On Friday, policymakers in Texas green-lighted House Bill 1666 (HB1666), which necessitates crypto firms to maintain a well-updated audit for proof assets report. The HB1666 bill will introduce the proof of reserve crypto rules which demands investors to own sufficient reserves to meet the ever-changing customer’s needs.
Per the bill requirements, crypto exchanges must maintain strong reserves to enable users to withdraw assets at anytime.The crypto exchanges must disclose their customers’ liabilities to the Texas Department of Banking at the agreed period.
The Department of Banking has the mandate to cancel the crypto exchange license if there is any reported non-compliance.
Scope of the Proof-of-Reserves Bill
A few days ago, the House of Representatives in Texas submitted the new bill to the Senate for further regulatory action. After the submission, the members of the House of Representatives engaged in prolonged discussion to examine the suitability of the new bill.
On May 19, it was reported that the policymaker voted for the bill with no objection. At the final voting for the bill, the regulators agreed to amend the existing financial codes in Texas.
Citing the legal requirement, the regulators confirmed that the companies had limited control over customers’ funds. They argued that customers’ funds are stored for transaction purposes and cannot be redeemed by the owner or be spent on catering for other activities.
Under the new bill, crypto firms must store customers’ funds in their respective accounts. The bill prohibits crypto firms from engaging in the inappropriate commingling of funds, that leads to the mix-up of depositories and digital assets.
Furthermore, the bill highlighted that the capital generated by the digital asset provider (DASP) and other business proprietary infrastructure would not be grouped as a customer’s fund. An official report conveyed by the President of the Texas Blockchain Council, Lee Bratcher, revealed that the HB1666 law aims at increasing transparency in crypto regulation.
Review of the Requirement of HB1666 Bill
Initially, the bill was submitted as a draft for further amendments to be made by the regulators. It was observed that after three subsequent readings at the Senate, the regulators formulated a well-synthesized report.
Despite the approval of the HB1666 bill, Bratcher believes the regulations will continue to create a friendly environment for crypto businesses in Texas. He argued that the new bill might fail to address crypto-related fraud, but it is an effective tool.
Elsewhere, the vice president of Digital Chambers, Cody Carbone, acknowledges the efforts made by Texas. He argued that the approval of the bill positions Texas as a secure place to engage in the buying and selling crypto assets.
Carbone announced that the Texas-based crypto firms would be at an added advantage compared to other states. He opined that the bill’s approval has supported restoring customers’ confidence that their assets are safe and secure.
Texas Proposed Amendment for Crypto Bill
Last year, the collapse of FTX, Celsius, Three Arrow Capital (3AC), and Terra exposed customers to massive losses. Following the crash of key market players in the crypto space, customers have expressed concern about whether they will recover their assets in future. Some of the affected customers have recently received their compensation after successful bankruptcy proceedings.
Besides approving the HB1666 law, the regulators had submitted a similar bill to impose restrictions on Bitcoin mining activities. A scope of Senate Bill 1751 outlining the limits of crypto mining due to environmental concerns.
The crypto mining bill was presented to the Texas Senate in April for further review. Presently, the proposed crypto mining bill is awaiting the Senate and House of Representatives’ approval to proceed to the final stages of rulemaking. Afterward, the bill will be presented to Governor Greg Abbot for final assent.
Notably, Texas has many proactive legislators concerned with crypto matters. A few months ago, the policymakers in Texas pushed for the amendment of the existing Bill of Rights.
In their recent submission, the legislators requested the Texas authority to integrate additional elements to provide individuals with the right to own cryptocurrencies.