Sec. 106. Notice of intent to register for digital commodity exchanges, brokers, and dealers
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/bill/118/hr/4763/rfs/section-106·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Any person may file a notice of intent to register with the Commodity Futures Trading Commission (in this subsection referred to as the Commission ) as a— digital commodity exchange, for a person intending to register as a digital commodity exchange under section 5i of the Commodity Exchange Act; digital commodity broker, for a person intending to register as a digital commodity broker under section 4u of such Act; or digital commodity dealer, for a person intending to register as a digital commodity dealer under section 4u of such Act. A person filing a notice of intent to register under paragraph
(1)shall be in compliance with this section if the person— submits to the Commission and continues to materially update a statement of the nature of the registrations the filer intends to pursue; submits to the Commission and continues to materially update the information required by subsections
(b)and (c); complies with subsection (d); is a member of a futures association registered under section 17 of the Commodity Exchange Act, and complies with the rules of the association, including the rules of the association pertaining to customer disclosures and protection of customer assets; and pays all fees and penalties imposed on the person under section 510 of this Act. A person filing a notice of intent to register under subsection
(a)shall disclose to the Commission the following: Information concerning the management of the person, including information describing— the ownership and management of the person; the financial condition of the person; affiliated entities; potential conflicts of interest; the address of the person, including— the place of incorporation; principal place of business; and an address for service of process; and a list of the States in which the person has operations. Information concerning the operations of the person, including— a general description of the person’s business and the terms of service for United States customers; a description of the person’s account approval process; any rulebook or other customer order fulfilment rules; risk management procedures; a description of the product listing process; and anti-money laundering policies and procedures. A person filing a notice of intent to register under subsection
(a)shall provide to the Commission and the Securities and Exchange Commission a detailed description of— the specific characteristics of each digital asset listed or offered by the person, including information regarding the digital asset’s market activity, distribution, and functional use; and the product listing determination made by the person for each asset listed or offered for trading by the person. A person filing a notice of intent to register under subsection
(a)shall comply with the following requirements: Except to the extent otherwise specifically provided by Commission or registered futures association rule, regulation, or order, the person shall not permit an individual who is subject to a statutory disqualification under paragraph
(2)or
(3)of section 8a of the Commodity Exchange Act to effect or be involved in effecting transactions on behalf of the person, if the person knew, or in the exercise of reasonable care should have known, of the statutory disqualification. The person shall keep their books and records open to inspection and examination by the Commission and by any registered futures association of which the person is a member. The person shall disclose to customers— information about the material risks and characteristics of the assets listed for trading on the person; information about the material risks and characteristics of the transactions facilitated by the person; information about the location and manner in which the digital assets of the customer will be and are custodied; information concerning the policies and procedures of the person that are related to the protection of the data of customers of the person; and in their disclosure documents, offering documents, and promotional material— in a prominent manner, that they are not registered with or regulated by the Commission; and the contact information for the whistleblower, complaint, and reparation programs of the Commission. The person shall— hold customer money, assets, and property in a manner to minimize the risk of loss to the customer or unreasonable delay in customer access to money, assets, and property of the customer; treat and deal with all money, assets, and property, including any rights associated with any such money, assets, or property, of any customer received as belonging to the customer; calculate the total digital asset obligations of the person, and at all times hold money, assets, or property equal to or in excess of the total digital asset obligations; and not commingle such money, assets and property held to meet the total commodity obligation with the funds of the person or use the money, assets, or property to margin, secure, or guarantee any trade or contract, or to secure or extend the credit, of any customer or person other than the one for whom the same are held, except that— the money, assets, and property of any customer may be commingled with that of any other customer, if separately accounted for; and the share of the money, assets, and property, as in the normal course of business are necessary to margin, guarantee, secure, transfer, adjust, or settle a contract of sale of a commodity asset, may be withdrawn and applied to do so, including the payment of commissions, brokerage, interest, taxes, storage, and other charges lawfully accruing in connection with the contract of sale of a digital commodity. This section shall not prevent or be construed to prevent the person from adding to the customer money, assets, and property required to be segregated under subparagraph (A), additional amounts of money, assets, or property from the account of the person as the person determines necessary to hold money, assets, or property equal to or in excess of the total digital asset obligations of the person. Any money, assets, or property deposited pursuant to clause
(i)shall be considered customer property within the meaning of this subsection. A person who has filed a notice of intent to register under this section and is in compliance with this section shall be exempt from Securities and Exchange Commission rules and regulations pertaining to registering as a national securities exchange, broker, dealer, or clearing agency, for activities related to a digital asset. Paragraph
(1)shall not apply if, after notice from the Commission and a reasonable opportunity to correct the deficiency, a person who has submitted a notice of intent to register is not in compliance with this section. Paragraph
(1)shall not be construed to limit any anti-fraud, anti-manipulation, or false reporting enforcement authority of the Commission, the Securities and Exchange Commission, a registered futures association, or a national securities association. Paragraph
(1)shall not be construed to limit the authority of the Commission and the Securities and Exchange Commission to jointly require a person to delist an asset for trading if the Commission and the Securities and Exchange Commission determines that the listing is inconsistent with the Commodity Exchange Act, the securities laws (including regulations under those laws), or this Act. A person may not file a notice of intent to register with the Commission after the Commission has finalized its rules for the registration of digital commodity exchanges, digital commodity brokers, or digital commodity dealers, as appropriate. Subsection (e)(1) shall not apply to a person who has submitted a notice of intent to register if— the Commission— determines that the person has failed to comply with the requirements of this section; or denies the application of the person to register; or the digital commodity exchange, digital commodity broker, or digital commodity dealer that filed a notice of intent to register failed to apply for registration as such with the Commission within 180 days after the effective date of the final rules of the Commission for the registration of digital commodity exchanges, digital commodity brokers, or digital commodity dealers, as appropriate. Within 180 days after the date of the enactment of this Act, a registered futures association shall adopt and enforce rules applicable to persons required by subsection (a)(3) to be members of the association. The rules adopted under paragraph
(1)may provide for dues in accordance with section 17(b)(6) of the Commodity Exchange Act. A registered futures association shall submit to the Commission any rule adopted under paragraph (1), which shall take effect pursuant to the requirements of section 17(j) of the Commodity Exchange Act. It shall be unlawful for any person to provide false information in support of a filing under this section if the person knew or reasonably should have known that the information was false. For purposes of section 23 of the Commodity Exchange Act, the term this Act includes this section.