The Texas House of Representatives has passed a new
bill that mandates crypto companies operating within the state borders
to provide their proof-of-reserves (PoR) reports every quarter.
The bill must be passed by the state's senate and signed into law to come into effect.
- The
reports will prove that the crypto firms have sufficient assets to
cover all crypto deposits and user balances, detailing outstanding
liabilities and the crypto amount held in reserve by the company.
- The proposed legislation will require crypto companies to deliver quarterly accounting reports to clients and auditors.
- The
firms will also have to submit a report with more detailed information
to the Texas Department of Banking before the 90th day after the end of
each fiscal year.
- The quarterly reports will be prepared in a more personalized manner for customers rather than a company-wide approach.
- An
auditor will need to confirm that the report is accurate, and providers
will need to ensure that auditors and customers can check the
accounting of digital assets every quarter and customer funds at any
time.
- The
rules will be valid for digital asset service providers catering to
more than 500 Texas residents and with at least $10M in customer funds.
- PoR
refers to the reports prepared by a third-party auditor to confirm that
a crypto company has sufficient reserves to cover all of its
depositors' funds and all the customer funds are safe.
- Following the crypto exchange FTX's bankruptcy
in November 2022, many crypto-related firms, including Binance,
Coinbase, and Kraken, have started publishing their PoR reports to
maintain customer confidence.
