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  By: Capriglione, Harris of Anderson, H.B. No. 1666
      Longoria, Bucy, et al.
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the commingling of funds by digital asset service
  providers; providing for an administrative penalty; creating a
  criminal offense.
         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 an audit performed in
  accordance with the Securities Exchange Act of 1934 (15 U.S.C.
  Section 78a et seq.), the Sarbanes-Oxley Act of 2002 (15 U.S.C.
  Section 7201 et seq.), or regulations adopted under those Acts.
         (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.
         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 may be imposed on a person who violates that
  chapter on a digital asset service provider who violates this
  chapter.
         Sec. 160.006.  RULES. (a) The commission may adopt rules to
  administer and enforce this chapter, including rules necessary and
  appropriate to implement and clarify this chapter.
         (b)  Rules adopted under this section may allow the banking
  commissioner to temporarily waive the requirements of Section
  160.004(c), (d), or (e) for a digital asset service provider if the
  commissioner finds that complying with those requirements is not
  technically or commercially feasible for the digital asset service
  provider.
         SECTION 2.  This Act takes effect September 1, 2023.