Key Takeaways
- Both Texas’ House and Senate voted in favor to require digital asset service providers to have audited proof-of-reserves, protecting 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 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 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 segregate customer funds from their own operational funds and to provide proof of reserves to the Texas Department of Banking on an annual basis. Along with that:
“A digital asset service provider may not maintain customer funds in such a manner that a digital asset customer may be unable to fully withdraw the customer’s funds.”
The bill is designed to protect consumers from fraud and ensure that they have access to their funds when they need them. A yearly audit will be mandatory, and operational funds shall not be paid for with the customer’s money. This comes right after 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 upon Bill 1666’s first draft in February 2023, stating in a support letter:
“Chamber has advocated that this standard of transparency, which requires verification that a custodian holds that appropriate reserve backing the digital asset for the customer, must be implemented and enforced.”
Another industry supporter of Bill 1666, President of the Texas Blockchain Council Lee Bratcher, took to Twitter to express his excitement about the bill, saying that “with the passage of HB 1666, Texas is continuing to demonstrate that we are the leader in blockchain and digital asset innovation.”
While Texas Governor Greg Abbot still has to decide on the bill’s fate, 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 who testified in front of Texas State Congress in favor of this bill, supported the passing of the bill, tweeting:
“Texas is Bitcoin Country!”
