S. 4064 — Digital Commodity Intermediaries Act

This section amends section 1a of the Commodity Exchange Act (7 U.S.C. 1a) by redesignating existing paragraphs and inserting new definitions for terms including associated person of a digital commodity broker, associated person of a digital commodity dealer, blockchain, blockchain application, blockchain protocol, blockchain system, decentralized finance messaging system, decentralized finance trading protocol, and decentralized governance system.

This section establishes definitions for terms used throughout this Act, including blockchain, decentralized finance messaging system, decentralized finance trading protocol, decentralized governance system, digital asset, digital commodity, digital commodity broker, digital commodity dealer, digital commodity exchange, and mixed digital asset transaction, by incorporating the meanings given to those terms in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).

This section directs the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to conduct multiple rulemakings on digital commodities. It requires the CFTC to further define terms including associated person of a digital commodity broker, blockchain, blockchain protocol, decentralized finance trading protocol, and digital commodity. It mandates joint CFTC-SEC rules to exempt dually registered persons from duplicative or conflicting requirements when doing so would foster fair markets, protect customers, and safeguard investors; to address mixed digital asset transactions; and, not later than 180 days after enactment, to issue rules, procedures, or guidance on delisting assets inconsistent with the Commodity Exchange Act or securities laws. Not later than 360 days after enactment, the agencies shall jointly issue rules facilitating portfolio margining of securities, security-based swaps, futures, swaps, and digital commodities across broker-dealer, futures commission merchant, swap dealer, and digital commodity accounts, after considering public comments and consulting with the Federal Reserve, FDIC, and OCC. Not later than 17 months after enactment, the CFTC shall issue rules establishing minimum standards to identify, mitigate, and resolve conflicts of interest, including governance and financial separations among affiliated entities, prohibitions on self-dealing, customer asset safeguards, and independent oversight.

This section requires any person acting as a digital commodity exchange, broker, or dealer to register with the Commodity Futures Trading Commission (CFTC) after the end of a 90-day period beginning on the date the CFTC adopts an expedited registration process, which the CFTC must establish by rule, regulation, or order no later than 180 days after enactment. Registered persons enter provisional status until 270 days after the final effective date of the rulemakings required under sections 4u or 5i of the Commodity Exchange Act, during which they must pay all applicable CFTC fees, remain subject to the requirements of this section and the Commodity Exchange Act, and may continue to offer or trade digital assets listed before registration until the rulemaking on definitions under section 103(a) takes effect (except for assets required to be delisted under the joint process in section 103(e)). The CFTC may exempt provisional registrants from requirements to promote innovation, fair competition, or customer protection. Beginning 30 days after enactment, any such person must prominently disclose in customer documents that it is not registered with or regulated by the CFTC, unless it has completed registration under this section.

This section preserves the applicability of the Commodity Exchange Act to futures contracts, swaps, security futures products, options, retail forex transactions, and leverage transactions, as well as to the activities of any person with respect to such instruments. It prohibits a digital commodity exchange, broker, or dealer from engaging in any such activity solely by virtue of registration under this Act. It further provides that an agreement, contract, or transaction subject to the Commodity Exchange Act is not regulated as a digital commodity agreement solely because it is issued, recorded, represented, or transferred on a blockchain or similar technology.

This section expands the prohibitions on certain trading practices under section 4c(a) of the Commodity Exchange Act to contracts for the sale of digital commodities.

This section directs the Commodity Futures Trading Commission to consult and coordinate with foreign regulatory authorities on consistent international standards for the regulation of digital commodities and authorizes the Commission to enter into information-sharing arrangements necessary or appropriate for the protection of investors, customers, and users of digital commodities.

This section directs the Commodity Futures Trading Commission and the Securities and Exchange Commission to promulgate rules and regulations required under this Act not later than 17 months after the date of enactment. It authorizes the Commissions to take preparatory actions before applicable effective dates, including promulgating rules, conducting studies, registering persons, and granting exemptions, provided such actions do not become effective earlier than otherwise specified. It also expresses the sense of Congress that the Commodity Futures Trading Commission should be fully constituted with at least two Commissioners nominated after consultation with the ranking minority member of the Senate Committee on Agriculture, Nutrition, and Forestry and be appropriately staffed prior to implementation.

This section provides that the Act and amendments made by the Act take effect 17 months after the date of enactment, except that provisions requiring rulemaking take effect on the later of 17 months after enactment or 120 days after publication of the final rule in the Federal Register.

This section expresses the sense of Congress that nothing in the Act or any amendment made by the Act authorizes any entity to regulate any commodity other than a digital commodity on any spot market.

This section adds a savings clause to section 2(a)(1) of the Commodity Exchange Act preserving the Commission's existing authority over futures contracts, swaps, security futures products, options, leverage transactions, and other enumerated agreements, contracts, or transactions, even when issued, recorded, or transferred on blockchain or similar technology. It limits the Commission's authority over permitted payment stablecoins issued by permitted issuers under the GENIUS Act. It further establishes the Commission's exclusive jurisdiction over cash or spot digital commodity transactions offered, traded, or executed on or by registered entities or persons, subject to exceptions for banking-regulated custodial activities, securities or investment contracts, and mixed digital assets; requires rulemaking on leverage, margin, or financing in digital commodity spot markets; authorizes exemptions for digital commodity exchanges and brokers; and applies the Act to permitted payment stablecoin transactions on registered platforms as if they were digital commodities.

This section requires futures commission merchants to hold customer property that consists of digital assets with a qualified digital asset custodian. It amends the Commodity Exchange Act to permit such custodians (in addition to banks and trust companies) to hold customer funds or property and adds an explicit requirement that any digital asset customer property be segregated and held only with a qualified digital asset custodian.

This section modifies certification procedures under section 5c of the Commodity Exchange Act to cover digital commodity exchanges and establishes a new self-certification process for listing digital commodities in cash or spot markets. Eligible entities must submit a written certification analyzing compliance with section 5i(c)(3) requirements, which becomes effective after 20 business days for new or modified certifications or 1 business day for previously certified commodities (unless the Commission disapproves with a public, detailed analysis of inconsistencies with the Act). The Commission may extend review once by 30 business days for novel or complex issues and once more by 30 business days for additional concerns, and persons seeking registration may request prior approval with a Commission deadline of 90 business days.

This section establishes a registration regime under the Commodity Exchange Act for trading facilities that offer or seek to offer a cash or spot market in at least one digital commodity. A facility must register with the Commodity Futures Trading Commission unless it serves only customers in a single State or territory, engages in no more than a de minimis amount of trading activity, or is already registered as a designated contract market and provides notice of its digital commodity activities. The Commission must issue rules governing application contents, including governance, systems safeguards, surveillance, and conflict management, as well as rules to address duplicative requirements, conflicts of interest in vertically integrated structures, and portfolio margining for entities with multiple registrations. The section applies sections 4b, 4c, and 4b-1 of the Commodity Exchange Act to agreements, contracts, or transactions in digital commodities. It prohibits a digital commodity exchange or its affiliate from trading on the exchange for its own account, subject to exceptions for customer-directed transactions, liquidity provision meeting expected customer demand, and risk-mitigating hedging, with the Commission required to adopt rules imposing conditions to protect customers and maintain fair markets.

This section establishes registration and regulatory requirements for digital commodity brokers and dealers under the Commodity Exchange Act. It makes it unlawful for any person to act in either capacity without registering with the Commission, while exempting de minimis activity, single-state operations, and certain futures commission merchants that provide notice and comply with applicable rules. The Commission must prescribe rules to address duplicative requirements for multi-registered entities, conflicts of interest in vertically integrated structures, and portfolio margining, and all registrants must join a registered futures association. The provision also sets ongoing registration, reporting, and recordkeeping obligations; bars statutorily disqualified associated persons from effecting transactions; requires minimum capital levels that meet the stricter of CFTC or SEC standards; limits trading to digital commodities not readily susceptible to manipulation; and directs the Commission to issue execution rules addressing fair pricing, information disclosure, price discovery, and protections for non-eligible contract participants.

This section expands registration requirements under the Commodity Exchange Act to associated persons of digital commodity brokers and digital commodity dealers. It prohibits any person from acting in such a role unless registered with the Commodity Futures Trading Commission and makes it unlawful for a digital commodity broker or dealer to permit association with an unregistered person if the firm knew or should have known of the registration lapse.

This section limits the application of the Commodity Exchange Act to persons engaging in specified activities related to blockchain systems or decentralized finance trading protocols. It exempts compiling or relaying network transactions, operating nodes or oracles, providing user interfaces for blockchain data, developing or distributing blockchain systems or DeFi messaging systems, administering DeFi trading protocols or liquidity pools for spot digital commodity transactions, and developing or distributing software or wallets that enable users to custody their own digital assets or private keys. The limitation does not affect the Commodity Futures Trading Commission’s anti-fraud, anti-manipulation, or false reporting enforcement authorities.

This section expands portfolio margining authority under the Commodity Exchange Act by applying customer fund segregation rules to cleared swaps and by including digital commodities and cleared swaps accounts in provisions governing commodity broker debtors.

This section modifies the treatment of customer property in commodity broker bankruptcies under the Commodity Exchange Act by adding broker estate assets—including trading or operating accounts and commodities held in inventory—to the pool of customer property. Such assets may be used only to the extent other customer property is insufficient to satisfy public customers’ net equity claims and remain subject to any unavoidable security interests or contractual offset and netting rights.

This section establishes a fee collection system under which the Commodity Futures Trading Commission assesses and collects registration and annual fees from digital commodity exchanges, brokers, dealers, and qualified digital asset custodians to recover the costs of registration, oversight, customer education and outreach, and other implementation activities required by the Digital Commodity Intermediaries Act. The Commission must set fee rates based on each entity’s volume of business and registration category, publish the rates annually in the Federal Register, adjust them each year to match appropriations, and deposit the fees as offsetting collections; the Commission may not require entities to collect transaction-based fees directly from customers and may not use the fees for unrelated activities. This section also directs the Commission to provide education and outreach to customers in digital commodity markets, authorizes appropriations of $150,000,000 (available until expended) until fee collections begin, and grants the Commission expedited hiring authority to appoint individuals with specialized knowledge of digital commodities markets to competitive service positions without regard to standard competitive service appointment rules.

This section establishes the Office of the Digital Commodity Retail Advocate within the Commodity Futures Trading Commission. The Digital Commodity Retail Advocate is appointed by and reports directly to the Chairman, receives compensation equal to the highest rate for other senior executives reporting to the Chairman, and is subject to a 2-year pre-appointment and 5-year post-service employment restriction with the Commission. The Advocate assists retail participants (i.e., non-eligible contract participants engaging in spot or cash digital commodity transactions with Commission-registered persons) in resolving problems with the Commission or registered futures associations, identifies areas for regulatory changes, analyzes the impact of proposed Commission regulations and association rules on retail participants, proposes legislative and administrative changes, conducts related research, and cooperates on outreach initiatives. The Advocate must submit an objectives report by June 30 and an activities report by December 31 each year, with detailed statistical and substantive analysis, directly to the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Agriculture without prior Commission review.

This section directs the Commodity Futures Trading Commission to examine the racial, ethnic, and gender demographics of customers participating in digital commodity markets and, within 180 days of enactment, submit a report to the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Agriculture. The report must describe how those demographics will inform Commission rules on customer protection, propose outreach methods to historically underserved customers, and include related policy recommendations, after seeking input from market participants, customers, and consumer advocates.