Texas Passes Proof of Reserves Legislation

AUSTIN, Texas, May 17, 2023 /PRNewswire/ -- The Texas Blockchain Council announces that today, the Texas Legislature passed House Bill 1666. The bill requires many digital asset service providers operating in Texas to segregate and separately account for customer funds. It also requires the filing of reports, a component of which is auditor-attested 'proof-of-reserves'. The companion bills HB1666 and SB770 were sponsored by Texas Representative Giovanni Capriglione and Texas Senator Tan Parker. The enrolled bill will now go to Governor Abbott's desk for signature.

The new law will require many digital asset service providers serving customers in Texas to segregate and separately account for customer funds. It also requires greater transparency to customers—at least quarterly—as well as the filing of an annual report with the Texas Department of Banking containing a third party attested "proof-of-reserves" report. 

The Texas Blockchain Council, a trade association working to make Texas a leader in digital assets, assembled a group of industry experts to provide input and feedback on HB 1666. The bills' authors Representative Capriglione and Senator Parker have worked tirelessly to ensure the creation of sound policy that increases consumer protections and enables digital asset platforms to operate in a climate of increased confidence and transparency. "We are grateful for the many hours of work contributed by subject matter experts such as Gavin Fearey of Winstead, Nic Carter of Castle Island Ventures, Tim Savage of Weaver, Noah Buxton, Clayton Lowery, and Jeremy Nau of the Network Firm and significant contributions from various digital asset exchanges," said Lee Bratcher, the TBC President. Bratcher added, "We greatly appreciate the intent of this bill and the author's commitment to delivering meaningful consumer protections. We look forward to working closely with the Texas Department of Banking on responsible implementation."

Gavin Fearey, a member of Texas Blockchain Council's working group, said:

"Segregating and separately accounting for customer funds are foundational principles in custody and trading of many types of assets in the financial industry. Recent events, such as FTX, remind us how important these principles are, particularly when—for regulatory reasons, investor protection, or otherwise—there is not self-custody of bitcoin and other digital assets. It's been a pleasure to serve with Lee Bratcher, my colleague Nick Curley and the team on TBC's working group providing input and feedback on HB 1666."

Nic Carter, another contributor to the work group, said, "This landmark bill is a ringing endorsement of industry-derived best practices around PoR. Texas is setting a strong legislative precedent by being the first state to ratify the use of PoR for exchange oversight."

To learn more about Texas emerging as a clear leader in the digital asset space, be sure to attend the Texas Blockchain Summit November 15^th – 17^th in Fort Worth, Texas.

For press inquiries, please contact: [email protected]

SOURCE Texas Blockchain Council