The regulation is intended to keep consumers from experiencing the same fate as clients who invested in the crypto trading platform FTX.
Texas Rep. Giovanni Capriglione introduced legislation to safeguard consumers who invest in digital assets such as cryptocurrencies. Capriglione’s House Bill 1666 would compel crypto exchanges to demonstrate that they have sufficient funds to pay consumers when they request money. Additionally, the law would prevent exchanges from combining client funds with corporate assets.
According to Lee Bratcher, president of the Texas Blockchain Council, the business tactics of companies such as FTX have significantly harmed the industry. This is why the council supports Capriglione’s HB 1666.
“We are confident that this industry will continue to grow, and we want to make sure that it does so in a properly regulated way,” Bratcher said.
Capriglione stated in a press release that his office has been working on the bill for months with entities such as the Texas Blockchain Council.
“Over 8.5 million Texans have invested in cryptocurrencies and other digital assets, the vast majority of which are held by third-party custodial account holders which facilitate the trade,” Capriglione said in the press release. “Recently, multiple companies have betrayed the trust of their consumers by commingling investor funds with corporate assets, leading consumers to lose billions in their investments.”
Capriglione expressed hope that his initiative will help rebuild industry trust.
HB 1666, if passed, would apply to trade firms that serve more than 500 consumers or have at least $10 million in customer funds. These businesses would be prohibited from combining consumer funds with their own money or digital assets. Customers will also benefit from increased transparency, according to the measure.
Each company would be forced to develop a plan that would allow clients to view a quarterly accounting of its assets and verify that it has sufficient funds. All of this information must also be accessible to an auditor.
Companies must submit an accounting of client assets confirmed by an auditor to the Texas Department of Banking no later than the 90th day of the new fiscal year. If passed and signed by the governor, the law will go into effect on September 1.
