The "Financial Innovation and Technology for the 21st Century Act" is a proposed bill that aims to set rules and guidelines for digital assets, including cryptocurrencies and digital commodities, by establishing definitions, regulatory procedures, and requirements for registration with financial authorities like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It also includes measures for improving digital asset market infrastructure and increasing financial literacy among digital asset holders.

This section amends the Securities Act of 1933 to define a variety of terms related to digital assets and blockchain technology, such as "affiliated person," "blockchain," and "decentralized governance system." It specifies conditions for entities involved with digital assets, including issuers and related persons, and sets rules for defining and handling digital assets, like stablecoins and digital commodities, within the context of securities laws.

The section amends the Securities Exchange Act of 1934 by introducing definitions for several terms related to digital assets, such as 'digital asset broker,' 'digital asset custodian,' and 'digital asset dealer.' It also specifies the meaning of the 'Bank Secrecy Act' and includes various terms from the Securities Act of 1933 and the Commodity Exchange Act.

The section provides definitions related to digital commodities under the Commodity Exchange Act. It introduces terms such as "digital commodity," "digital commodity broker," and "digital commodity dealer," among others, and describes what entities and activities are included or excluded under these definitions.

The section provides definitions for various terms used in the Act, specifying that some terms related to digital commodities are defined by the Commodity Exchange Act, terms associated with securities and digital assets follow the definitions in the Securities Act of 1933, and certain terms linked to digital asset trading are defined by the Securities Exchange Act of 1934.

The section requires the Commodity Futures Trading Commission and the Securities and Exchange Commission to jointly create rules for defining certain digital asset terms, exempting certain registered persons from burdensome regulations, and managing mixed digital asset transactions. It also prohibits rules that prevent Americans from self-custody of digital assets, provides guidelines for delisting assets, and sets capital requirements for persons registered with both agencies.

Any person who wants to register as a digital commodity exchange, broker, or dealer with the Commodity Futures Trading Commission (CFTC) must declare their intentions and comply with a set of requirements such as disclosing management and operational information, adhering to customer protection rules, and keeping accurate records. If they follow all the rules, they will be exempt from certain Securities and Exchange Commission (SEC) regulations for digital asset activities, but they still have to act honestly and manage customer assets responsibly.

Any person who wants to register as a digital asset broker, dealer, or trading system with the Securities and Exchange Commission (SEC) must follow specific rules like disclosing information about their management and operations, ensuring customer asset protection, and complying with registration requirements. They must also avoid engaging with individuals who have legal disqualifications, and they are exempt from some SEC rules if they follow these guidelines, although they can face penalties for non-compliance, like providing false information or failing to delist problematic assets.

The section explains that this Act does not change or apply to certain financial agreements and activities that are already covered under the Commodity Exchange Act, like futures contracts and swaps. It also clarifies that digital commodity exchanges and similar entities cannot engage in those activities just because they are registered as such.

The amendment to the Securities and Exchange Act of 1934 adds that members of Congress, their staff, and federal employees have a duty to not misuse confidential, nonpublic information about digital assets gained from their jobs. Additionally, changes to the Commodity Exchange Act now prohibit certain types of contracts involving digital commodities, ensuring that contracts of sale for digital commodities are subjected to similar rules as other financial instruments.

The section describes a requirement for the Commodity Futures Trading Commission and the Securities and Exchange Commission to work together with foreign regulators to create consistent global rules for digital assets. They are also allowed to share information with these international bodies if it's necessary or helpful for protecting investors and users.

The Implementation section outlines that the Commodity Futures Trading Commission and the Securities and Exchange Commission have up to 360 days from the enactment date to establish necessary rules and regulations. Additionally, these commissions can begin developing rules, conducting studies, registering individuals, and granting exemptions before the official start dates, but these actions can't take effect until the set dates.

The section updates the Bank Secrecy Act to include categories related to digital assets, such as digital asset brokers and exchanges, thereby expanding its scope. It also requires a study by the Comptroller General to assess risks from foreign intermediaries not meeting U.S. regulations and to suggest any necessary legislation, with a report due to Congress within a year.

The section states that the official name for this title is the "Securities Clarity Act of 2024."

The section clarifies that an "investment contract asset," which is a type of digital asset that can be transferred person to person without an intermediary and tracked on a secure digital ledger, is not considered a "security" under several major U.S. financial laws, including the Securities Act and the Investment Company Act. This change affects how various financial services laws apply to such digital assets.

The section allows for certain transactions involving digital assets to be exempt from some regulations, as long as specific conditions are met, such as limits on the amount sold and requirements for reporting and disclosure. It also describes rules for digital asset issuers and intermediaries to follow in order to qualify for these exemptions, including registration and communication guidelines.

This section outlines the requirements for digital asset issuers involving reporting and disclosure, including submitting annual, semiannual, and current reports to the Commission, and rules for intermediaries in transactions. It also details rules for communicating potential offerings, ensuring qualifications of purchasers, and adhering to anti-fraud provisions of federal securities laws.

The section outlines the rules for the offering and sale of digital assets and digital commodities. It specifies that restricted digital assets can only be sold under certain conditions, such as waiting periods and public certifications, and establishes special rules for related and affiliated persons, including reporting requirements to regulatory bodies like the Commodity Futures Trading Commission and the Securities and Exchange Commission. Additionally, certain end user distributions of digital assets are not considered investment contracts and are exempt from requirements under the Securities Act of 1933.

The section outlines rules for offering and selling digital assets, stating that certain digital assets can be sold if they meet specified conditions, like being part of a functional blockchain system and providing certified information. Additionally, it specifies conditions for sales by related or affiliated persons, sets limits on the sales volume by affiliated persons, and clarifies that some distributions are not considered investment contracts under securities laws.

The section establishes enhanced disclosure requirements for digital assets, mandating the disclosure of detailed information about the blockchain system, transaction history, digital asset economics, development plans, associated risks, and other related aspects. It also requires a quarterly certification from issuers or relevant entities attesting to the truthfulness of this information to certain regulatory bodies.

The section outlines enhanced disclosure requirements for digital assets, specifying that digital asset issuers must provide detailed information about the blockchain's source code, transaction history, purpose, and governance, alongside development plans, affiliated individuals, and risks involved. This information must be certified quarterly to relevant regulatory bodies like the Commodity Futures Trading Commission and the Securities and Exchange Commission to ensure its accuracy and truthfulness.

The section amends the Securities Exchange Act of 1934 to allow individuals to certify that a blockchain system is decentralized by providing detailed information to the Securities and Exchange Commission (SEC). The SEC has 60 days to review the certification and can either accept it or rebut it if the system is found not to be decentralized, and individuals have the right to appeal a rebuttal decision in court.

The section outlines a process where a person can certify to the Securities and Exchange Commission (SEC) that a blockchain system linked to a digital asset is decentralized. The SEC reviews these certifications and can rebut them if it finds that the system is not genuinely decentralized; it also includes specifics on certification requirements, potential outcomes, and the possibility of public feedback and appeals.

The section explains when the title and its amendments will take effect. Generally, they will become effective 360 days after the Act is enacted, but if a rulemaking is needed for a provision, it will take effect later—either 360 days after enactment or 60 days after the rule is published in the Federal Register, whichever is later.

The section updates several existing financial regulations to specify that digital commodities and certain stablecoins are not included under traditional terms like "securities" and "exchange." It also establishes that terms related to digital assets will have meanings based on the definitions in the Securities Act of 1933.

The section amends the Securities Exchange Act of 1934 to ensure that rules and court decisions regarding fraud, manipulation, and insider trading apply to transactions involving permitted payment stablecoins and restricted digital assets in the same way they apply to securities transactions. It also defines when the Commission has jurisdiction over permitted payment stablecoins: specifically, when they are brokered, traded, or held by brokers, dealers, or digital asset platforms.

Permitted payment stablecoins can be brokered, traded, or kept safe by specific financial professionals or through digital trading systems. The Commission can only regulate these transactions when they occur under these conditions.

The proposed amendment to the Securities Exchange Act of 1934 requires digital asset trading systems operating in the United States to register with the Securities and Exchange Commission (SEC) if they manage transactions involving restricted digital assets. However, systems meeting certain exemptions may not need to register. Additionally, registered systems can also apply for multiple registrations with the SEC and Commodity Futures Trading Commission for various trading roles, with rules to avoid redundant regulations.

The text outlines requirements for digital asset trading systems and custodians, emphasizing that trading systems must use qualified custodians to hold customer assets and cannot use the term "exchange" in their name unless they meet specific criteria. Additionally, it describes how custodians must be properly supervised and regulated, ensuring financial integrity, protection of customer assets, compliance with laws, and the ability to share information with the Commission when necessary.

A digital asset trading system must store customer digital assets with a qualified custodian and cannot hold custody of customer money or property itself, except when acting in other approved roles like a broker. The system must follow rules set by the Commission regarding notices for starting operations, order displays, fair access, security, examinations, recordkeeping, transaction reporting, and safeguarding trading information. Additionally, a digital asset trading system cannot use the term "exchange" in its name unless it is run by a registered national securities exchange and clearly states its separate operation from such an exchange.

A digital asset custodian is considered qualified if it complies with certain regulatory requirements, including supervision by a relevant authority and sharing information with the Commission upon request. These requirements ensure that custodians protect customer assets, maintain financial integrity, and comply with state and federal laws. If a custodian is a trust company already allowed by a state to handle digital assets, it may be considered adequately supervised until new rules are established.

The bill section proposes that digital asset brokers and dealers must register with the Securities Exchange Commission (SEC) unless they solely operate within one state and don't use digital asset trading systems. It also requires these brokers and dealers to join a national securities association, allowing them to hold multiple registrations with the SEC and the Commodity Futures Trading Commission, ensuring they comply with specific rules to protect investors and ensure market efficiency.

The section outlines that digital asset brokers and dealers must register with the Commission unless they operate solely in one state without utilizing a digital asset trading system. They must also join a national securities association, can maintain additional registrations with both the Commission and the Commodity Futures Trading Commission, and must follow specific rules and regulations for compliance and investor protection.

The section outlines specific rules for digital asset brokers and dealers to prevent fraudulent activities and protect customer assets. It requires them to keep customer funds separate, use qualified custodians, and adhere to capital requirements while also setting guidelines for recordkeeping, reporting, and possible customer participation in blockchain services.

The section introduces a new rule in the Securities Exchange Act of 1934, which requires all registered digital asset trading systems, brokers, dealers, and clearing agencies to have written policies to manage and reduce conflicts of interest, especially in deals or arrangements with affiliated entities.

Each entity involved in digital asset trading, brokering, or clearing must create and follow written guidelines to help prevent conflicts of interest, especially when dealing with related companies.

A new addition to the Securities Act allows certain digital assets to be exempt from registration requirements when they are handled by federally regulated intermediaries, like registered digital asset brokers and dealers or digital asset trading systems.

The section exempts certain decentralized finance activities from being regulated under the Securities Exchange Act of 1934. These activities include tasks like managing blockchain transactions, running a node, or providing software for personal digital asset management, but the exemption does not apply to the Commission's anti-fraud and anti-manipulation rules.

The section outlines that certain activities related to decentralized finance, such as managing blockchain transactions, running nodes, and creating wallets, are not subject to specific regulations under this Act. However, these exemptions do not apply to the Commission's anti-fraud and anti-manipulation authorities.

Section 410 of the bill amends the Securities Exchange Act to allow certain entities to register as notice-registered digital asset clearing agencies. Eligible entities include digital asset brokers or dealers, banks, and other registered clearing agencies, and they can register by filing a notice with the Commission. The registration becomes effective when the Commission publishes the notice, and the Commission may adopt rules for these agencies' activities related to restricted digital assets.

The section outlines regulations for banking institutions regarding how they should handle assets held in custody. It states that these institutions don't need to list such assets as liabilities on balance sheets or hold extra capital against them, except to manage specific operational risks and they won't recognize liabilities for digital asset services they don't own.

The section explains that, unless stated otherwise, the new rules in this title will become effective 360 days after the law is passed. However, if a part of the law needs a specific rule to be created, then it will take effect either 360 days after the law is passed or 60 days after the rule is published in the Federal Register, whichever is later.

In this section of the bill, the amount of money allowed under a specific part of the Federal Reserve Act is reduced by $15 million. This change will start being effective on September 30, 2034.

The section requires the Secretary of the Treasury and the Comptroller General to conduct studies and submit reports to congressional committees about digital asset registrants owned by foreign adversaries, the collection of data on United States persons by these foreign adversaries, and any misuse or theft of proprietary intellectual property by them. It also defines key terms, such as “digital asset registrant,” “foreign adversaries,” and specifies which congressional committees are relevant for receiving the reports.

The section outlines the jurisdiction of the Commodity Futures Trading Commission (CFTC) over digital commodity transactions, specifying that the CFTC can regulate certain digital commodities and stablecoin transactions, but cannot impose regulations on the operation of stablecoin issuers. It also introduces rules for digital commodity dealers and brokers, and clarifies what transactions fall under the commission's authority, with exceptions for those regulated by banking agencies.

The bill amends the Commodity Exchange Act to require that digital commodities held by futures commission merchants be stored with a "qualified digital commodity custodian," in addition to banks and trust companies. This ensures that digital assets are managed safely according to updated legal standards.

The proposed amendments to the Commodity Exchange Act establish rules for digital commodity exchanges, requiring them to certify that digital commodities meet specific standards before trading is allowed. The amendments describe the process for certification, modification, review, and disapproval of a digital commodity, aiming to ensure transparency and regulatory compliance in digital commodity trading.

This section outlines the registration and operational requirements for digital commodity exchanges, which are platforms that facilitate trading of digital commodities like cryptocurrencies. It details rules on registration, compliance, customer protection, trading practices, recordkeeping, and responsibilities such as appointing a chief compliance officer and holding customer assets securely, all aimed at ensuring fair, transparent, and secure trading environments under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

The section outlines the requirements for digital commodity exchanges, which are platforms where people can trade digital commodities like cryptocurrencies. It explains how these exchanges must register, follow specific rules to protect customers' funds, ensure safe trading practices, and maintain transparency by sharing information with the authorities.

The text outlines the requirements for a digital commodity custodian to be considered "qualified." It mandates that they must comply with supervision and regulation by appropriate authorities, ensure customer asset protection, maintain necessary financial standards, and share information with the Commission. The Commission also has rulemaking authority to define requirements and can provide flexibility with temporary suspensions of these standards if in the public interest.

A digital commodity custodian is considered qualified if it meets certain conditions, including being properly supervised by federal, state, or foreign authorities. These custodians must also share information with the Commission when requested and follow specific regulations to protect customer assets, maintain financial integrity, and comply with laws. The Commission has the authority to set these standards and can temporarily change them if necessary.

The section establishes regulations for digital commodity brokers and dealers, requiring them to register with the Commodity Futures Trading Commission (CFTC), meet specific capital and conduct standards, and maintain proper recordkeeping. It aims to protect customers and ensure proper oversight while allowing certain exemptions if deemed appropriate by the CFTC.

The section outlines the regulations for digital commodity brokers and dealers, requiring them to register with a commission and adhere to standards that ensure transparency and fairness in their operations. It specifies requirements like maintaining records, protecting customer assets, managing risks, and prohibiting fraudulent practices, while also allowing the commission to exempt brokers or dealers under certain conditions.

The section makes it illegal for someone to work as an associated person of a digital commodity broker or dealer without proper registration with the Commission. It also prohibits digital commodity brokers or dealers from having someone associated with them if they knew the person was not properly registered or had their registration expired, suspended, or revoked.

The bill section modifies the Commodity Exchange Act to include "commodity pool operators" alongside "commodity trading advisors" and adds "digital commodities" to the list that needs regulation. It also grants the Commission the power to create rules that exempt these operators and advisors from certain overlapping or difficult requirements, especially to support fair, orderly, and innovative digital commodity markets, while still protecting customers.

The section exempts certain decentralized finance activities from being regulated under the Commodity Exchange Act, including tasks like network transaction compilation and software development for blockchain systems. However, this exemption does not apply to actions related to fraud, manipulation, or false reporting.

A person is not subject to the rules of this Act for engaging in activities related to decentralized finance or blockchain systems, such as validating transactions, managing a liquidity pool, or operating a node. However, this exception does not cover activities concerning fraud, manipulation, or false reporting, which still fall under the Commission's enforcement powers.

The section specifies that the Commodity Futures Trading Commission (CFTC) will collect fees from applicants intending to register as digital commodity exchanges, brokers, or dealers. It outlines how these fees are scheduled, adjusted, and potentially refunded, and includes provisions for penalties on late payments, depositing fees into the Treasury, additional funding through appropriations, and a sunset clause for this authority after four years.

Unless stated otherwise, this section specifies that the title and any changes it makes will become effective 360 days after the Act is enacted. However, if a part of the title needs a rule to be made, it will take effect either 360 days after the Act is enacted or 60 days after the rule is published in the Federal Register, whichever is later.

Congress expresses that this Act, along with its amendments, is not meant to allow any entity to control goods besides digital commodities on any spot market.

Congress highlights the importance and potential benefits of digital assets and blockchain technology, emphasizing the need for the U.S. to prioritize their development and regulate them responsibly to protect consumers and the financial system while fostering innovation.

The section establishes the Strategic Hub for Innovation and Financial Technology (FinHub) within the Securities and Exchange Commission (SEC) to help the agency adapt to technological changes and support financial tech innovation. FinHub will have a director, advise on tech-related regulatory matters, liaise with emerging technology firms, and submit annual reports to Congress on its activities and recommendations.

The section amends the Commodity Exchange Act to establish LabCFTC within the Commission, aiming to foster innovation in financial technology and offer guidance to innovators about regulations. LabCFTC will report to Congress annually about its activities and maintain secure records of communications.

The CFTC-SEC Joint Advisory Committee on Digital Assets is a group set up by the Commodity Futures Trading Commission and the Securities and Exchange Commission to give advice on digital asset regulations and improve coordination between the two commissions. It includes non-federal members from various digital asset sectors, meets at least twice a year, and operates without compensation, with both commissions responsible for its funding and organization.

The section mandates a study by the Commodity Futures Trading Commission and the Securities and Exchange Commission on decentralized finance to analyze various factors such as its operation, governance, benefits, risks, and connection with traditional finance. The results are to be reported to Congress within a year, and the study will be conducted with consultation from the Treasury and include an additional study by the Comptroller General.

The Comptroller General of the United States is tasked with conducting a detailed study on non-fungible digital assets, examining their nature, use, and risks, as well as their relation to traditional markets and potential illegal activities. This study's findings are to be made public within one year after the law is enacted.

The section mandates the Commodity Futures Trading Commission and the Securities and Exchange Commission to collaborate on a study focused on improving financial literacy among digital asset holders. This study aims to explore current literacy levels, enhance educational materials, promote coordination with other organizations, and create strategies to boost investors' understanding of digital assets, with a report on findings due within one year.

The section mandates that the Commodity Futures Trading Commission and the Securities and Exchange Commission work together to study whether new rules are needed to help create fair financial markets using tokenized securities and derivatives. They have to submit a report with their findings to certain congressional committees within a year.