Crypto exchanges operating in Texas in the near future will need to maintain sufficient reserves to fulfill all their obligations to customers due to the recent approval of House Bill 1666 (HB1666). This bill seeks to enact “proof of reserves” rules that would require crypto exchanges to provide audited or on-chain proof of assets at all times. This groundbreaking decision follows last year’s collapses of prominent digital asset platforms such as FTX, Terra, Three Arrows Capital, and Celsius, which raised concerns for many customers.
Co-sponsored by Texas Rep. Giovanni Capriglione and Sen. Tan Parker, HB-1666 also imposes new regulations and duties on companies dealing with customer funds. For example, businesses must not maintain customer funds in a manner that prevents them from being “fully withdrawn” by users, nor can the funds be used for any purposes other than a customer transaction. Furthermore, the bill necessitates that companies segregate and separately account for customer funds, effectively banning “commingling,” or the mixing of user deposits with other digital assets, the service provider’s capital, or any property that does not belong to the customer.
Although these new requirements aim to increase transparency and maintain Texas’ pro-business environment, Lee Bratcher, president of the Texas Blockchain Council, argues that they are “not sufficient in and of themselves to prevent fraud in the digital asset space” but serve as a useful tool. Cody Carbone, vice president of crypto advocacy group Digital Chambers, supports the bill, stating that it makes Texas “the safest place in the country to trade cryptocurrencies.” Carbone also contends that platforms operating in Texas are now held to a much higher standard, providing investors and consumers peace of mind regarding the safety of their money and assets.
However, not all news is positive for digital asset companies in the Lone Star State, with the recent approval of Texas Senate Bill 1751 stirring up controversies. This bill aims to introduce restrictions on Bitcoin mining activities, causing concern among mining advocates. Despite its approval in the Senate, the bill still has a long way to go before becoming law, requiring full Senate approval and subsequent discussions in the House of Representatives. Ultimately, Texas Gov. Greg Abbott would need to sign off for the bill to be enacted.
In conclusion, while Texas is taking significant measures to protect consumers and businesses in the crypto market by approving HB1666, it’s important to acknowledge that there are still pending restrictions on digital asset companies like Senate Bill 1751. This combination of consumer protection and potential business impact both in favor and against the industry could greatly affect how the future of the cryptocurrency environment unfolds in Texas.
Source: Decrypt
