Texas passes Proof of Reserves bill! Cryptocurrency exchanges required to provide proof of reserves

The Blockchain Committee of Texas announced that the state's legislative body has passed House Bill 1666, which will regulate exchanges providing cryptocurrency services to Texas users to provide "proof of reserves" and ensure that user funds can be "fully and regularly withdrawn" under any circumstances. Source

Bill Aims to Enhance Security of Cryptocurrency Trading and Usage in Texas

In January of this year, Texas State Representatives Giovanni Capriglione and Senator Tan Parker introduced House Bill 1666, which was passed by the House last week. The bill focuses on amending the state's current Financial Code to add a chapter on regulating crypto assets to ensure that exchanges operating in high-risk markets prioritize the security of all users' assets.

In light of the numerous black swan events plaguing crypto platforms like FTX and 3AC, Giovanni believes there is a significant lack of asset transparency in the entire crypto market. The "proof of reserves" submitted by exchanges and audited by the state's banking department can address this issue. The key points of the bill include:

• Cryptocurrency service providers must segregate and separately account for user assets from the company's operational funds
• Exchanges are prohibited from using user funds for any unauthorized purposes
• Exchanges must provide proof of reserves to the banking department within 90 days of the end of each fiscal year to ensure the ability to withstand any potential withdrawals at all times
• Violators of the bill may have their operating licenses suspended or revoked by the department

Texas Proactively Legislates to Join Crypto-Friendly Jurisdictions

Texas previously passed a bill to remove cryptocurrency mining incentives and voted to include cryptocurrencies in the state's Bill of Rights, allowing anyone to own, hold, and use cryptocurrencies. The state's frequent yet relatively reasonable regulatory framework for the crypto industry is also being observed by other countries or regions, hoping to follow and learn from it.

The proactive legislative actions have also raised the bar for legal compliance for crypto platforms operating in the state. This seems to provide investors and consumers with more confidence in the safety of their assets and is likely to attract more local residents to explore the field.

Lee Bratcher, Chairman of the Texas Blockchain Committee, stated:

He also added, "However, the bill itself cannot completely prevent fraud in the crypto asset space, but it will be an effective solution."