It has been quite an interesting week for the crypto industry as major cryptocurrency exchanges, including Binance and Coinbase, took a spotlight in the news. While news of digital asset regulations has lingered for a while, the House of Representatives in Texas recently passed a bill that could change the dynamics of exchange operations.
Truth be told, cryptocurrencies have brought its users a measure of life-changing wealth investment opportunities. Exchanges have also played a part in enabling investor access to crypto investment opportunities. However, user protection cannot be over-emphasized as news of multiple hacks and bad actors downplay the industry’s growth, with FTX collapse being a major one. What is the Texas bill about?
Texas Passes Bill HB1666 For Cryptocurrency Exchanges
The Texas State House of Representatives recently passed a bill dated April 20, 2023, mandating cryptocurrency exchanges to come forward and provide accountability by presenting their Proof-of-Reserves.
The bill, which is designated HB1666, sees to it that exchanges render full transparency and protection to users leveraging the services they offer.
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This bill is particularly directed to digital asset service company providers and exchanges offering their services to more than 500 Texas-based users or digital asset providers with at least $10 million in customer funds on their service platforms.
According to the Texas-passed bill, digital asset providers and exchanges could be required to maintain adequate fund reserves to cater to their user’s commitment and obligations, which includes digital asset deposits and balances.
Apart from that, exchanges could be mandated to present quarterly accounting reports to auditors and also to users/customers utilizing their platform services. These accounting reports, which are to be provided quarterly by exchanges, should be personalized to each customer and must show and include an attestation of outstanding liabilities and the exact amount of digital assets in reserves held by the exchange or company.
The attestations must also be adequately established and brought forward using zero-knowledge encryption frameworks and processes.
This newly passed bill is in accord with the recent legislation, which makes it clear that all digital asset providers, including cryptocurrency exchanges, must submit a detailed report before or on the 90th day after each fiscal year.
However, it is important to note that the Texas House of Representatives has only passed this bill, not the Senate. It is still tentative whether the bill will be signed into law. But time will tell.
Security And Transparency For Cryptocurrency Investors
The newly passed bill could pass for bullish news in the crypto space as new users may be drawn to the industry stemming from the sense of adequate security provision and transparency they perceive to be offered by exchanges.
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The markets showed positive signs of recovery in recent weeks after a rally from Bitcoin, which pushed alongside a number of Altcoins. Currently, the total cryptocurrency market capitalization is at $1.15 trillion, with more room for growth to the upside.