The Texas House of Representatives has voted to advance the Proof of Reserves bill to the Senate. If the bill passes the Senate and receives Governor Greg Abbott’s signature, it could become law by September 1.
According to the bill, a digital asset company is defined as one that has more than 500 customers and holds at least $10 million in customer funds. Should the bill pass, these companies would be required to maintain reserves for customer assets.
Reporting requirements and industry pushback
Exchanges would be mandated to submit a report to the Texas Banking Department, providing evidence of customer assets, which an auditor can verify. The report must also include the exchange’s outstanding liabilities owed to customers. Failure to comply could result in the Banking Department revoking the digital asset company’s license.
The proposed legislation comes after multiple crypto lenders’ collapses in 2022, including Voyager, Celsius, BlockFi, and FTX, which led to frozen customer assets. The bill aims to ensure that exchanges maintain adequate reserves to fulfill all customer obligations.
In addition to the Proof of Reserves bill, Texas is also considering cutting incentives for Bitcoin miners operating in the state. However, the bill has been met with resistance from Bitcoin miners and the broader crypto community in Texas. Pierre Rochard, VP of Research at Riot, argued on Twitter that the bill is “bad for rural jobs and economic growth.”