In a decisive display of leadership in the evolving world of digital assets, the Texas Legislature has given the thumbs up to House Bill 1666, a landmark legislation that paves the way for an era of increased transparency and security in the operation of digital asset service providers. In short, this innovative law – about to land on Governor Abbott’s desk for signature – will obligate these providers to meticulously isolate and account for client funds, setting the bar high for other states to follow.
The trailblazing legislation is the brainchild of Texas Representative Giovanni Capriglione and Senator Tan Parker. But it wasn’t just these seasoned lawmakers who guided this bill to fruition; a cavalcade of industry experts, convened by the Texas Blockchain Council (TBC), played a critical role in shaping the bill. The TBC, an association with a vision to make Texas a frontrunner in the digital asset sphere, hosted several key contributors from high-profile firms such as Winstead, Castle Island Ventures, and Weaver. These figures and specialists from the Network Firm and multiple digital asset exchanges contributed invaluable insights into crafting the bill’s provisions.
A new standard: Secure, transparent crypto exchanges
The crux of HB 1666 lies in its rigorous requirements for digital asset service providers. According to the bill, crypto exchanges must ensure they can provide auditor-verified “proof-of-reserves” reports, affirming they hold enough assets to meet all their obligations. This crucial accountability measure, established by HB 1666, gives consumers the assurance they need to fully engage in digital trading.
The bill goes a step further, seeking to prevent potential mismanagement of customer funds. Service providers are prohibited from handling these funds in a way that could hinder full withdrawal by customers. Moreover, the bill stops “commingling,” the practice of mixing customer deposits with other assets not owned by the customer, a move that effectively safeguards clients’ interests.
As president of the Texas Blockchain Council, Lee Bratcher articulated that the passage of HB 1666 cements Texas as the safest state for trading cryptocurrencies. However, it’s essential to understand that while the bill boosts transparency and continues the state’s light regulatory touch and pro-business approach, it isn’t a standalone solution to prevent digital asset fraud. But it certainly is a crucial piece of the puzzle.
BREAKING: The Texas Legislature has just passed a first-of-its-kind proof of reserves bill! Here is a quote from the bill's author, Rep. @VoteGiovanni: “From the onset, we set out to create a model that would not just protect Texas consumers, but provide a path forward for the… pic.twitter.com/ob0zgHis4G
— Lee ₿ratcher (@lee_bratcher) May 17, 2023
While this news puts Texas on the map as a trailblazer in crypto regulation, the future of digital assets in the Lone Star State isn’t entirely set in stone. Texas Senate Bill 1751, which aims to curtail Bitcoin mining activities, has caused a stir among advocates and awaits full Senate approval.
Nonetheless, the passage of HB 1666 offers the crypto community a breath of fresh air amid the recent turmoil in the digital asset landscape. It underscores Texas’s commitment to consumer protection, setting the state apart as the safest place in the nation to trade cryptocurrencies. However, the crypto landscape in Texas isn’t without its challenges, with Senate Bill 1751 looking to introduce restrictions on Bitcoin mining activities. But as HB 1666 shows, the future of digital assets in Texas is shaping up to be as expansive as the state itself.
