Regulatory Analysis
Protecting Against Illicit Finance
Title II — AML/CFT Framework for Digital Commodity Markets
Digital Asset Market
Clarity Act
Sections 201–206
January 2026
Executive Summary
Title II extends Bank Secrecy Act obligations to CFTC-registered digital commodity brokers, dealers, and exchanges, requiring full AML/CFT programs modeled on futures commission merchant requirements. §201 mandates risk assessments, compliance officers, suspicious activity reporting, customer identification programs, and OFAC compliance. §202 establishes Treasury examination authority. §203 creates a 5-year public-private intelligence-sharing pilot (30 designated entities). §205 imposes comprehensive operational requirements on crypto kiosk operators: quarterly location registration, dedicated compliance officers, distributed ledger analytics deployment, wallet pinning, 72-hour holds for new customers, and $3,500/24hr interim transaction limits. States retain enforcement authority; stricter state laws preserved [§5337(q)–(r)].
Regulatory Trigger — Covered Entity Classification [§201(a)]
Digital commodity broker, dealer, or exchange = CFTC registrant (or required to register) under Commodity Exchange Act permitting direct customer access
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Title II Structure
§201
BSA Extension
Amends 31 USC §5312(c)(1)(A)—adds digital commodity brokers/dealers/exchanges to BSA financial institution definition
§202
Exam Standards
Treasury establishes risk-based AML/CFT examination framework in coordination with federal functional regulators
§203
Info Sharing Pilot
5-year program; FinCEN designates 30 entities (10 MSBs, 10 crypto intermediaries, 10 banks) for threat intelligence sharing
§204
Working Group
Interagency working group on illicit use by terrorists, state sponsors, transnational organized crime; 4-year sunset
§205
Kiosk Rules
Adds 31 USC §5337—registration, analytics, wallet pinning, holding periods, transaction limits, compliance officer mandate
§206
Illicit Use Study
Treasury review of FTO/transnational criminal digital asset utilization; report to Congress 18 months post-enactment
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BSA Program Requirements [§201(b)]
AML/CFT Program Elements
Risk assessment tailored to entity size and complexity; internal policies, procedures, and controls; designated compliance officer; ongoing employee training; independent audit function to test program effectiveness.
Recordkeeping & Monitoring
Retain appropriate records of transactions [§201(b)(1)(B)]. Monitor and report suspicious activity—may include distributed ledger analytics [§201(b)(1)(C)]. Maintain customer identification program (CIP) with appropriate customer due diligence [§201(b)(1)(D)].
Sanctions Compliance [§201(b)(2)]
Digital commodity brokers, dealers, and exchanges must comply with all laws and regulations related to United States sanctions administered by OFAC. Sense of Congress: nothing limits applicability of sanctions laws [§201(c)].
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Kiosk Operator Requirements [§205]
Operational Mandates
Quarterly location registration (90 days post-enactment) [§5330(f)]
Full-time compliance officer (non-CEO, <10% ownership) [§5337(g)]
Distributed ledger analytics deployment [§5337(h)(1)]
Wallet pinning—one customer per address [§5337(h)(2)]
Pre-transaction disclosures + fraud warnings [§5337(b)]
Post-transaction receipts [§5337(d)]
Consumer Protections
72-hour hold for new customer transactions [§5337(j)]
$3,500/24hr interim limit for new customers [§5337(l)]
Live customer service during business hours [§5337(n)]
Law enforcement contact displayed [§5337(o)]
Fee refunds for fraud victims (30-day police report) [§5337(m)]
Written anti-fraud policy required [§5337(f)]
State Authority Preserved [§5337(p)–(r)]
State regulators retain civil enforcement authority. State laws providing greater customer protection not preempted unless directly conflicting. Pre-enactment state transaction limit laws preserved [§5337(s)].
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Product Impact Matrix
| Entity Type | Statutory Treatment | Status | Compliance Gap |
|---|---|---|---|
| Digital Commodity Exchanges (CFTC) | Full BSA program required via §201—AML/CFT, SAR, CIP/CDD, OFAC | FULL PROGRAM | AML program architecture; SAR infrastructure; independent audit function |
| Digital Commodity Brokers/Dealers | Full BSA program required via §201—parity with futures commission merchants | FULL PROGRAM | Risk assessment methodology; compliance officer designation; employee training |
| Crypto Kiosk Operators | Comprehensive operational regime via §205/§5337—registration, analytics, holds, limits | FULL PROGRAM | Compliance officer hiring; analytics vendor selection; 72-hr hold implementation |
| Banks (Pilot Eligible) | Voluntary participation in §203 intelligence-sharing pilot—10 designated slots | PILOT ELIGIBLE | Information-sharing protocol readiness; secure communication infrastructure |
| Money Services Businesses | Voluntary participation in §203 pilot—10 designated MSB slots | PILOT ELIGIBLE | FinCEN designation criteria; use restrictions on shared intelligence |
| Non-Custodial Wallets | Outside Title II scope—no BSA extension; Title VI protections apply | NOT COVERED | None under Title II |
| DeFi Protocols | Outside Title II scope—governed by Title III §301–302 (separate regime) | TITLE III | Title III DeFi-specific AML obligations apply instead |
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Implementation Timeline
Now
Immediate
§5337(j)–(l) 72-hr holds and $3,500 interim limits effective upon enactment
90
Days
§205 Kiosk registration + §203 pilot entity designations
1 Yr
Post-Enactment
§204 Working Group first report + §206 Treasury review complete
18 Mo
Post-Enactment
§206 Illicit use study report to Congress
TBD
No Deadline
§201 FinCEN rulemaking for BSA requirements
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Pending Amendments Affecting Title II
Amd. 29 (Blunt Rochester)
Crypto ATM requirements—additional consumer protection and operational mandates for kiosk operators
Amd. 51 (Reed)
Revises kiosk provisions—reduces transaction limits, strengthens consumer protection requirements
Amd. 52 (Reed)
Further kiosk revisions—additional transaction limit reductions and consumer protections
Amd. 67 (Britt)
Permits federal grant funds to be used for blockchain tracing tools in fraud investigations
Amd. 73 (Cortez Masto-Kim)
Expands FinCEN authority and Treasury sanctions power for blockchain-enabled platforms
Amd. 96 (Warren)
Closes sanctions enforcement loopholes in digital asset transactions
Amd. 121 (Kim)
Modernizes Bank Secrecy Act with targeted carve-outs for decentralized finance protocols
Amd. 122 (Kim)
Reestablishes National Cryptocurrency Enforcement Team at DOJ
Cross-Ref: §307
Monetary instrument definition amendment—adds digital assets to 31 USC §5312(a)(3)(D)