the business conduct standards described in this Act, including conflicts arising out of transactions or arrangements with affiliates (including affiliates acting as issuers, market-makers, or custodians); and which may include, as the Commission determines to be appropriate, information partitions and the legal separation of different categories of digital commodity platforms; establish a process for resolving conflicts of interest described in clause (i); require disclosure by a digital commodity platform of any material incentives or conflicts of interest that the digital commodity platform is unable to resolve; and address such other issues as the Commission determines to be appropriate. A digital commodity platform shall have adequate financial, operational, and managerial resources to discharge each responsibility of the digital commodity platform. The Commission shall require such additional financial resources as are necessary to enable a digital commodity platform to fulfill obligations of the digital commodity platform arising from margined, leveraged, or financed transactions. A digital commodity platform shall— establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk (including cybersecurity risk), through the development of appropriate controls and procedures, and automated systems, that— are reliable and secure; and have adequate scalable capacity; establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for— the timely recovery and resumption of operations; and the fulfillment of the responsibilities and obligations of the digital commodity platform; and periodically conduct tests to verify that the backup resources of the digital commodity platform are sufficient to ensure continued— order processing and trade matching; price reporting; market surveillance; and maintenance of a comprehensive and accurate audit trail. A digital commodity platform shall designate an individual to serve as a chief compliance officer (referred to in this paragraph as a chief compliance officer ). A chief compliance officer shall— report directly to the board or to the senior officer of the digital commodity platform; review compliance with the core principles described in this subsection; in consultation with the board of the digital commodity platform, a body performing a function similar to that of a board, or the senior officer of the digital commodity platform, resolve any conflicts of interest that may arise; be responsible for establishing and administering the policies and procedures required to be established pursuant to this section; ensure compliance with this Act and the rules and regulations issued under this Act, including rules prescribed by the Commission pursuant to this section; and establish procedures for the remediation of noncompliance issues found during compliance office reviews, look backs, internal or external audit findings, self-reported errors, or through validated complaints. In establishing procedures under clause (ii)(VI), a chief compliance officer shall design the procedures to establish the handling, management response, remediation, retesting, and closing of noncompliance issues. In accordance with rules prescribed by the Commission, a chief compliance officer shall annually prepare and sign a report that contains a description of— the compliance of the digital commodity platform with this Act; and the policies and procedures, including the code of ethics and conflict of interest policies, of the digital commodity platform. A chief compliance officer shall— submit each report described in subclause
(I)with the appropriate financial report of the digital commodity platform that is required to be submitted to the Commission pursuant to this section; and include in the report a certification that, under penalty of law, the report is accurate and complete. A digital commodity platform shall establish governance arrangements that are transparent to fulfill public interest requirements. A digital commodity platform shall establish and enforce appropriate fitness standards for— directors; and any entity offering affiliated services for the digital commodity platform. A digital commodity platform shall hold customer property (including digital commodities) in a manner that minimizes the risk of loss of, or unreasonable delay in access to, the customer property. A digital commodity platform shall treat and deal with all customer property that is received by the digital commodity platform as belonging to the customer. Customer property described in subclause (I)— shall be separately accounted for; and shall not be commingled with the assets of the digital commodity platform. Notwithstanding clause (ii), customer property described in that clause may, for convenience, be commingled in the same account or accounts with— an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 )); an insured credit union (as defined in section 101 of the Federal Credit Union Act ( 12 U.S.C. 1752 )); or a digital commodity platform. Notwithstanding clause (ii), such share of the customer property described in that clause as, in the normal course of business, is necessary to margin, guarantee, secure, transfer, adjust, or settle a digital commodity transaction with a digital commodity platform, or with any customer of a digital commodity platform, may be withdrawn and applied to such purposes lawfully accruing in connection with the digital commodity transaction, including the payment of commissions, taxes, and brokerage, interest, storage, and other charges. Notwithstanding clause (ii)— the Commission may adopt rules or regulations permitting the lending of digital commodities by a digital commodity platform holding those digital commodities for customers, subject to such conditions as the Commission may prescribe to protect customers and achieve the purposes of this Act; and in accordance with such terms and conditions as the Commission may prescribe by rule, regulation, or order, any customer property described in that clause may be commingled and deposited in customer accounts with any other money, securities, or property received by the digital commodity platform and required by the Commission to be separately accounted for, treated, and dealt with as belonging to customers. Customer property described in clause
(ii)in the form of money may be invested in— obligations of the United States; obligations the principal and interest of which are fully guaranteed by the United States; and any other investment that the Commission may by rule or regulation prescribe. Investments under subclause
(I)shall be made in accordance with such rules and regulations, and subject to such conditions, as the Commission may prescribe. It shall be unlawful for any person, including a digital commodity platform or a depository institution, that has received any customer property for deposit in a separate account or accounts in accordance with clause
(ii)to hold, dispose of, or use that customer property as belonging to the depositing digital commodity platform or any person other than the customers of the digital commodity platform. The Commission may make, promulgate, and enforce such rules governing margined, leveraged, or financed digital commodity trades on digital commodity platforms as are reasonably necessary to protect the public interest and promote the orderly settlement of transactions. Subject to the requirements under this subsection, a digital commodity trading facility may— list for trading a contract for a digital commodity; and approve and implement a new rule or rule amendment. A digital commodity trading facility that elects to carry out an activity described in subparagraph
(A)or
(B)of paragraph
(1)shall, prior to carrying out that activity, provide to the Commission a written certification that the contract, new rule, or rule amendment, as applicable, complies with this Act (including regulations under this Act). Subject to paragraph (4), a listing, rule, or rule amendment described in paragraph
(1)shall become effective on the date that is— in the case of a listing of a contract that has not previously been listed on any digital commodity trading facility, 30 business days after the date on which the Commission receives the certification (or such shorter period as determined by the Commission by rule or regulation); or in any other case, 10 business days after the date on which the Commission receives the certification (or such shorter period as determined by the Commission by rule or regulation). The Commission may stay a certification for a listing, rule, or rule amendment described in paragraph
(1)by notifying the digital commodity trading facility that the Commission is staying the certification because there exists— a novel or complex issue that requires additional time to analyze; an inadequate explanation by the submitting digital commodity trading facility; or a potential inconsistency with this Act (including regulations under this Act). A stay of certification by the Commission under subparagraph
(A)shall be for a period of not more than 90 days, beginning on the date of the notification by the Commission under that subparagraph. A listing, rule, or rule amendment subject to a stay under subparagraph
(A)shall become effective on the expiration of the period described in subparagraph (B), unless the Commission— withdraws the stay prior to that time; or notifies the digital commodity trading facility during such period that the Commission objects to the proposed certification and disapproves a listing, rule, or rule amendment pursuant to paragraph (5). The Commission may provide a public comment period of not less than 30 days, within the period in which a stay is in effect under subparagraph (B), whenever the Commission reviews a listing, rule, or rule amendment pursuant to a notification by the Commission under subparagraph (A). The Commission may disapprove a listing, rule, or rule amendment described in paragraph
(1)if the Commission determines that the listing, rule, or rule amendment is inconsistent with this Act (including the considerations in subparagraph
(B)and regulations under this Act). In making a determination described in subparagraph
(A)with respect to a listing for a digital commodity, the Commission may consider, among other things— whether the operating structure and system of the digital commodity is secure from cybersecurity threats, including the possibility of material alterations by persons acting collectively; whether the functionality of the digital commodity will protect holders from operational failures; with respect to a digital commodity that purports to have a fixed value— an identification and description of the issuer of the digital commodity; the collateral or reserves backing the digital commodity; and the terms by which the issuer will redeem the digital commodity; and whether the digital commodity and the market for the digital commodity are not readily susceptible to manipulation. A digital commodity trading facility may request that the Commission grant prior approval to the listing of any new contract for a digital commodity. If prior approval is requested under subparagraph (A), the Commission shall take final action on the request not later than 90 days after submission of the request, unless the person submitting the request agrees to an extension of the time limitation established under this subparagraph. Paragraphs
(4)and
(5)shall apply to Commission action on a request under this paragraph. After the listing of a contract for a digital commodity has taken effect, the Commission may require the delisting of the contract or disapprove the listing in accordance with paragraph (5). The Commission shall require a digital commodity trading facility to disclose to the public, on a timely basis, with respect to a listing described in paragraph (1)(A)— the operating structure and system of the digital commodity; and the trading volume and volatility of the digital commodity. The Commission shall prescribe rules and regulations for the standardization and simplification of disclosures under subparagraph
(A)and subsection (f)(1)(A), including requiring that disclosures— are conspicuous; use plain language comprehensible to customers; and succinctly explain the information that is required to be communicated to the customer. A digital commodity broker and a digital commodity dealer may only trade, or arrange a trade, in a contract for a digital commodity that is not readily susceptible to manipulation. A digital commodity broker and a digital commodity dealer may only trade, or arrange for trading, in digital commodities that have met the requirements of subsection
(d)(including the listing and disclosure requirements). The Commission shall adopt customer protection requirements that— require disclosure by a digital commodity platform to a customer (other than another digital commodity platform registered under this section) of— information about the material risks and characteristics of any applicable digital commodity contracts; and any material incentives or conflicts of interest that the digital commodity platform may have in connection with any applicable digital commodity contracts; establish a duty for a digital commodity platform to communicate in a fair and balanced manner based on principles of fair dealing and good faith; establish standards governing digital commodity platform marketing and advertising, including testimonials and endorsements; and establish such other standards and requirements as the Commission may determine are— in the public interest; appropriate for the protection of customers; or otherwise in furtherance of the purposes of this Act. The Commission shall examine, in collaboration with other Federal regulatory agencies as the Commission determines appropriate, the energy consumption and sources of energy used in connection with the creation and transfer of the most widely traded digital commodities. Not later than 180 days after the date of enactment of the Digital Commodities Consumer Protection Act of 2022 , the Commission shall submit to the Committee on Agriculture, Nutrition, and Forestry of the Senate and the Committee on Agriculture of the House of Representatives a report describing— an estimate of the energy consumption and sources of energy used in connection with the creation and transfer of the most widely traded digital commodities; and the methodology used by the Commission to generate the estimate described in subparagraph (A). Using the methodology described in paragraph (2)(B), the Commission shall publish on the website of the Commission, and periodically update on a timely basis, an estimate of the energy consumption and sources of energy used in connection with the creation and transfer of the most widely traded digital commodities. It shall be unlawful for any digital commodity platform to engage in any act, practice, or course of business in connection with its business as a digital commodity platform that is fraudulent, deceptive, or manipulative. A digital commodity broker, digital commodity dealer, or digital commodity custodian shall be a member of a registered futures association, regardless of whether such person is separately registered as a digital commodity trading facility. The Commission may authorize any registered futures association to perform any portion of the registration functions with respect to digital commodity platforms, associated persons of digital commodity brokers, and associated persons of digital commodity dealers— in accordance with rules, notwithstanding any other provision of law, adopted by that registered futures association and submitted to the Commission for approval; and subject to the provisions of this section applicable to registrations granted by the Commission. A digital commodity platform registered under this section may also be registered with the Securities and Exchange Commission as an exchange, broker, or dealer (as those terms are defined in section 3 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c )) or another trading platform. The Commission shall, in accordance with this subsection, assess and collect fees, which shall be used to recover the annual costs of— registering digital commodity platforms; conducting oversight of digital commodity trades; and carrying out education and outreach under subsection (l). In determining fee rates under paragraph (1), the Commission shall consider— the volume of business of the digital commodity platform; and the category of the digital commodity platform. The Commission shall not require a digital commodity platform to collect directly from customers a per-transaction fee for each digital commodity trade. A digital commodity platform shall not impose directly on customers a per-transaction fee for each digital commodity trade to pay the fees under paragraph (1). Not later than 60 days after the date of enactment of an Act making a regular appropriation to the Commission for a fiscal year, the Commission shall publish in the Federal Register a notice of— the fee rates determined pursuant to this subsection for that fiscal year; and any estimates or projections on which those fee rates are based. In carrying out this subsection, the Commission shall not be required to comply with section 553 of title 5, United States Code. A fee rate prescribed under this subsection shall not be subject to judicial review. Fees collected pursuant to this subsection for any fiscal year shall be deposited and credited as offsetting collections to the account providing appropriations to the Commission. For each fiscal year, the Commission shall, by order, determine fee rates pursuant to this subsection that are reasonably likely to produce aggregate fee collections that are equal to the annual appropriation to the Commission by Congress for activities relating to the registration of digital commodity platforms and the oversight of digital commodity trades. If, on the first day of a fiscal year, a regular appropriation to the Commission has not been enacted, the Commission shall continue to collect (as offsetting collections) fees pursuant to this subsection at each of the rates in effect during the preceding fiscal year. The Commission shall itemize in each budget submitted to the President or the Office of Management and Budget the estimated annual costs of— registering digital commodity platforms; conducting oversight of digital commodity trades; and carrying out education and outreach under subsection (l). Fees may only be assessed and imposed pursuant to this subsection on digital commodity platforms regulated by the Commission pursuant to this section. Fees authorized under this subsection are prohibited from funding any Commission activity not directly related to the registration of digital commodity platforms, the oversight of digital commodity trades, and the education and outreach carried out under subsection (l). The Commission shall provide education and outreach to customers participating in digital commodity markets. The Commission may inspect and monitor digital commodity platforms, on an ongoing basis, for the purpose of ensuring compliance with this Act. The registration of a digital commodity platform, an associated person of a digital commodity broker, or an associated person of a digital commodity dealer under this section— shall preempt any applicable registration requirements under State laws relating to money transmission, virtual currency, and commodity brokers; and shall not affect the applicability of State antifraud laws. Beginning on the effective date of a registration of a digital commodity platform under this section, the digital commodity platform shall not be required to comply with applicable State law requirements relating to money transmission, virtual currency, and commodity brokerage. The Commission shall prescribe such rules and regulations as are appropriate for the implementation of this section. .
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- 7 USC 7b–3
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