Texas House of Representatives Passes Bill Mandating Proof of Reserves for Crypto Exchanges

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The Texas House of Representatives has voted to pass a new bill that would require crypto exchanges operating in the state to prove they have reserves to back up their assets.

According to a new press release from the Chamber of Digital Commerce, a blockchain advocacy group, the Texas House of Representatives passed HB1666 on April 20 in an effort to restore trust in the industry.

The bill, which was first introduced by state representative Giovanni Capriglione, applies to crypto exchanges that serve more than 500 customers in the state or those with at least 10 million dollars of customer funds.

The bill requires crypto exchanges to maintain sufficient reserves to meet all obligations to digital asset customers.

It also asks companies to formulate a plan that would require crypto exchanges to provide quarterly accounting of any liabilities owed to customers as well as assets they have in reserve. In addition, an auditor must be able to access and view the same information provided to customers at any time.

The text of the legislation also states that crypto asset service providers cannot mix their own funds with customer funds, use customer funds to secure any transaction other than customer transactions contributing the funds, or hold client funds in a way where users could not withdraw them entirely or invest their funds in an unapproved way.

As Perianne Boring, CEO of the Chamber of Digital Commerce, said in the press release,

This legislation represents an essential step towards ensuring the stability and security of the digital asset market, and it is very promising to see this bill moving forward.

The proof of reserves requirement in this bill is exactly what custodians should require to demonstrate that they hold sufficient assets to cover all customer deposits.

The bill passed with 148 votes in favour, zero noes and one abstention, according to Legiscan. However, the bill would still need to pass the state senate before it can be signed into law.

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Featured Image: MidjourneyShutterstock/Andy Chipus

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