Texas Proof-of-Reserve Bill Passes Senate Vote
• On May 15, the Texas Senate passed a bill that would require exchanges to maintain reserves “in an amount sufficient to fulfill all obligations to customers”.
• The bill would restrict exchanges from comingling customer funds with any other type of operational capital and using customer funds for transactions besides the original transaction demanded by the customer.
• Within 90 days following each fiscal year’s conclusion, companies must submit a report to the Texas Department of Banking regarding their existing liability to customers.
Overview of Legislation
The legislation in question is House Bill 1666, amending the Texan finance code. It was voted on by the state’s House of Representatives earlier this year and has now been passed by the Senate without any significant changes from its prior draft.
Under these new amendments, digital asset providers serving more than 500 customers in Texas with at least $10 million in customer funds must maintain reserves large enough to accommodate all potential withdrawals at any given moment. Companies must also submit a report detailing their liabilities to customers within 90 days following each fiscal year’s end or face having their license revoked by the Texas Department of Banking.
Other Crypto Initiatives in Texas
Texas is no stranger when it comes to proactive legislation involving cryptocurrency. In April, another bill was passed by the Senate which would limit crypto mining incentives while simultaneously amending the state’s Bill of Rights; adding a provision recognizing individuals‘ right to possess, retain and utilize digital currencies in Texas.
Implications of Legal Requirements for Exchanges
The legal requirements placed on digital asset providers could have far reaching implications if made law as they not only impose additional costs associated with maintaining adequate reserves but also increase operational complexity due to reporting obligations imposed on them by regulators. As such, it remains uncertain how such laws will shape the competitive landscape among cryptocurrency exchanges operating at a global scale as well as those based out of United States jurisdictions like Texas.
In conclusion, House Bill 1666 has been passed through both chambers in Texas without changes and now awaits approval from Governor Greg Abbott before becoming law in its current form.. If signed into law, it could bring about sweeping changes for digital asset providers operating in this jurisdiction and beyond depending on how other states decide to follow suit when introducing similar regulations surrounding proof-of-reserves and reporting obligations for exchanges holding customer funds.