Bill Text: TX HB1666 | 2023-2024 | 88th Legislature | Enrolled

---

Bill Title: Relating to the commingling of funds by digital asset service providers; providing an administrative penalty.

Spectrum: Bipartisan Bill

Status: (Passed) 2023-06-09 - Effective on 9/1/23 [HB1666 Detail]

Download: Texas-2023-HB1666-Enrolled.html

---

H.B. No. 1666

AN ACT
relating to the commingling of funds by digital asset service
providers; providing an administrative penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle E, Title 3, Finance Code, is amended by
adding Chapter 160 to read as follows:
CHAPTER 160. DIGITAL ASSET SERVICE PROVIDERS
Sec. 160.001. DEFINITIONS. In this chapter:
(1) "Commission" means the Finance Commission of
Texas.
(2) "Customer funds" means the digital assets, fiat
currency, or other property deposited by a digital asset customer.
(3) "Department" means the Texas Department of
Banking.
(4) "Digital asset" means a natively electronic asset
that confers economic, proprietary, or access rights and is
recorded or stored in a blockchain, cryptographically secured
distributed ledger, or similar technology, and includes:
(A) a digital asset that the laws of any country
consider to be legal tender; or
(B) virtual currency as defined by Section
12.001, Business & Commerce Code.
(5) "Digital asset customer" means a person who
deposits fiat currency or a digital asset with a digital asset
service provider.
(6) "Digital asset service provider" means an
electronic platform that facilitates the trading of digital assets
on behalf of a digital asset customer and maintains custody of the
customer's digital assets.
Sec. 160.002. ADMINISTRATION. The department shall
administer this chapter.
Sec. 160.003. APPLICABILITY. (a) This chapter applies to a
digital asset service provider doing business in this state that:
(1) holds a money transmission license under
Subchapter D, Chapter 151; and
(2) either:
(A) serves more than 500 digital asset customers
in this state; or
(B) has at least $10 million in customer funds.
(b) This chapter does not apply to:
(1) a bank, as defined by Section 31.002; or
(2) an entity excluded by commission rule or by order
of the banking commissioner based on a finding that the entity is:
(A) not required to hold a money transmission
license under Subchapter D, Chapter 151; or
(B) not subject to the requirements of this
chapter.
Sec. 160.004. DUTIES OF DIGITAL ASSET SERVICE PROVIDERS.
(a) Except as provided by this chapter, a digital asset service
provider may not:
(1) commingle customer funds with funds belonging to
the digital asset service provider, including the digital asset
service provider's:
(A) operating capital;
(B) proprietary accounts;
(C) digital assets;
(D) fiat currency; or
(E) other property that is not customer funds;
(2) use customer funds to secure or guarantee a
transaction other than a transaction for the customer contributing
the funds; or
(3) maintain customer funds in such a manner that a
digital asset customer may be unable to fully withdraw the
customer's funds.
(b) In addition to any other requirements under state law, a
digital asset service provider shall maintain customer funds not
subject to the requirements of Chapter 151:
(1) in separate accounts for obligations to each
digital asset customer; or
(2) in an omnibus account that only contains digital
assets of digital asset customers and in which digital assets of
digital asset customers are not strictly segregated from each
other.
(c) A digital asset service provider shall create a plan to
allow:
(1) each digital asset customer to view at least
quarterly an accounting of:
(A) any outstanding liabilities owed to the
digital asset customer; and
(B) the digital asset customer's digital assets
held in custody by the digital asset service provider; and
(2) an auditor to access and view at any time a
pseudonymized version of the information made available to each
digital asset customer under Subdivision (1).
(d) Not later than the 90th day after the end of each fiscal
year, a digital asset service provider shall file a report with the
department. The report must include the following information, as
of the end of the digital asset service provider's fiscal year:
(1) an attestation by the digital asset service
provider of outstanding liability to digital asset customers;
(2) evidence of customer assets held by the provider;
(3) a copy of the provider's plan under Subsection (c);
and
(4) an attestation by an auditor that the information
in the report is true and accurate.
(e) An auditor fulfilling the requirements of this section
must:
(1) be an independent certified public accountant
licensed in the United States; and
(2) apply attestation standards adopted by the
American Institute of Certified Public Accountants.
(f) A digital asset service provider may meet the
requirements of Subsections (c)(2), (d)(1), (d)(2), and (d)(4) by
filing with the department a copy of:
(1) an audit of the digital asset service provider
performed in accordance with the Sarbanes-Oxley Act of 2002 (15
U.S.C. Section 7201 et seq.) or regulations adopted under that Act;
or
(2) an audit of the digital asset service provider's
parent company that includes an audit of the digital service
provider performed in accordance with the Sarbanes-Oxley Act of
2002 (15 U.S.C. Section 7201 et seq.) or regulations adopted under
that Act.
(g) A digital asset service provider may include an amount
of funds, assets, or property belonging to the digital asset
service provider with customer funds for the purpose of
facilitating trade and operational needs to provide digital asset
services. That amount of funds, assets, or other property
belonging to the digital asset service provider is considered and
shall be treated as customer funds. A digital asset service
provider may only withdraw or assert a claim on that amount to the
extent that amount exceeds the amount deposited with the digital
asset service provider by or for digital asset customers.
(h) The commissioner may waive a requirement of this section
or allow a digital asset service provider to submit alternative
information to satisfy a requirement of this section if the
commissioner determines that the waiver or alternative information
is consistent with the purposes of this chapter and in the best
interest of the public.
Sec. 160.005. REQUIREMENTS FOR MONEY TRANSMISSION LICENSE.
(a) In addition to any other requirements under Subchapter D,
Chapter 151, a digital asset service provider must comply with the
requirements of this chapter to obtain and maintain any money
transmission license under Subchapter D, Chapter 151. A digital
asset service provider applying for a new money transmission
license under Subchapter D, Chapter 151, must submit to the
department the report required by Section 160.004(d).
(b) The department may suspend and revoke a money
transmission license issued under Subchapter D, Chapter 151, to a
digital asset service provider if the provider violates the
requirements of this chapter.
(c) The department may impose any penalty under Subchapter
H, Chapter 151, that the department may impose on a person who
violates that chapter on a digital asset service provider who
violates this chapter.
(d) The commissioner may examine a digital asset service
provider in the same manner as allowed under Subchapter G, Chapter
151. Information disclosed to the commissioner in connection with
an examination under this section is confidential information and
subject to the provisions regarding confidentiality under
Subchapter G, Chapter 151.
Sec. 160.006. RULES. The commission may adopt rules to
administer and enforce this chapter, including rules necessary and
appropriate to implement and clarify this chapter.
SECTION 2. This Act takes effect September 1, 2023.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1666 was passed by the House on April
20, 2023, by the following vote: Yeas 148, Nays 0, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 1666 on May 17, 2023, by the following vote: Yeas 145, Nays 0,
1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1666 was passed by the Senate, with
amendments, on May 15, 2023, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor