Aiming to reinforce regulation in the digital asset industry, the Texas legislature has enacted bipartisan House Bill 1666. Set to take effect on September 1, 2023, the legislation imposes rigorous requirements on digital asset service providers in terms of handling customer funds.
Digital asset service providers, specifically those serving over 500 customers or holding at least $10 million in customer funds within Texas, are prohibited from merging customer funds with their own under the new law. This provision includes the provider’s operating capital, proprietary accounts, digital assets, and fiat currency.
To bolster transparency and accountability, the bill mandates that providers offer customers quarterly accountings of outstanding liabilities and assets held in custody. Additionally, an independent auditor must have continuous access to a pseudonymized version of the customer’s information.
The legislation also empowers the Texas Department of Banking to suspend or revoke the provider’s money transmission license if found in violation of the new requirements, thereby implementing a regulatory oversight mechanism. The enactment of House Bill 1666 showcases Texas’s efforts to balance the growth of the digital asset market with consumer protection, setting a precedent that other states may follow.