Texas Senate Passes Proof-of-Reserve Bill

The bill seeks to safeguard cryptocurrency exchange users by mandating exchanges to maintain ample reserves and separate operational capital from customer funds.

Texas is one step closer to securing enhanced protection for cryptocurrency exchange users with the progression of a bill imposing stricter reserve requirements for exchanges. This legislative piece, passed in the Senate, now only requires the governor’s endorsement.

State bill 1666, proposed amendments to the Texan Finance Code, and passed successfully in both the state House of Representatives and Senate without significant changes from its initial draft. The bill targets digital asset providers handling over 500 customers and controlling at least $10 million of customer funds.

Such providers would be barred from merging customer funds with operational capital or using these funds for additional transactions beyond the customer’s initial intent.

Furthermore, these exchanges would need to maintain reserves enough to cover all potential withdrawals at any given time. At the end of each fiscal year, companies must furnish a report detailing their existing liabilities to customers to the State Banking Department within 90 days.

The legislation empowers the Banking Department to revoke the licenses of providers failing to adhere to the stipulations. The move solidifies Texas’s position as a state with forward-thinking legislators concerning cryptocurrency. In addition to the ‘Proof of Reserve’ bill, the Senate approved a project to reduce part of the crypto mining incentives earlier this year. Meanwhile, Texan lawmakers acknowledged the right of individuals to possess and utilize digital currencies by amending the state’s Bill of Rights.

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