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.
Sponsorship: Bipartisan Bill
Status: (Passed) 2023-06-09 - Effective on 9/1/23 [HB1666 Detail]
Download: Texas-2023-HB1666-Enrolled.html
| H.B. No. 1666 | ||
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| 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 | ||
