‘Proof of reserves’ bill passes Texas House of Representatives
Digital asset providers would be restricted from comingling customer funds with any other type of operational capital.
The Texas House of Representatives approved a bill that would require crypto exchanges to maintain reserves “in an amount sufficient to fulfill all obligations to customers” on April 20.
Should the bill pass the Senate and receive the governor’s signature, it could become law by September 1, 2023.
The bill introduces amendments to the Texan Finance Code, namely to its Section 160. According to these amendments, digital asset providers that serve more than 500 customers in the state and have at least $10 million of customer funds would be restricted from comingling the customer funds with any other type of operational capital and using customer funds for any other transactions besides the original transaction, demanded by the customer.
Related: Advocates criticize bill removing crypto mining incentives
In addition, the provider would have to hold reserves in an amount enough to immediately let all the possible withdrawals. It should also “create a plan” to allow auditors to review the information made available to the customer.
By the 90th day after the end of each fiscal year, an exchange will need to file a report about its outstanding liability to customers with the State Banking Department. The report should also include and attestation by the auditor.
If the provider fails to comply with the requirements, the Banking Department would have a right to revoke its license.
In the aftermath of 2022’s market failures, Texas took a cautious approach toward crypto. On April 12, the state’s Senate approved a bill aimed at largely removing incentives for local crypto miners.