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

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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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-Comm_Sub.html

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88R19232 MLH-F
By: Capriglione, et al. H.B. No. 1666
Substitute the following for H.B. No. 1666:
By: VanDeaver C.S.H.B. No. 1666

A BILL TO BE ENTITLED
AN ACT
relating to the commingling of funds by digital asset service
providers.
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) 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 reserves in an amount
sufficient to fulfill all obligations to digital asset customers.
These reserves may be held:
(1) in separate accounts for obligations to each
digital asset customer;
(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; or
(3) in the digital asset corresponding to the digital
asset customer's obligations or obligations issued or guaranteed by
a governmental entity listed in Section 2256.009, Government Code,
as applicable.
(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 reserve by the digital asset service provider; and
(2) an auditor to access and view at any time 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:
(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.
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.
(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.
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.