AUSTIN, Texas — House Bill 166 would bring some regulation to the unregulated cryptocurrency market in Texas to protect investors, using a digital asset exchange.
Some well-known digital asset service providers are CoinBase, Cash App and Kraken.
The bill, filed by Republican State Rep. Giovanni Capriglione, aims to prevent the loss of funds for customers, like what happened with the FTX Exchange.
"We need to restore the reputation of this industry by setting out best practices," said Lee Bratcher, president of Texas Blockchain Council.
Those best practices are aimed at overcoming fraud concerns in the industry, especially after FTX, one of the largest cryptocurrency exchanges, collapsed after not having funds to pay investors. Now it's accused of taking billions from its customers.
"Using customer funds to do all sorts of things," Bratcher said. "It was disappointing. It is a setback."
To make sure that doesn't happen again to Texans, Bratcher is supporting House Bill 1666 filed by Capriglione.
"Everybody believes that if you're a customer, you should have the ability to know what you have and that it hasn't been taken from you," Capriglione said.
The bill would:
- Require digital asset exchanges to verify they have enough funds on reserve to pay customers.
- Prohibit exchanges from commingling consumer funds with corporate assets.
- Require independent audits with reports submitted to the Texas Department of Banking.
Those are all things FTX is accused of not doing.
"We do work on commonsense regulations, and what this bill will do is seek to address the biggest concerns while still allowing this technology and innovation to flourish in Texas," Capriglione said.
Capriglione said he has received some pushback but has also seen a shift in industry wanting to provide assurance to customers.
"So we've actually seen that shift to more and more folks, 'Hey, we get it,'" Capriglione said. "The free-wheeling and all that kind of stuff has provided a lot of innovative change, but we're going to need somebody to keep the bad actors out, and that's what we're going to trying to."
A similar bill has been filed in the Texas Senate, SB 770.
If either bill is passed, Capriglione said it would be the first regulations in the country of its kind.