Texas Senate Passes the House Bill 1666, Known as Proof-of-Reserves Bill

Texas is getting closer to fully legalizing the proof-of-reserves bill.

The State of Texas is close to enacting a law that would require crypto exchanges to maintain adequate reserves to cover their obligations to customers.

On May 15th, the Texas House Bill 1666, also known as the Proof-of-Reserves bill, passed a vote in the Senate and now awaits the governor’s signature to become law.

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Based on the Proof-of-Reserves bill, digital asset providers with more than 500 customers in Texas, holding at least $10 million of customer funds, will be barred from mixing customer funds with their operational capital. On top of that, the companies also cannot use customer funds for any transactions beyond the original request by the customers.

Additionally, these providers must maintain sufficient reserves to handle all possible customer withdrawals at any time. They are obligated to submit a report to the Texas Department of Banking within 90 days of the end of each fiscal year, outlining their liabilities to customers.

The bill, which proposes amendments to the Texas finance code, originated in the state’s House of Representatives and has been read three times in the Senate without any significant changes from the initial draft.

This proposed law is the latest in Texas’s proactive approach to regulating cryptocurrencies. The state Senate voted in April to limit incentives for crypto mining, and lawmakers have amended the state’s Bill of Rights to recognize the rights of individuals to possess and use digital currencies.

At the end of April, crypto enthusiasts took to the streets of Texas to protest against the bill removing crypto mining incentives.

With the governor’s signature, this significant reform to crypto exchange regulation in Texas will become law. This is a clear indication of the state’s proactive and cautious approach to the rapidly expanding digital asset space.