119-hr4394

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4394 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 4394

 To require the Secretary of the Treasury to develop a public-private 
 partnership program to examine innovative anti-money laundering 
 solutions for decentralized finance services, and for other purposes.

_______________________________________________________________________

 IN THE HOUSE OF REPRESENTATIVES

 July 15, 2025

 Mr. Casten introduced the following bill; which was referred to the 
 Committee on Financial Services

_______________________________________________________________________

 A BILL

 To require the Secretary of the Treasury to develop a public-private 
 partnership program to examine innovative anti-money laundering 
 solutions for decentralized finance services, and for other purposes.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

 This Act may be cited as ``the Compliant Operations of 
Decentralized Entities Act of 2025'' or the ``the CODE Act of 2025''.

SEC. 2. FINDINGS.

 The Congress finds the following:

    (1) In 2019, under the Trump Administration, the Financial 
 Crimes Enforcement Network issued guidance (FIN-2019-G001) to 
 clarify that decentralized finance applications may be required 
 to register with the agency and comply with the Bank Secrecy 
 Act, including anti-money laundering, recordkeeping, and 
 reporting requirements.

    (2) In 2019, under the Trump Administration, the Financial 
 Crimes Enforcement Network published an advisory (FIN-2019-
 A003) noting that the prevalence of unregistered cryptocurrency 
 entities without sufficient anti-money laundering controls 
 enables illicit activity that threatens national security.

    (3) In 2022, under the Biden Administration, the Federal 
 Bureau of Investigation published a public service announcement 
 (I-082922-PSA) encouraging decentralized finance services to 
 institute real-time analytics, monitoring, and rigorous testing 
 of the computer code to more quickly identify vulnerabilities 
 and respond to indicators of suspicious activity.

    (4) In 2023, under the Biden Administration, the Commodity 
 Futures Trading Commission issued a report (``Decentralized 
 Finance''), advocating for building regulatory compliance into 
 decentralized finance systems and noting that areas like 
 illicit finance compliance and cybersecurity are ripe for this 
 kind of near-term action by software developers.

    (5) Decentralized finance services may be subject to Bank 
 Secrecy Act requirements, but there is a lack of 
 standardization across decentralized finance services and 
 compliance processes.

    (6) Decentralized finance services present unique 
 cybersecurity risks and have been vulnerable to exploitation 
 campaigns by North Korean threat actors.

    (7) Decentralized finance services and the broader 
 cryptocurrency ecosystem could benefit from a set of 
 technological controls that are coherent, consistent, and 
 capable of satisfying Bank Secrecy Act requirements.

SEC. 3. PUBLIC-PRIVATE PARTNERSHIP PROGRAM FOR DECENTRALIZED FINANCE 
 SERVICES.

    (a) In General.--Not later than 6 months after the date of 
enactment of this Act, the Secretary of the Treasury, in consultation 
with the Financial Crimes Enforcement Network, the Office of Foreign 
Assets Control, the Federal Bureau of Investigation, the United States 
Secret Service, the National Institute of Standards and Technology, the 
Cybersecurity and Infrastructure Security Agency, and such other 
relevant agencies as determined by the Secretary of the Treasury, shall 
develop a public-private partnership program with decentralized finance 
services and relevant risk management experts to--

    (1) focus on decentralized finance applications and front-
 end user interfaces;

    (2) consider integrating anti-money laundering, identity 
 verification, sanctions, and cybersecurity controls and other 
 technological solutions into decentralized smart contracts 
 prior to deployment on a public blockchain network;

    (3) test the capabilities of such integrated controls in 
 decentralized smart contracts;

    (4) consider establishing a regulatory gateway to external, 
 verifiable data inputs and outputs that are capable of 
 upgrading smart contract behavior after it has been deployed; 
 and

    (5) provide legislative and regulatory recommendations 
 related to integrated compliance mechanisms for decentralized 
 finance services.

    (b) Prohibition on Certain Participants.--Participants selected for 
the public-private partnership program required under subsection

    (a) shall not include a decentralized finance service owned or controlled, 
directly or indirectly, by a covered person.
            (c) Sunset.--The public-private partnership program developed under 
subsection

    (a) shall terminate 18 months after the date of enactment of 
this Act.
            (d) Rule of Construction.--Nothing in subsection

    (a) shall be 
construed to limit, impair, or otherwise affect the supervisory, 
regulatory, or enforcement authority or the jurisdiction of the 
agencies described in subsection

    (a) under any applicable law.

    (e) Interagency Coordination.--The Secretary of the Treasury shall 
share the recommendations provided pursuant to subsection

    (a)

    (5) with 
other appropriate agencies, and such agencies shall take the 
recommendations into account when issuing rules or carrying out 
supervisory functions.

SEC. 4. FINCEN ADVISORY.

 Not later than 18 months after the date of enactment of this Act, 
the Financial Crimes Enforcement Network shall publish an advisory 
related to the responsible development, deployment, and ongoing 
operation of decentralized finance services on a public blockchain 
network for the purposes of strengthening compliance with the Bank 
Secrecy Act.

SEC. 5. RULEMAKING TO MODERNIZE AND STRENGTHEN BANK SECRECY ACT 
 REQUIREMENTS FOR DECENTRALIZED FINANCE SERVICES.

 Not later than 30 months after the date of enactment of this Act, 
the Secretary of the Treasury shall issue a rule to--

    (1) further define the terms ``decentralized finance 
 service'' and ``decentralized smart contract''; and

    (2) expressly require that a decentralized finance service 
 implements and maintains--
        (A) a risk-based anti-money laundering program that 
 meets the requirements under the Bank Secrecy Act; and
        (B) a risk-based sanctions compliance program.

SEC. 6. DEFINITIONS.

 In this Act:

    (1) Bank secrecy act.--The term ``Bank Secrecy Act'' 
 means--
        (A) section 21 of the Federal Deposit Insurance Act 
 (12 U.S.C. 1829b);
        (B) chapter 2 of title I of Public Law 91-508 (12 
 U.S.C. 1951 et seq.); and
            (C) subchapter II of chapter 53 of title 31, United 
 States Code.

    (2) Covered person.--The term ``covered person'' means--
        (A) the President;
        (B) the Vice President;
            (C) a Member of Congress;
            (D) a senior executive branch employee; or
        (E) the spouse, child, son-in-law, or daughter-in-
 law, as determined under applicable common law, of any 
 individual described in subparagraph
        (A) ,
        (B) ,
            (C) , or
            (D) .

    (3) Decentralized finance service.--The term 
 ``decentralized finance service'' means a protocol, 
 application, or service that, through the use of decentralized 
 smart contracts deployed on a public blockchain network, 
 facilitates digital asset transactions or the exchange of 
 digital assets for other digital assets or fiat currency and 
 may include--
        (A) a peer-to-peer digital asset trading platform;
        (B) a digital asset lending protocol;
            (C) a digital asset staking or liquidity service;
            (D) a digital asset mixing service;
        (E) a cross-chain bridge service provider; or
        (F) any other decentralized finance service 
 determined by the Secretary of the Treasury.

    (4) Decentralized smart contract.--The term ``decentralized 
 smart contract'' means a digital contract or collections of 
 computer code on a public blockchain network that are 
 automatically executed if specific conditions are met.

    (5) Public blockchain network.--The term ``public 
 blockchain network'' means an open source, decentralized, 
 permissionless distributed ledger system that records digital 
 asset transactions.

    (6) Risk management expert.--The term ``risk management 
 expert'' means a person or entity with specialized knowledge or 
 expertise in identifying, preventing, and managing illicit 
 finance, cybersecurity, or compliance risks associated with 
 decentralized finance services, and may include--
        (A) an identity verification software provider;
        (B) a fraud detection service;
            (C) a blockchain analytics firm;
            (D) a smart contract auditor;
        (E) a blockchain oracle service;
        (F) a blockchain cybersecurity service; and
        (G) any other relevant risk management experts as 
 determined by the Secretary of the Treasury.

    (7) Senior executive branch employee.--The term ``senior 
 executive branch employee'' means an executive branch 
 employee--
        (A) who is employed in a position listed in 

section 5312 of title 5, United States Code, or for which the 
 rate of pay is equal to the rate of pay payable for 
 level I of the Executive Schedule;
        (B) who is employed in a position--
            (i) in the Executive Office of the 
 President; and
            (ii) listed in 

section 5313 of title 5, 
 United States Code, or for which the rate of 
 pay is equal to the rate of pay payable for 
 level II of the Executive Schedule;
            (C) who is appointed by the President pursuant to 
 

section 105

    (a)

    (2)
        (A) of title 3, United States Code; or
            (D) who is appointed by the Vice President pursuant 
 to 

section 106

    (a)

    (1)
        (A) of title 3, United States Code.
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