Texas to require cryptocurrency exchanges to submit proof of reserves
The Texas House of Representatives passed an annual testing bill to promote transparency
The Texas House of Representatives has passed a bill to require cryptocurrency exchanges to submit proof of annual reserves, in order to promote transparency on these platforms.
The body authorized a project that establishes that all entities that offer services related to digital assets must submit an annual report to the state Banking Department. This report must include a series of clearly established data and provisions, and must be submitted no later than 90 days after the close of the fiscal year.
The new law requires crypto exchanges and companies to include in their report:
- A certification from the service provider of outstanding liability to customers for digital assets, documented using zero-knowledge encryption or a similar industry standard.
- Evidence of customer assets held by the organization, documented by zero knowledge (ZK) testing or a similar industry standard.
- A certification from an auditor that the information in the report is true and accurate.
- A copy of the provider’s plan to allow auditors and customers to view accounting of digital assets on a quarterly basis, as well as customer digital assets at any time.
This measure seeks to foster confidence in exchanges, especially after the crisis of confidence that affected the crypto ecosystem after the collapse of FTX at the end of last year. Binance CEO Changpeng Zhao proposed that the platforms implement “Proof of Reserves” to demonstrate the status of client and company funds. Although some major exchanges have started publishing these reports on a regular basis, Texas becomes the first state in the US to implement a mandatory measure for the issuance of these reports.
(Reference image source: file)
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