Requirements for digital exchanges regarding treatment of customer assets

(a) Required standards and procedures Each digital exchange shall establish baseline accounting standards and procedures that are designed to protect and ensure the safety of covered assets of customers of the exchange. (b) Holding of customer assets (1) In general Each digital exchange shall hold the covered assets of each customer of the exchange in a manner that minimizes— (A) the risk of loss by the customer of any such covered asset; and (B) any delay in the customer accessing any such covered asset. (2) Segregation of funds (A) In general Each digital exchange shall treat and deal with all covered assets of a customer of the exchange that are received by the exchange as belonging to the customer. (B) Co-mingling prohibited Except as provided in subparagraph (C), with respect to any covered asset of a customer of a digital exchange, the exchange may not— (i) co-mingle that covered asset with assets that are not covered assets; or (ii) use that covered asset to margin, secure, or guarantee any trade or account of any person other than the customer for which that item is held. (C) Exceptions (i) In general A digital exchange may, for convenience, co-mingle and deposit a covered asset of a customer of the exchange in the same account as funds of the exchange with any bank, trust company, or qualified digital custodian. (ii) Withdrawal A digital exchange may withdraw from a bank, trust, or digital wallet account such share of a covered asset of a customer of the exchange as may be necessary in the ordinary course of business to margin, guarantee, secure, transfer, adjust, or settle a transaction regarding a digital asset or digital commodity with another digital exchange, including for the payment of a commission, a brokerage fee, interest, taxes, storage costs, or any other charge that lawfully accrues in connection with a digital commodity transaction. (iii) Substitution A customer may explicitly consent to a digital exchange substituting covered assets of the customer with certain other assets. (c) Enforcement (1) In general If, in the process of reviewing a report submitted to the Under Secretary under section 4(b) with respect to a digital exchange, the Under Secretary discovers that the digital exchange has violated a provision of this section, the Under Secretary, through the Office, shall impose a civil penalty on the digital exchange in the manner described in clauses (i), (ii), and (iii) of section 4(c)(1)(A) (subject to paragraph (2) of this subsection). (2) Rule of construction For the purposes of a civil penalty imposed under paragraph (1)— (A) an entity that is subject to the requirements of section 4(a), as described in section 4(c)(1)(A), shall be deemed to be an entity that is subject to the requirements of this section; and (B) the failure of an entity to satisfy the requirements of section 4(a), as described in section 4(c)(1)(A), shall be deemed to be a failure to satisfy the requirements of this section.