Texas Legislature passes bill that requires digital asset service providers to separate and account for customer funds

The Texas Legislature has recently passed House Bill 1666, which enhances the security and transparency of digital asset trading. The innovative law mandates digital asset service providers to distinctly segregate and account for customer funds, enhancing the confidence of consumers and stakeholders in the digital trading ecosystem. 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.

: “From the onset, we set out to create a model that would not just protect Texas consumers, but provide a path forward for the… The journey of HB 1666 to the desk of Governor Abbott is laden with industry insights and collaboration involving key figures such as Representative Giovanni Capriglione and Senator Tan Parker. This bill, paired with its companion Senate Bill 770, underlines Texas’ pioneering stance in recognizing the growing importance of cryptocurrencies and fostering a regulatory environment conducive to their safe and efficient operation. The brainchild of the Texas Blockchain Council (TBC), an industry trade association, HB 1666 heralds a significant leap forward for Texas in the digital asset landscape.

With experts from Winstead, Castle Island Ventures, Weaver, the Network Firm, and digital asset exchanges providing valuable insights, the bill was tailored to meet the demands of the growing digital economy. The Texas Blockchain Council and their diligent working group, including Gavin Fearey and Nic Carter, underscore the necessity of segregating and separately accounting for customer funds. Such measures serve as a bedrock for the financial industry’s custody and trading of digital assets.

HB 1666 is designed to ensure these principles, aiming to boost investor protection and prevent crises like the one that engulfed FTX. The legislation puts Texas in the spotlight for leading the charge in “proof-of-reserves” (PoR) best practices. The first state to legislate PoR for exchange oversight, Texas is now a beacon for digital asset trading safety.

Concurrently, the state has also set its sights on crypto exchanges, ensuring they maintain adequate reserves to meet customer obligations. Under HB 1666, the exchanges must provide audited or on-chain proof of assets round-the-clock, preventing any ambiguities regarding the solvency of these platforms. The approved bill stands as a stalwart against unethical practices such as “commingling” – the mixing of user deposits with the service provider’s capital or any other assets not owned by the customer.

It propounds a clear, uncompromising stance on consumer protection, thus promoting a healthier and more secure trading environment in Texas. HB 1666 is not just a significant legislative precedent; it’s a testament to Texas’s robust future of digital assets. While the legislation prevents fraud and ensures transparency, its effectiveness lies in the broader canvas of the state’s light regulatory touch and pro-business environment.

As digital asset platforms worldwide reckon with the fallout of collapses such as FTX, Terra, and Celsius, Texas stand firm, setting a precedent for other states to follow. With HB 1666, the Lone Star State shines bright, illuminating a more secure, transparent future in the digital asset realm. The crypto world will watch keenly as other states decide whether to follow in Texas’s trailblazing footsteps.

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