H.R. 4394 — the CODE Act of 2025

This section sets forth seven congressional findings on decentralized finance (DeFi) services, including (1) 2019 Financial Crimes Enforcement Network (FinCEN) guidance and advisory under the Trump Administration on Bank Secrecy Act registration and anti-money laundering requirements; (2) a 2022 Federal Bureau of Investigation public service announcement and 2023 Commodity Futures Trading Commission report under the Biden Administration on cybersecurity and compliance; and (3) the lack of DeFi standardization, unique cybersecurity risks (e.g., from North Korean actors), and benefits of coherent technological controls for Bank Secrecy Act compliance.

This section establishes a public-private partnership program, to be developed by the Secretary of the Treasury (in consultation with FinCEN, OFAC, FBI, Secret Service, NIST, CISA, and other relevant agencies) not later than 6 months after enactment, with decentralized finance (DeFi) services and risk management experts. The program must (1) focus on DeFi applications and front-end user interfaces; (2) consider integrating anti-money laundering, identity verification, sanctions, and cybersecurity controls into smart contracts prior to public blockchain deployment; (3) test such integrated controls; (4) consider a regulatory gateway for verifiable external data inputs/outputs to upgrade deployed smart contracts; and (5) provide legislative and regulatory recommendations on DeFi compliance mechanisms. Participants exclude DeFi services owned or controlled by a covered person; the program sunsets 18 months after enactment; it does not limit agency authorities; and the Secretary must share recommendations with other agencies for consideration in rulemaking and supervision.

This section directs the Financial Crimes Enforcement Network (FinCEN) to publish, not later than 18 months after enactment, an advisory on the responsible development, deployment, and ongoing operation of decentralized finance services on public blockchain networks to strengthen compliance with the Bank Secrecy Act (BSA).

This section directs the Secretary of the Treasury, not later than 30 months after the date of enactment, to issue a rule that (1) further defines the terms “decentralized finance service” and “decentralized smart contract”; and (2) expressly requires decentralized finance services to implement and maintain a risk-based anti-money laundering program compliant with the Bank Secrecy Act (BSA) and a risk-based sanctions compliance program.

This section defines terms used in the Act, including (1) "Bank Secrecy Act," as section 21 of the Federal Deposit Insurance Act (12 U.S.C. 1829b), chapter 2 of title I of Public Law 91–508 (12 U.S.C. 1951 et seq.), and subchapter II of chapter 53 of title 31, U.S. Code (i.e., laws generally requiring financial institutions to maintain records useful for criminal, tax, regulatory, and counterterrorism investigations); (2) "covered person," as the President, Vice President, Member of Congress, senior executive branch employee, or spouse, child, son-in-law, or daughter-in-law thereof; (3) "decentralized finance service," as a protocol, application, or service using decentralized smart contracts on a public blockchain network to facilitate digital asset transactions (e.g., peer-to-peer trading platforms, lending protocols, staking services, mixing services, or cross-chain bridges); (4) "decentralized smart contract," as digital contracts or code on a public blockchain network automatically executed upon meeting specified conditions; (5) "public blockchain network," as an open source, decentralized, permissionless distributed ledger system recording digital asset transactions; (6) "risk management expert," as a person or entity with expertise in managing illicit finance, cybersecurity, or compliance risks for decentralized finance services (e.g., identity verification providers, blockchain analytics firms, or smart contract auditors); and (7) "senior executive branch employee," as those in specified high-level positions under 5 U.S.C. §§5312-5313 or appointed under 3 U.S.C. §§105(a)(2)(A) or 106(a)(1)(A).