Sec. 501. Responsible consumer protection
732 words·~3 min read·
/bill/117/s/4356/is/section-501A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Chapter 98 of title 31, United States Code, as added by section 101(a) of this Act, is amended by adding at the end the following: A person or protocol that provides digital asset services shall ensure that the scope of permissible transactions that may be undertaken with customer digital assets is disclosed clearly in a customer agreement. A person who provides digital asset services shall provide clear notice to each customer, and require acknowledgment, of the following: Prior to the implementation of any updates, material source code version changes relating to digital assets, except in emergencies, which may include security vulnerabilities.
Whether customer digital assets are segregated from other customer assets and the manner of segregation. How the assets of the customer would be treated in a bankruptcy or insolvency scenario and the risks of loss. The time period and manner in which the person is obligated to return the digital asset of the customer upon the request of the customer. Applicable fees. The dispute resolution process of the person. In this subsection: The term subsidiary proceeds includes forks, airdrops, staking, and other gains that accrue to a digital asset through market transactions, use as a financial asset, or being held in custody or safekeeping by a person who provides digital asset services.
The term agreement includes the standard terms of service of the person who provides digital asset services. Except as otherwise specified by an agreement with a customer, all ancillary or subsidiary proceeds relating to digital asset services provided to a customer shall accrue to the benefit of the customer in accordance with paragraph (3). A person who provides digital asset services may elect not to collect certain subsidiary proceeds if the election is disclosed in an agreement with the customer.
A customer may withdraw digital assets in a method that permits the collection of the subsidiary proceeds. A person who provides digital asset services shall enter into an agreement with a customer, if desired by the customer, regarding the manner in which to invest subsidiary proceeds or other gains attributable to the digital assets of the customer. A person who provides digital asset services shall ensure any lending arrangements relating to digital assets are— clearly disclosed to customers before any lending services take place; subject to the affirmative consent of the customer; fully enforceable as a matter of commercial law; accompanied by full disclosures of applicable terms and risks, yield, and the manner in which the yield is calculated; accompanied by appropriate disclosures relating to collateral requirements and policies, including— haircuts and overcollateralization requirements; collateral the person accepts when calling for additional collateral from a customer, including collateral substitution; whether customer collateral is commingled with the collateral of other customers or of the person; and how customer collateral is invested, and whether the yield belongs to the customer or to the person; accompanied by disclosures of mark-to-market and monitoring arrangements, including— the frequency of mark-to-market monitoring and how frequently the person will call for additional collateral from a customer; the time period in which the customer must supply additional collateral to the person after a collateral call; and whether the person permits failures to deliver such collateral, and in the event of a failure to deliver the period of time in which the customer must cure the failure to deliver before the customer’s position is closed; and compliant with all applicable Federal and State laws.
In this subsection, the term rehypothecation means the pledging of an asset as collateral for a financial transaction by a person after the pledging of the asset as collateral by a customer of that person. Before rehypothecating a digital asset, a person who provides digital asset services to a customer shall clearly disclose policies on rehypothecation to customers, including a clear definition of rehypothecation that is accessible to consumers. The person who provides digital asset services to a customer shall obtain affirmative consent and consider the following factors to appropriately mitigate risk relating to rehypothecation:
The liquidity and volatility of a digital asset. Past failures to deliver a particular digital asset. Concentration risk. Whether an issuer or lender of last resort relating to a digital asset exists, including for virtual currency with a finite supply. The capital, leverage and market position of the person. The legal obligations of the person to customers and other persons in the market who provide digital asset services. .