Key points to remember
- The Texas House and Senate have both voted in favor of requiring digital asset service providers to have evidence of audited reserves, protecting customer assets.
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Texas is set to become the first US state to pass a bill demanding digital asset service providers, such as crypto exchanges, to maintain proof of reserves. The bill, House Bill 1666, was approved by the Texas Senate on May 15, passed in the Texas House on May 18, and will head to the governor’s office for final approval.
The bill requires crypto exchanges to serve more than 500 customers in Texas and have at least $10 million in customer funds to segregate customer funds from their own operational funds and provide proof of reserves to the Texas Department of Banking on an annual basis. As well as:
“A digital asset service provider may not hold customer funds in such a way that a digital asset customer may be unable to fully withdraw the customer’s funds.”
The bill aims to protect consumers against fraud and to ensure that they have access to their funds when they need them. An annual audit will be mandatory and operating funds will not be paid with client money. It comes just after the Texas House passed legislation that would add the right to use cryptocurrency in the Texas Bill of Rights.
The Texas Chamber of Digital Commerce supported the bill during the first draft of Bill 1666 in February 2023, indicating in a letter of support:
“The Chamber advocated that this standard of transparency, which requires verifying that a custodian holds this appropriate reserve supporting the digital asset for the client, should be implemented and enforced.”
Another industry supporter of Bill 1666, Texas Blockchain Council President Lee Bratcher, took to Twitter to express his excitement about the bill, saying that “with the passage of HB 1666, Texas continues to demonstrate that we are the leader in blockchain and digital asset innovation.”
While Texas Governor Greg Abbot is yet to decide the fate of the bill, it would be a major victory for the crypto industry in Texas. Pierre Rochard, vice president of research at Riot Platforms and among the few to have testified before the Texas State Congress in favor of this bill, supported passage of the bill, tweeting:
“Texas is Bitcoin country!”