Sec. 404. Registration of digital asset exchanges
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The Commodity Exchange Act ( 7 U.S.C. 1 et seq. ) is amended by inserting after section 5h the following: In this section, the term customer means any person that maintains an account for the trading of digital assets directly with a registered digital asset exchange (other than a person that is owned or controlled, directly or indirectly, by the registered digital asset exchange) on behalf of the person or any other person. Any trading facility that offers or seeks to offer a market in digital assets may register with the Commission as a digital asset exchange by submitting to the Commission an application in such form and containing such information as the Commission may require for the purpose of making the determinations required for approval under subsections
(d)and (f). A registered designated contract market or registered swap execution facility that fulfills the requirements of this section may elect to be considered a registered digital asset exchange, in such form and manner as the Commission shall prescribe. A registered digital asset exchange shall be registered with the Secretary of the Treasury as a money services business. A registered digital asset exchange may make available for trading any digital asset that is not readily susceptible to manipulation, subject to this subsection. The Commission may make, promulgate, and enforce such additional rules governing margined, leveraged, or financed transactions as are reasonably necessary to protect market participants and promote the orderly settlement of transactions with respect to— disclosure; recordkeeping; capital, margin, and other financial resources; reporting; business conduct; documentation; and such other matters as the Commission determines to be necessary. Registration as a digital asset exchange shall not permit a trading facility to offer any contract of sale of a commodity for future delivery, option, or swap for trading without also being registered as a designated contract market or swap execution facility. To be registered, and maintain registration, as a digital asset exchange, the registered digital asset exchange shall comply with— the core principles described in this subsection; and any requirement that the Commission may impose by rule pursuant to section 8a(5). Unless otherwise determined by the Commission by rule, a registered digital asset exchange described in subparagraph
(A)shall have reasonable discretion in establishing the manner in which the registered digital asset exchange complies with the core principles described in this subsection. A registered digital asset exchange shall— establish and enforce compliance with 1 or more rules of the registered digital asset exchange, including— the terms and conditions of the trades traded or processed on or through the registered digital asset exchange; and any limitation on access to the registered digital asset exchange; establish and enforce compliance with trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce violations of those rules, including means— 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 registered digital asset exchange, including rules specifying trading procedures to be used in entering and executing orders traded or posted on the registered digital asset exchange. A registered digital asset exchange shall permit trading only in assets that are not readily susceptible to manipulation. A registered digital asset exchange shall not permit trading in a digital asset if it is reasonably likely that— the transaction history of the digital asset can be fraudulently altered by any person or group of persons acting collectively; or the functionality or operation of the digital asset can be materially altered by any person or group of persons under common control. In assessing a digital asset under this paragraph, a registered digital asset exchange shall consider— the purpose and use of the digital asset; the creation or release process of the digital asset; the consensus mechanism of the digital asset; the governance structure of the digital asset; the participation and distribution of the digital asset; the current and proposed functionality of the digital asset; the legal classification of the digital asset; and any other factor required by the Commission. A registered digital asset exchange shall establish standards and procedures that are designed to protect and ensure the safety of customer money, assets, and property. A registered digital asset exchange shall hold customer money, assets, and property in a manner to minimize the customer’s risk of loss of, or unreasonable delay in the access to, the money, assets, and property. A registered digital asset exchange shall treat and deal with all money, assets, and property of any customer received as belonging to the customer. Money, assets, and property of a customer described in subclause (I)— shall be separately accounted for; and shall not be— commingled with the funds of the registered digital asset exchange; or used to margin, secure, or guarantee any trades or accounts of any customer or person other than the person for whom the money, assets, or property are held. Notwithstanding clause (ii), money, assets, and property of customers of a registered digital asset exchange may, for convenience, be commingled and deposited with an entity described in section 4d(i)(1)(B). Notwithstanding clause (ii), the share of the money, assets, and property described in item
(aa)as in the normal course of business is necessary to margin, guarantee, secure, transfer, adjust, or settle a digital asset transaction with a registered entity may be withdrawn and applied to those purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the digital asset transaction. Notwithstanding clause (ii), in accordance with such terms and conditions as the Commission may prescribe by rule or order, any money, assets, or property of the customers of a registered digital asset exchange may be commingled and deposited in customer accounts with any other money, assets, or property received by the registered digital asset exchange and required by the Commission to be separately accounted for and treated and dealt with as belonging to the customer of the registered digital asset exchange. Money described in subparagraph (B)(ii)(I) may be invested— in— obligations of the United States; general obligations of any State or of any political subdivision of a State; obligations fully guaranteed as to principal and interest by the United States; or any other investment that the Commission may by rule prescribe; and in accordance with such rules and subject to such conditions as the Commission may prescribe. It shall be unlawful— for any registered digital asset exchange that has received any customer money, assets, or property for custody to dispose of, or use any of the money, assets, or property as belonging to the registered digital asset exchange; or for any other person, including any other registered digital asset exchange or custodian that has received any customer money, assets, or property for deposit, to hold, dispose of, or use any of the money, assets, or property as belonging to— the registered digital asset exchange that deposited the money, assets, or property; or any person other than the customers of the registered digital asset exchange. A customer shall have the right to waive any requirement under subparagraph
(B)by affirmatively electing, in writing to the registered digital asset exchange, to waive the requirement. The Commission may, by rule, establish notice and disclosure requirements, segregation requirements, investment limitations, and other rules relating to the waiving of any requirement under this paragraph that is reasonably necessary to protect customers, including eligible contract participants, non-eligible contract participants, or any other class of customers. A registered digital asset exchange shall provide a competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process of trading on the registered digital asset exchange. A registered digital asset exchange shall establish and enforce compliance with 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 registered digital asset exchange. A registered digital asset exchange shall— establish and enforce compliance with 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 registered digital asset exchange; and procedures for trade processing of digital assets on or through the facilities of the registered digital asset exchange; and monitor trading in digital assets to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, and compliance, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions. A registered digital asset exchange shall— establish and enforce rules that will allow the registered digital asset exchange 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 registered digital asset exchange shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission or a registered entity, as is necessary and appropriate, including the authority to facilitate the liquidation or transfer of open positions in any digital asset or to suspend or curtail trading in a digital asset. A registered digital asset exchange shall provide to the Commission information that is determined by the Commission to be necessary to perform any responsibility of the Commission under this Act. A registered digital asset exchange shall make public timely information on price, trading volume, and other trading data on digital assets to the extent prescribed by the Commission. A registered digital asset exchange may make trading data freely accessible to the public under rules established by the Commission. A registered digital asset exchange shall be required to have the capacity to electronically capture and transmit trade information with respect to transactions executed on the registered digital asset exchange. A registered digital asset exchange shall— maintain records of all activities relating to the business of the registered digital asset exchange, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years; report to the Commission, in a form and manner acceptable to the Commission, such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under this Act; and keep any records relating to ancillary assets open to inspection and examination by the Securities and Exchange Commission. Subject to section 8, and on request, the Commission shall share information collected under subparagraph
(A)with— a self-regulatory organization; the Securities and Exchange Commission; an appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 )); a State bank supervisor (as defined in that section); a State securities or commodities regulator; the Financial Stability Oversight Council; the Department of Justice; and any other person that the Commission determines to be appropriate, including— foreign financial supervisors (including foreign futures authorities); foreign central banks; and foreign ministries. Before the Commission may share information with any entity described in subparagraph (B), the Commission shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in section 8 relating to the information on digital asset transactions that is provided. Each registered digital asset exchange shall provide to the Commission (including any designee of the Commission) information under subparagraph
(A)in such form and at such frequency as is required by the Commission. Unless necessary or appropriate to achieve the purposes of this Act, a registered digital asset exchange 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. A registered digital asset exchange shall— establish and enforce rules to minimize conflicts of interest in the decision-making process of the registered digital asset exchange; and establish a process for resolving conflicts of interest described in subparagraph (A). A registered digital asset exchange shall have adequate financial, operational, and managerial resources, as determined by the Commission, to discharge each responsibility of the registered digital asset exchange. A registered digital asset exchange shall possess financial resources that, at a minimum, exceed the total amount that would enable the registered digital asset exchange to conduct an orderly wind-down of the activities of the registered digital asset exchange. The Commission may require such additional financial resources as are necessary to enable a registered digital asset exchange that offers margined, leveraged, or financed transactions to fulfill the customer obligations of the registered digital asset exchange. A registered digital asset exchange shall establish governance arrangements that are transparent to fulfill public interest requirements. A registered digital asset exchange shall establish and enforce appropriate fitness standards for— directors; any individual or entity with direct access to the settlement activities of the registered digital asset exchange; any individual or entity with direct access to any custodian affiliated with the registered digital asset exchange; any entity offering affiliated services for the registered digital asset exchange; and any party affiliated with any individual or entity described in clauses
(i)through (iv). A registered digital asset exchange shall— establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational and security risks, through the development of appropriate controls and procedures and automated systems that— 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 registered digital asset exchange; and periodically conduct tests to verify that the backup resources of the registered digital asset exchange are sufficient to ensure continued— order processing and trade matching; price reporting; market surveillance; and maintenance of a comprehensive and accurate audit trail. If a proceeding under section 5e results in the suspension or revocation of the registration of a digital asset exchange, or if a digital asset exchange withdraws from registration, the Commission, after providing notice to the digital asset exchange, may apply to the district court of the United States for the judicial district in which the digital asset exchange is located for the appointment of a trustee. If the Commission applies to a court for appointment of a trustee under paragraph (1)— the court may take exclusive jurisdiction over— the digital asset exchange; and the records and assets of the digital asset exchange, wherever those records and assets are located; and if the court takes jurisdiction under subparagraph (A), the court shall appoint the Commission, or a person designated by the Commission, as trustee with power to take possession and continue to operate or terminate the operations of the digital asset exchange in an orderly manner for the protection of customers, subject to such terms and conditions as the court may prescribe. A registered digital asset exchange shall deposit with an entity described in section 4d(i)(1)(B) each digital asset that is— the property of a customer of the registered digital asset exchange; required to be held by the registered digital asset exchange under subsection (c)(2) or (d)(12); or otherwise required by the Commission to be so held to reasonably protect customers or promote the public interest. To promote responsible economic or financial innovation and fair competition, or protect customers, the Commission may exempt, either unconditionally or on stated terms or conditions or for stated periods, and retroactively, prospectively, or both, a registered digital asset exchange from the requirements of this section, if the Commission determines that— the exemption— will be consistent with the public interest and the purposes of this Act; and will not have a material adverse effect on the ability of the Commission or the registered digital asset exchange to discharge duties under this Act; or the registered digital asset exchange is subject to comparable, comprehensive regulation by the appropriate government authorities in the home country of the registered digital asset exchange. The Commission may grant an exemption under paragraph (1)— on the initiative of the Commission; or after receiving an application for the exemption by the registered digital asset exchange. Notwithstanding any other provision of law, the Commission shall have exclusive jurisdiction over the regulation and all other activities of a registered digital asset exchange. The Commission may prescribe rules to implement this section. . Section 4f(c) of the Commodity Exchange Act ( 7 U.S.C. 6f(c) ) is amended by adding at the end the following: A registered digital asset exchange shall not be required to register as a futures commission merchant for any activity for which the registered digital asset exchange is regulated under section 5i. .
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