Qualified digital asset custodians

The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended by the preceding provisions of this Act, is amended by inserting after section 5i the following: 5j. Qualified digital asset custodians (a) In general A person is a qualified digital asset custodian for purposes of this Act if the person— (1) holds digital assets on behalf of a person registered under this Act or a customer of a person registered under this Act; and (2) is in compliance with subsections (b) and (c). (b) Supervision requirement A person is in compliance with this subsection if the person is subject to— (1) supervision and examination for custody and safekeeping of digital assets by an appropriate Federal banking agency, the National Credit Union Administration, the Commission, or the Securities and Exchange Commission; or (2) adequate supervision and appropriate regulation for custody and safekeeping of digital assets by— (A) a State bank supervisor (within the meaning of section 3 of the Federal Deposit Insurance Act); (B) a State officer, agency, or other entity which has primary regulatory authority over nondepository State trust companies; (C) a State credit union supervisor, as defined under section 6003 of the Anti-Money Laundering Act of 2020; or (D) an appropriate foreign governmental authority in the home country of such person. (c) Other requirements A person shall be in compliance with this subsection if: (1) Not otherwise prohibited The person has not been prohibited by its supervisor from engaging in an activity with respect to the custody and safekeeping of digital assets. (2) Information sharing (A) In general The person shares information with the Commission on request and complies with such requirements for periodic sharing of information regarding customer accounts that the person holds on behalf of an entity registered with the Commission as the Commission determines by rule are reasonably necessary to effectuate any of the provisions, or to accomplish any of the purposes, of this Act. (B) Provision of information If the person is subject to regulation and examination by an appropriate Federal banking agency, the person may satisfy any information request described in subparagraph (A) by providing the Commission with a detailed listing, in writing, of the digital assets of a customer in the custody of, or use by, the person. (3) Rulemaking for CFTC entities (A) In general The Commission shall prescribe rules to permit a person registered with the Commission to be a qualified digital asset custodian in compliance with this section. (B) Content In prescribing the rules under subparagraph (A), the Commission shall require a person registered with the Commission to— (i) implement requirement consistent with the requirements in subsection (d)(1); (ii) establish sufficient system safeguards; (iii) prevent or mitigate conflicts of interest, as appropriate; and (iv) establish separate governance arrangements for the custodial function of the entity. (d) Adequate supervision and appropriate regulation (1) In general For purposes of subsection (b), the terms adequate supervision and appropriate regulation mean such minimum standards for supervision and regulation as are reasonably necessary to protect the digital assets held by a person registered under this Act, including standards relating to the licensing, examination, and supervisory processes that require the person to, at a minimum— (A) receive a review and evaluation of ownership, character and fitness, conflicts of interest, business model, financial statements, funding resources, and policies and procedures of the person; (B) hold capital sufficient for the financial integrity of the person; (C) protect customer assets; (D) establish and maintain books and records regarding the business of the person; (E) submit financial statements and audited financial statements to the applicable supervisor described in subsection (b); (F) provide disclosures to the applicable supervisor described in subsection (b) regarding actions, proceedings, and other items as determined by the supervisor; (G) maintain and enforce policies and procedures for compliance with applicable State and Federal laws, including those related to anti-money laundering and cybersecurity; (H) establish a business continuity plan to ensure functionality in cases of disruption; and (I) establish policies and procedures to resolve complaints. (2) Rulemaking with respect to definitions (A) In general For purposes of this section, the Commission may, by rule, further define the terms adequate supervision and appropriate regulation as necessary and appropriate for the protection of customers, and consistent with the purposes of this Act. (B) Existing digital asset custodians A trust company operating as a digital asset custodian before the effective date of a rulemaking under subparagraph (A) is deemed subject to adequate supervision and appropriate regulation if— (i) the trust company is expressly permitted by a State bank supervisor to engage in the custody and safekeeping of digital assets; (ii) the State bank supervisor has established licensing, examination, and supervisory processes that require the trust company to, at a minimum, meet the conditions described in subparagraphs (A) through (I) of paragraph (1); and (iii) the trust company is in good standing with its State bank supervisor. (C) Transition period for certain custodians In implementing the rulemaking under subparagraph (A), the Commission shall provide a transition period of not less than 2 years for any trust company that is deemed subject to adequate supervision and appropriate regulation under subparagraph (B) on the effective date of the rulemaking. (e) Authority to temporarily suspend standards The Commission may, by rule or order, temporarily suspend, in whole or in part, any requirement imposed under, or any standard referred to in, this section, or any requirement to utilize a qualified digital asset custodian, if the Commission determines that the suspension would be consistent with the public interest and the purposes of this Act..