The freshly approved House Bill 1666 (HB1666) obligates all crypto exchanges to illustrate the proof of reserves. Firms must at all times ensure customers can entirely withdraw their deposited funds.
In their Friday session, the Texas legislature approved a bill directing crypto exchanges to maintain an audited proof of assets.
Texas Law Obligates Crypto Exchanges to Accumulate Sufficient Reserves
The new legislation directs all exchanges seeking a Texas operating license to have sufficient reserves to meet the customers’ obligations.
The House Bill was passed last week by the Texas House of Representatives to harmonize safety measures to safeguard customers’ deposits who have in the past fallen victim to fraudulent exchange platforms.
Citing the recent implosion of FTX in November 2022, Texas representatives considered HB1666 as necessary. As such, the House of Representatives passed the bill last week for discussion and approval by the Texas Senate. The Senate subjected the bill to a detailed discussion before concluding by taking a vote.
Senate Approves HB1666 to Guarantee Safety of Clients’ Cryptos and Funds
HB1666 aims to amend the existing law to Subject companies to a statutory obligation to safeguard customers’ funds. In the HB1666 journey, Texas leaders have lamented the discovery that most crypto companies have insufficient reserves to guarantee that users can entirely withdraw assets.
The new law provides that crypto firms should refrain from operating in a manner that extinguishes the capability of customers to withdraw their funds. Also, the new law prohibits companies from directing customer resources to fulfil purposes beyond settling customer transactions.
HB1666 Directs Crypto Firms to Segregate Users and Firm’s Capital
HB-1666 involves a bill sponsored by Representative Giovanni Capriglione alongside Senator Tan Parker. The bill, now law, directs crypto firms to segregate their funds from customers’ deposits. Additionally, the legislation instructs companies to separate accounts holding customer funds. HB1666 prohibits commingling if the user deposits the firm’s fees and capital. It directs service providers from mixing users’ funds with property belonging to other parties.
Texas Blockchain Council chief Lee Bratcher lauded the HB1666 approval as a critical milestone for increased transparency. He added that it sustains the momentum portrayed by Texas leaders in approving regulations that nurture the pro-business culture.
Bratcher admitted that approving HB1666 is insufficient to avert crypto-related fraud. Nonetheless, it constitutes a valuable starting point.
Texas Pro-crypto Regulatory Approach Makes it Safest Trading Jurisdiction
Meanwhile, Digital Chambers vice president Cody Carbone concluded that the HB1666 approval transforms Texas state into the safest centre to execute cryptocurrency trading in the US.
The executive of the crypto advocacy group emphasized that crypto platforms choosing Texas as their operating environment are perceived to uphold higher standards. By doing so, Carbone considers the standards as disputing peace of mind to investors and customers on the safety of their funds and crypto assets.
HB-1666 is a unique piece of legislation set to pace subsequent enactment of regulatory responses to the catastrophic collapse of once key crypto players 8nclusing FTX, 3AC, Terra and Celsius Network. The sudden downfall of the above firms in 2022 left customers writhing in the pain of losing funds. While the firms are subject to bankruptcy, customers can only recover some of their stock funds and assets.
Texas Setting Pace with Crypto-friendly Regime
Meanwhile, Texas is setting the pace for the rest of the country. Such is evident in the April approval of Senate Bill 1751. The legislation seeks to restrict Bitcoin mining activities. Also, it intends to raise signals to create awareness for mining advocates. Nevertheless, the bill awaits approval from the entire Senate.
Also, the bill is subject to discussions before the House of Representatives before sending it to Texas Governor Greg Abbot to append a signature to the law.
In the previous week, Texas witnessed the approval vote of Bill HJR 146 seeking the inclusion of digital currency within its Bill of Rights, granting their utilization for trading. The Wednesday, May 10 approval integrates the right for individuals to own, retain and use digital currencies.
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