- Both Texas’ House and Senate voted in favor of requiring digital asset service providers to have audited proof-of-reserves, which would protect customers’ assets.
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Texas is set to become the first state in the United States to pass a bill requiring digital asset service providers, such as crypto exchanges, to maintain evidence of reserves. The bill, House Bill 1666, is approved in the Texas Senate on May 15, passed the Texas House on May 18 and will go to the governor’s desk for final approval.
The bill requires crypto exchanges that serve more than 500 customers in Texas and have at least $10 million in customer funds to separate customer funds from their own operating funds and to provide proof of reserves of the Texas Department of Banking each year. Along with this:
“A digital asset service provider may not maintain customer funds in such a way that a digital asset customer may not fully recover customer funds.”
The bill is designed to protect consumers from fraud and ensure they have access to their funds when they need them. An annual audit will be mandatory, and operating funds will not be paid with the customer’s money. It comes after the Texas House passed legislation that would add more the right to use cryptocurrency of the Texas Bill of Rights.
The Texas Chamber of Digital Commerce supported the bill in the first draft of Bill 1666 in February 2023, expressed in a letter of support:
“The Chamber emphasizes that this standard of transparency, which requires verification that a custodian holds an appropriate reserve that supports the digital asset for the customer, must be implemented and enforced.”
Another industry supporter of Bill 1666, Texas Blockchain Council President Lee Bratcher, took to Twitter to DECLARE his excitement about the bill, saying that “with the passage of HB 1666, Texas continues to demonstrate that we are at the forefront of blockchain and digital asset innovation.”
While Texas Governor Greg Abbot has yet to decide the bill’s fate, this is a major win for the crypto industry in Texas. Pierre Rochard, vice president of research at Riot Platforms and among others who testified before the Texas State Congress in favor of this bill, supported passing the bill, tweeted:
“Texas is Bitcoin Country!”