,,ii #aahth ,,congress #ast ,session ,s4 #bcee ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,july #ah1 #bjbc,mr4 ,reed 7for himself1 ,mr4 ,rounds1 ,mr4 ,warner1 and ,mr4 ,romney7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to clarify the applicability of sanctions and antimoney laundering compliance obligations to ,united ,states persons in the decentralized finance technology sector and virtual currency kiosk operators1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,crypto-,asset ,national ,security ,enhancement and ,enforcement ,act of #bjbc4 #b4 ,decentralized finance national security enhancement 7a7 ,definitions ,in this section3 7#a7 ,control ,the term control1 with respect to a digital asset protocol1 includes the power1 directly or indirectly1 to direct a change in the computer code or other terms governing the operation of the protocol1 as determined by the ,secretary of the ,treasury4 ,such power may be exercised through ownership of governance tokens1 administrator privileges1 ability to alter or upgrade computer code1 or otherwise4 7#b7 ,digital asset ,the term digital asset means any digital representation of value that is recorded on a cryptographically secured distributed ledger or any similar technology or another implementation1 which was designed and built as part of a system to leverage or replace blockchain1 distributed ledger technology1 or their derivatives4 7#c7 ,digital asset protocol ,the term digital asset protocol means any communication protocol1 smart contract1 or other software-- 7,a7 deployed through the use of distributed ledger or similar technology2 and 7,b7 that provides a mechanism for users to interact and agree to the terms of a trade for digital assets4 7#d7 ,digital asset protocol backer 7,a7 ,in general ,the term digital asset protocol backer means any person that-- 7i7 holds governance tokens of a digital asset protocol valued at more than #be1jjj1jjj 7subject to adjustment under subparagraph 7,b772 or 7ii7 makes-- 7,i7 an investment in the development of a digital asset protocol of #be1jjj1jjj 7subject to adjustment under subparagraph 7,b77 or more2 or 7,,ii7 any combination of investments in the development of a digital asset protocol if-- 7aa7 any such investment is not less than #b1ejj1jjj 7subject to adjustment under subparagraph 7,b772 and 7bb7 such investments1 in the aggregate1 equal or exceed #be1jjj1jjj 7subject to adjustment under subparagraph 7,b77 in any #ab-month period4 7,b7 ,adjustment of thresholds ,the ,secretary of the ,treasury may adjust any dollar amount specified in clause 7i7 or 7ii7 of subparagraph 7,a7 if1 before the increase takes effect1 the ,secretary notifies the following committees of the increase3 7i7 ,the ,committee on ,banking1 ,housing1 and ,urban ,affairs and the ,committee on ,foreign ,relations of the ,senate4 7ii7 ,the ,committee on ,financial ,services and the ,committee on ,foreign ,affairs of the ,house of ,representatives4 7,c7 ,valuation of governance tokens 7i7 ,in general ,for purposes of subparagraph 7,a71 the procedures and criteria to be used in determining the valuation of governance tokens may1 as determined by the ,securities and ,exchange ,commission in regulations-- 7,i7 require a minimum trading period2 7,,ii7 rely on sales in a private market2 or 7,,iii7 rely on secondary market trades through a financial institution 7as defined in section #ajaj4ajj7t7 of title #ca1 ,code of ,federal ,regulations 7or a successor regulation774 7ii7 ,consultation required ,the ,securities and ,exchange ,commission shall consult with the ,secretary of the ,treasury before prescribing regulations under clause 7i74 7iii7 ,certification required ,each digital asset protocol backer described in paragraph 7#d7 or in section #ecab7;a77#b77;,,aa7 of title #ca1 ,united ,states ,code1 as amended by subsection 7c7 of this section1 shall submit to the ,securities and ,exchange ,commission and the ,secretary of the ,treasury an annual certification with respect to the value of the governance tokens of the digital asset protocol held by the digital asset protocol backer1 beginning on the earlier of-- 7,i7 the date on which the value of those governance tokens equals or exceeds the dollar amount specified in subparagraph 7,a77i71 as may be adjusted by the ,secretary of the ,treasury2 or 7,,ii7 the date on which the ,securities and ,exchange ,commission or the ,secretary of the ,treasury request information about the valuation of the governance tokens4 7#e7 ,digital asset transaction facilitator ,the term digital asset transaction facilitator means any person that-- 7,a7 controls a digital asset protocol1 as determined by the ,secretary of the ,treasury2 or 7,b7 makes available an application designed to facilitate transactions using a digital asset protocol4 7#f7 ,united states person ,the term ,united ,states person means any ,united ,states citizen1 permanent resident alien1 entity organized under the laws of the ,united ,states or any jurisdiction within the ,united ,states 7including foreign branches71 or any person in the ,united ,states4 7b7 ,applicability of sanctions compliance obligations to united states persons in the decentralized finance sector 7#a7 ,in general ,in the case of a violation described in paragraph 7#b7 that is conducted through the use of a digital asset protocol1 each person described in paragraph 7#c7 shall be subject to the penalties set forth in subsections 7b7 and 7c7 of section #bjf of the ,international ,emergency ,economic ,powers ,act 7#ej ,u4,s4,c4 #agje7 to the same extent as a person that commits an unlawful act described in subsection 7a7 of that section4 7#b7 ,violations described ,a violation described in this paragraph is a violation of a license1 order1 regulation1 or prohibition issued to implement sanctions administered by the ,office of ,foreign ,assets ,control4 7#c7 ,persons described ,a person described in this paragraph is a ,united ,states person that is a digital asset transaction facilitator or a digital asset protocol backer of a digital asset protocol used in a violation described in paragraph 7#b74 7#d7 ,exemption for controlled decentralized finance protocols ,a digital asset protocol backer shall not be subject to paragraph 7#a7 for a violation described in paragraph 7#b7 if the ,secretary has determined that the digital asset protocol is controlled by a digital asset transaction facilitator or by another person1 who may be appointed by contract or another means4 7#e7 ,applicability ,paragraph 7#a7 shall apply with respect to violations described in paragraph 7#b7 that occur on or after the date that is #ij days after the date of the enactment of this ,act4 7c7 ,bank secrecy act application to the decentralized finance sector 7#a7 ,in general ,section #ecab7;a77#b7 of title #ca1 ,united ,states ,code1 as amended by section #faaj7;a77#a7 of the ,anti-,money ,laundering ,act of #bjbj 7division ,f of ,public ,law #aaf-bhc71 is amended-- 7,a7 in subparagraph 7,z71 by striking or at the end2 7,b7 by redesignating subparagraph 7,,aa7 as subparagraph 7,,bb72 and 7,c7 by inserting after subparagraph 7,z7 the following3 7,,aa7 a digital asset transaction facilitator or a digital asset protocol backer of a digital asset protocol2 or 4 7#b7 ,effective date ,subparagraph 7,,aa7 of section #ecab7;a77#b7 of title #ca1 ,united ,states ,code1 as added by subsection 7a71 shall take effect on the day after the effective date of the final rules issued by the ,secretary of the ,treasury pursuant to section #faaj7;b7 of the ,anti-,money ,laundering ,act of #bjbj 7division ,f of ,public ,law #aaf-bhc74 7#c7 ,exemption for controlled decentralized finance protocols ,the ,secretary of the ,treasury may exercise the exemptive authority under section #ecah7;a77#g7 of title #ca1 ,united ,states ,code1 with respect to a digital asset protocol backer of a digital asset protocol1 if-- 7,a7 the ,secretary of the ,treasury finds that such digital asset protocol is controlled by a digital asset transaction facilitator or by another person1 who may be appointed through contract or other means2 and 7,b7 the digital asset transaction facilitator or other person described in subparagraph 7,a7 is subject to the requirements under this section and regulations prescribed under this section for transactions conducted through the use of such digital asset protocol4 #c4 ,prohibitions or conditions on certain transmittals of funds ,section #ecah;,a of title #ca1 ,united ,states ,code1 is amended-- 7#a7 in subsection 7a77#b77;,c71 by striking subsection 7b77#e7 and inserting paragraphs 7#e7 and 7#f7 of subsection 7b72 and 7#b7 in subsection 7b7-- 7,a7 in paragraph 7#e71 by striking for or on behalf of a foreign banking institution2 and 7,b7 by adding at the end the following3 7#f7 ,prohibitions or conditions on certain transmittals of funds ,if the ,secretary finds a jurisdiction outside of the ,united ,states1 #a or more financial institutions operating outside of the ,united ,states1 #a or more types of accounts within1 or involving1 a jurisdiction outside of the ,united ,states1 or #a or more classes of transactions within1 or involving1 a jurisdiction outside of the ,united ,states to be of primary money laundering concern1 the ,secretary1 in consultation with the ,secretary of ,state1 the ,attorney ,general1 and the ,chairman of the ,board of ,governors of the ,federal ,reserve ,system1 may prohibit1 or impose conditions upon1 certain transmittals of funds 7to be defined by the ,secretary71 to or from any domestic financial institution or domestic financial agency if such transmittal of funds involves any such jurisdiction1 institution1 class of transaction1 or type of account4 4 #d4 ,virtual currency kiosk national security enhancement 7a7 ,definitions ,in this section3 7#a7 ,virtual currency ,the term virtual currency means any digital representation of value that is recorded on a cryptographically secured distributed ledger or any similar technology or another implementation1 which was designed and built as part of a system to leverage or replace blockchain1 distributed ledger technology1 or their derivatives4 7#b7 ,virtual currency transfer ,the term virtual currency transfer means a withdrawal1 exchange1 or other payment or transfer that involves a transaction in virtual currency4 7#c7 ,virtual currency kiosk ,the term virtual currency kiosk means a stand-alone machine that facilitates a virtual currency transfer4 7#d7 ,virtual currency kiosk operator ,the term virtual currency kiosk operator means any person who operates a virtual currency kiosk at which consumers initiate virtual currency transfers4 7b7 ,antimoney laundering 7#a7 ,in general ,except as provided in paragraph 7#b71 before effecting any virtual currency transfer1 a virtual currency kiosk operator shall verify and record1 at a minimum1 the name and physical address of the-- 7,a7 consumer1 which shall include review of an official document evidencing nationality or residence that includes a photograph of the consumer2 and 7,b7 counterparty to such transfer4 7#b7 ,exception ,paragraph 7#a7 shall not apply to a counterparty described in paragraph 7#a77;,b7 that conducts a virtual currency transfer using a wallet held at a financial institution1 as defined in section #ecab of title #ca1 ,united ,states ,code1 that is subject to the requirements of subchapter ,,ii of title #ca1 ,united ,states ,code4 7c7 ,rulemaking ,not later than #cfj days after the date of enactment of this ,act1 the ,financial ,crimes ,enforcement ,network shall promulgate regulations requiring each virtual currency kiosk operator to-- 7#a7 furnish to the ,financial ,crimes ,enforcement ,network a list of the locations1 including physical addresses1 of all virtual currency kiosks that are owned or operated by such operator2 and 7#b7 update the list described in paragraph 7#a7 every #ij days4