On Thursday, the Texas House of Representatives passed a bill targeting crypto companies and their reserves. The bill mandates crypto companies to prove they have sufficient assets on hand.
Sources reveal that the bill designated HB1666, could require companies to maintain sufficient reserves to cover all user obligations (crypto deposits and balances).
The passed bill could also mandate crypto companies to provide customers and auditors with accounting reports every quarter. Those reports must detail outstanding liabilities owed to the customer and the amount of crypto held in reserve by the company.
In addition, the bill requires companies to file a report containing other significant information with the Texas Department of Banking before the 90th day after the end of each fiscal year.
The bill’s requirements are in some ways comparable to the proof-of-reserve reports that are already published by several leading exchanges such as Binance, Coinbase, and Kraken. However, the bill’s provisions suggest that companies must supply individuals with personalized reports and not the usual company-wide reports.
Reportedly, the terms under the proposed bill will apply to digital asset service providers who cater to more than 500 Texas-based citizens using those digital asset services or to digital asset service providers with at least $10 million in customer funds. The rules do not apply to banks, nor do they apply to companies that are not required to hold money services licenses.
At the moment, the bill has only been passed by the House of Representatives and has not been approved by Texas’ senate, nor has it been signed into law. Currently, it is unclear if or when the bill will reach these stages.
Notably, this step from the lawmakers aims at providing security to investors amidst the rising concerns of fraud and scams. Some of the features of the proposed bill target and cater to much-highlighted concerns by the regulators.
According to a statement released by the Public Company Accounting Oversight Board (PCAOB), the proof-of-reserve reports which are routinely released by crypto firms to assure customers that their financial transactions are in secure hands shouldn’t be trusted.
Texas has been one of the pro-crypto states with the authorities wanting to embrace the industry and the technology it has to offer. However, recent incidents have brought forth a completely different stance compared to the usual approach of the Texas lawmakers favoring the crypto sector.
Previously, Cody Harris, a Texas House of Representatives member, proposed a Right to Mine bill. Harris asked his fellow lawmakers to rise in support of miners and “express support for protecting individuals who code or develop on the Bitcoin network.”
However, days after that, the Texas Senate gave unanimous approval to Senate Bill 1751 before moving it to the House and the governor. The proposed bill seeks to regulate how Bitcoin miners can interact with the power grid, and how their earnings will be taxed. The legislators are separately advancing legislation that aims to eliminate incentives previously offered to cryptocurrency mining firms.