Texas Senate Passes Bitcoin ‘Proof of Reserves’ Bill

Enhancing Customer Protection and Regulating Digital Assets: Recent Developments in Texas Cryptocurrency Legislation.
Texas Senate Passes Bitcoin 'Proof of Reserves' Bill

Legislation that may soon become law in Texas has taken a significant step forward. The bill, which requires exchanges to hold reserves that are enough to meet all customer obligations, has successfully passed a vote in the state Senate on May 15. It now awaits the governor’s signature before becoming officially enacted.

Texas House Bill 1666, which makes amendments to the Texan finance code, was approved by the state’s House of Representatives earlier this year. The bill has undergone three readings in the Senate, and there have been no notable changes to its content compared to the previous version.

The amendments state that digital asset providers operating in Texas, serving over 500 customers and holding a minimum of $10 million in customer funds, must keep customer funds separate from their operational capital. They are also prohibited from using customer funds for any transactions other than the specific transaction requested by the customer. These measures aim to ensure the protection and integrity of customer funds within the digital asset industry in the state.

The introduction of this groundbreaking bill follows a challenging year for digital asset platforms, including the collapses of FTX, Terra, Three Arrows Capital, and Celsius. Customers of these platforms are currently awaiting the outcome of the bankruptcy process to determine the extent of fund recovery.

In addition, exchanges are required to maintain reserves that are capable of accommodating all potential customer withdrawals at any given time. Within 90 days after the end of each fiscal year, companies must submit a report to the Texas Department of Banking detailing their liability to customers.

Texas legislators are actively taking steps in the realm of cryptocurrency. In addition to passing the proof-of-reserves bill, the Senate voted to restrict crypto mining incentives. Simultaneously, Texan lawmakers amended the state’s Bill of Rights to acknowledge individuals’ rights to possess, retain, and use digital currencies.

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