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Russell Castagnaro
@rcastag
Time to read up on the FINANCIAL INNOVATION AND TECHNOLOGY FOR THE 21ST CENTURY ACT "Fit21" bill and let your representative and senator know what you think. https://rules.house.gov/sites/republicans.rules118.house.gov/files/RCP_H4763_xml%20%28003%29.pdf
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Russell Castagnaro
@rcastag
The congressional bill H.R. 4763 addresses non-custodial systems like decentralized exchanges (DEXs) and smart contract functionality primarily through several provisions that focus on decentralized finance (DeFi) and blockchain protocols. Here are the key points related to these topics:
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Russell Castagnaro
@rcastag
1. Definitions Related to Blockchain and DeFi - Blockchain Protocol: Defined as any executable software deployed to a blockchain composed of publicly available and accessible source code, including smart contracts or networks of smart contracts.
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Russell Castagnaro
@rcastag
- Decentralized Governance System: A rules-based system allowing users of a system to form consensus or reach agreements in the development, provision, publication, management, or administration of the system. Excludes systems where any entity has unilateral control or can determine the outcomes related to the system.
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Russell Castagnaro
@rcastag
- Decentralized System: Refers to a blockchain system that meets certain criteria, including the absence of unilateral control over the blockchain system by any person or group over the past 12 months.
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Russell Castagnaro
@rcastag
2. Custody Rules: - A digital asset trading system is prohibited from holding custody of customer money, assets, or property. This ensures that non-custodial systems, like DEXs, cannot hold users' funds directly, which aligns with the principles of DeFi.
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Russell Castagnaro
@rcastag
3. Regulations for Digital Asset Trading Systems: - Mandates that systems must notify the Commission about their operations and any material changes; Must have policies ensuring fair access, the capacity, integrity, and security of automated systems, and must comply with recordkeeping and reporting requirements.
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Russell Castagnaro
@rcastag
4.Exemptions for Decentralized Finance Activities: Recognizes decentralized finance as blockchain protocols that allow users to engage in financial transactions in a self-directed manner without third-party intermediaries taking custody of digital assets with Certain registration exemptions.
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Russell Castagnaro
@rcastag
5. Standards for Digital Commodity Exchanges: DCEs must protect customer assets and ensure the safety of customer money, assets, and property. This includes maintaining separate accounts for customer funds and ensuring robust cybersecurity measures. Also applies to DEXs where appropriate.
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Russell Castagnaro
@rcastag
6. Customer Protection and Bankruptcy: Provisions are included for customer protection during bankruptcy, where assets held on behalf of a customer by a digital commodity exchange are considered customer property. This ensures that user assets on non-custodial platforms are protected in the event of insolvency.
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Russell Castagnaro
@rcastag
Defi Summary: The bill addresses non-custodial systems by setting clear definitions and regulations that emphasize transparency, security, and user protection. Defi folk should be aware of these provisions to ensure compliance and to advocate for regulations that support innovation while protecting user interests.
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TAYKΞN
@tayken
Hope our trip to DC pays off. @graven @dylang @blondontherun
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