texas

‘Proof of reserves’ bill passes Texas House of Representatives

Digital asset providers would be restricted from comingling customer funds with any other type of operational capital.

The Texas House of Representatives approved a bill that would require crypto exchanges to maintain reserves “in an amount sufficient to fulfill all obligations to customers” on April 20.

Should the bill pass the Senate and receive the governor’s signature, it would become law by Sept. 1. 

The bill introduces amendments to the Texan Finance Code, namely Section 160. Under the amendments, digital asset providers that serve more than 500 customers in the state and have at least $10 million of customer funds would be restricted from comingling the customer funds with any other type of operational capital and using customer funds for any other transactions besides the original transaction demanded by the customer.

Related: Advocates criticize bill removing crypto mining incentives

In addition, the provider would have to hold reserves in an amount enough to immediately let all the possible withdrawals. It should also “create a plan” to allow auditors to review the information made available to the customer.

By the 90th day after the end of each fiscal year, an exchange will need to file a report about its outstanding liability to customers with the State Banking Department. The report should also include and attestation by the auditor.

If the provider fails to comply with the requirements, the Banking Department would have a right to revoke its license.

In the aftermath of 2022’s market failures, Texas took a cautious approach toward crypto. On April 12, the state Senate approved a bill aimed at removing mosincentives for local crypto miners.

Bill limiting incentives for crypto miners passes Texas Senate, moves to House

Senate Bill 1751 will next move to the Texas House of Representatives, which is scheduled to meet and discuss legislation on April 13.

Texas lawmakers in the state’s Senate have approved a bill aimed at largely removing incentives for crypto miners operating under the seemingly friendly regulatory environment.

In a 30-1 vote on the floor of the Texas State Senate on April 12, lawmakers in the 88th legislative session passed Senate Bill 1751, legislation that would amend sections of the state’s utilities and tax code to add restrictions for crypto mining firms. The Senate session marked the first time the bill had moved forward in the state government after more than a week, when the Texas Senate Committee on Business and Commerce passed it on April 4.

The bill will next move to the Texas House of Representatives, which is scheduled to meet and discuss legislation on April 13 — though it’s unclear whether lawmakers intend to address SB 1751 at that time. If passed in the House, Texas Governor Greg Abbott — a self-described “crypto law proposal supporter” — will be able to sign the bill into law.

Senate Bill 1751 passing the Texas State Senate on April 12.

SB 1751 has garnered national attention from crypto advocacy groups, including the Chamber of Digital Commerce and the Satoshi Action Fund. The organizations have called on Texas residents to voice their opposition to the bill through their local representatives but also plan to gather crypto mining supporters at a rally at the Texas State Capitol on April 25.

Under the proposed legislation, crypto mining firms participating in a program intended to compensate them for load reductions on Texas’ power grid would have their incentives capped at 10%. Certain companies operating data centers would also not receive an abatement on state taxes starting in September 2023.

“Elected officials only know how to use hammers — they don’t know how to be surgeons,” Fred Thiel, CEO of mining firm Marathon Digital Holdings, told Cointelegraph prior to the Senate vote. “They started whacking at crypto, and Bitcoin mining has gotten caught up in the whacking.”

Thiel added that should the bill pass in Texas, some mining firms, including Riot Platforms, that participate in the energy grid load reduction program would likely see reduced revenue. According to the Marathon Digital CEO, all miners operating in the state would be affected by the tax abatement policy, potentially leading to companies reconsidering Texas as a home — a move that could be interpreted as a part of anti-crypto sentiment at the federal level.

“What politicians are attempting to do now is push crypto and Bitcoin offshore, which is only going to mean that countries that the U.S. doesn’t want having control of this technology will gain control of it.”

Related: Texas lawmaker introduces resolution to protect Bitcoin miners and HODLers

Marathon Digital largely obtains power for its Bitcoin (BTC) mining operations in Texas through a wind farm, and other firms operating in the state include Core Scientific, Riot Platforms, White Rock Management and Argo Blockchain. Core Scientific filed for bankruptcy in December 2022 but continues to mine in Texas, while Argo announced at roughly the same time it planned to sell its Texas facility to Galaxy Digital.

Magazine: Crypto City: Guide to Austin

Texas’ gold-backed digital currency project: Law Decoded, April 3–10

While Ted Cruz and Ron DeSantis attack the idea of American CBDC, Texan lawmakers propose to create a statewide one.

The topic of central bank digital currencies is in the crossfire of United States politicians, with figures like Ron DeSantis and Ted Cruz trying to prevent them from existing. But what about a statewide digital currency? The first of its kind, a gold-backed state-based digital currency project has appeared in Texas. 

On the same day, two Texan lawmakers introduced identical bills for creating a state-based digital currency backed by gold. Each unit of the digital currency would represent a particular fraction of a troy ounce of gold held in trust, according to the bills. Once a person purchases a certain amount of digital currency, the comptroller uses that money received to buy an equivalent amount of gold. Although neither of the bills has been passed or presented for a vote, both state that the act will take effect from Sept. 1, 2023.

Meanwhile, another bill has been passed by a senate committee in Texas. The bill would largely remove incentives for miners operating under the state’s regulatory environment. Under the bill, crypto firms participating in a program intended to compensate them for load reductions on Texas’ power grid would be capped for anticipated demand of “less than 10 percent of the total load required by all loads in the program.” Certain crypto mining companies would also not receive a reduction on state taxes for participation in the program starting in September 2023.

Regulators announce $10 million settlement with Robinhood ‘for failing investors’

The California Department of Financial Protection and Innovation said that the company behind cryptocurrency and stock trading platform Robinhood will likely pay more than $10 million in penalties “for operational and technical failures that harmed main street investors.” The settlement resulted from an investigation by the North American Securities Administrators Association in conjunction with securities regulators from Alabama, Colorado, California, Delaware, New Jersey, South Dakota and Texas. The platform suffered a series of system outages in March 2020, causing users to miss out on trades while many of its services were unavailable.

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Coinbase supports new court action to remove Tornado Cash ban

The U.S. Department of the Treasury faces a renewed legal challenge aiming to overturn its decision to sanction the crypto mixer Tornado Cash. The challenge was filed by six individuals backed by the cryptocurrency exchange Coinbase. A motion for a partial summary judgment was filed on April 5 in a Texas district court, with the Coinbase-backed plaintiffs moving for the U.S. Office of Foreign Asset Control (OFAC) to settle the first two counts from its original complaint filed in September 2022. The counts claimed OFAC exceeded its statutory powers under the International Emergency Economic Powers Act and violated the free speech clause of the U.S. Constitution’s first amendment.

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Bill protecting Bitcoin mining rights passes in Arkansas

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A bill seeking to regulate Bitcoin (BTC) mining activity in Arkansas has passed in the state’s Congress. It will now move to the governor’s office for approval. Under the legislation, crypto miners will enjoy the same rights as data centers. The bill outlines that Arkansas’ government should not “impose a different requirement for a digital asset mining business that is applicable to any requirement for a data center.” Arkansas’ move follows a similar initiative in the state of Montana, where the Senate passed a bill to protect crypto miners in late March. 

‘Don’t Mess with Texas Innovation’ — Advocates criticize bill removing crypto mining incentives

Lawmakers in a Texas Senate committee moved forward on Senate Bill 1751 on April 4, paving the way for a floor vote for the legislation some have labeled as against crypto miners.

Three crypto advocacy groups have launched a campaign in response to proposed legislation that would remove many incentives for miners operating in Texas.

In an April 10 announcement, the Texas Blockchain Council, Chamber of Digital Commerce, and Satoshi Action Fund called on Texas residents to reach out to lawmakers in opposition to the state’s Senate Bill 1751. The legislation, if passed, would amend sections of Texas’ utilities and tax code to add restrictions for crypto mining facilities.

The campaign, named “Don’t Mess With Texas Innovation” — a play on the state’s anti-littering slogan, which has been used by many lawmakers to describe government overreach — claimed many aspects of the mining bill were antithetical to free market principles. Currently, some crypto mining firms are allowed to participate in a program organized by the Electric Reliability Council of Texas (ERCOT), which compensates them for adjusting their load on the state’s power grid during periods of high demand.

“We need to send a strong message to policymakers that the people do not want protectionist policies that push innovation out of the market,” said Chamber of Digital Commerce founder and CEO Perianne Boring. “At a time when folks here are concerned with the economy, jobs, and a reliable energy grid headed into summer, this bill is the wrong proposal at the wrong time.”

Operations concerning Texas’ power grid have been under increased scrutiny from federal and state lawmakers and regulators since a massive winter storm in February 2021 left millions of residents without power — as well as running water — for days. Such conditions have also contributed to damage to certain miners due to burst water pipes.

Many experts said that it was unlikely crypto firms contributed to the energy crisis in Texas in 2021 due to them temporarily shutting down or scaling back operations as part of the ERCOT program. Some lawmakers, including Massachusetts Senator Elizabeth Warren, have probed ERCOT on the energy usage and potential environmental impact of crypto mining companies.

“Bitcoin mining companies were able to curtail 50,000 megawatt hours of electricity in July 2022 alone to respond to record heat and energy demand, ensuring that Texans could continue to cool their homes,” said the campaign. “No other industry can perform the same service as efficiently or effectively.”

Related: Texas lawmakers propose a gold-backed state digital currency

According to the three crypto advocacy groups, more than 22,000 people in Texas are employed by Bitcoin (BTC) miners. Some of the largest companies include Core Scientific, Riot Platforms, White Rock Management and Argo Blockchain — though Argo announced in December that it would be selling its Texas facility to Galaxy Digital.

Magazine: Crypto City: Guide to Austin

Texas Senate committee moves forward on bill removing incentives for crypto miners

Under the proposed legislation, certain crypto mining firms participating in a program to reduce the load on Texas’ energy grid would not receive an abatement on state taxes.

The Texas Senate Committee on Business and Commerce has passed legislation that would largely remove incentives for miners operating under the state’s crypto-friendly regulatory environment. 

In an April 4 session of the committee, Texas lawmakers agreed to move forward in a 10-0 vote on Senate Bill 1751 first introduced by state Senator Lois Kolkhorst. The proposed legislation would amend sections of Texas’ utilities and tax code to add restrictions for crypto mining facilities.

Under the bill, crypto firms participating in a program intended to compensate them for load reductions on Texas’ power grid would be capped for anticipated demand of “less than 10 percent of the total load required by all loads in the program.” Certain crypto mining companies would also not receive an abatement on state taxes for participation in the program starting in September.

According to Bitcoin (BTC) mining advocate Dennis Porter, the CEO of the Satoshi Action Fund, the changes to the state’s code would effectively eliminate incentives for crypto miners to create jobs in rural parts of Texas. He claimed that lawmakers on the committee had been “swayed by the influence of the powerful bill sponsor” — likely referring to Senator Kolkhorst.

Related: Bitcoin mining advocate is going state-to-state to educate US lawmakers

Texas has become somewhat of a beacon for crypto miners due to its seemingly loose regulatory regime and in the wake of the practice being largely banned in China. Crypto has been recognized as part of the state’s commercial code since 2021, and Governor Greg Abbott — re-elected to another four-year term in November — has previously referred to himself as a “crypto law proposal supporter” in the state.

Senate Bill 1751 will likely next move to the Texas state Senate for a floor vote.

Magazine: Crypto City: Guide to Austin

Texas lawmaker introduces resolution to protect Bitcoin miners and HODLers

The Lone Star State is already home to many crypto and blockchain firms as well as miners taking advantage of the regulatory-friendly environment.

Cody Harris, a member of the Texas House of Representatives, has introduced a resolution aiming to have the legislature say the “Bitcoin economy is welcome” in the state.

In a resolution released on March 21, Harris encourages Texas lawmakers to “express support for protecting individuals who code or develop on the Bitcoin network” as well as miners and Bitcoiners operating in the Lone Star State. The state representative added that Texas’ constitutional rights concerning “all unreasonable seizures or searches” should extend to attempts to go over residents’ digital asset holdings.

“Individuals who mine Bitcoin in Texas will never be inhibited by any law or resolution that restricts the practice of securing the Bitcoin network for the safety of the virtual currency,” said the resolution. “All those in the broader community who choose to own Bitcoin as a manner of storing their wealth and transacting peer-to-peer with other law-abiding Texas citizens shall always feel free and safe in their ownership and use of Bitcoin.”

House Concurrent Resolution 89, if adopted, would largely not apply to Texas’ laws and regulations, but rather express a certain sentiment among lawmakers. The resolution cited the Chinese government’s crackdown on crypto miners, a move that drove many firms to Texas. Riot Platforms, Core Scientific and White Rock Management are among some of the firms to set up operations in the Lone Star State.

Under the state’s commercial laws, cryptocurrencies are recognized as part of an amendment to Texas’ Uniform Commercial Code. However, some lawmakers at the federal level have criticized Texas’ seemingly loose regulatory regime for the potential environmental impact caused by the energy consumption of mining firms.

Related: Bitcoin mining advocate is going state-to-state to educate US lawmakers

Texas Governor Greg Abbott, reelected to another four-year term in November 2022, has previously referred to himself as a “crypto law proposal supporter” in the state. According to Florida Governor Ron DeSantis, Texas was considering a ban on central bank digital currencies, both foreign and domestic, following a similar initiative announced by his office on March 20.

Texas objects to Voyager-Binance.US deal, court filing shows

Texas claims that Binance.US’s terms of service and restructuring plan contain inadequate disclosures and discriminates against Texas creditors.

Texas’ State Securities Board and the Department of Banking are objecting to a proposed deal between Binance.US and bankrupted crypto lender Voyager Digital, according to a Feb. 24 court filing 24. 

According to the document, Binance.US’s terms of service and restructuring plan contain a number of “inadequate” disclosures, including not informing unsecured creditors adequately that under the plan, they may only get 24%-26% recovery rather than the 51% they would receive under Chapter 7. Binance.US disclosed in December an agreement to buy Voyager’s assets for $1.022 billion.

The filing also notes the company’s disclosure statement fails to inform that account holders are required to allow the transfer of “personally sensitive information to any party in any part of the world as required by Binance.US, and then strips the account holders of any legal recourse for any issues that may arise.” As explained in the objection:

“So, under these ToUs, customers’ information can be transferred to almost any company or person that Binance.us desires, and, if any issues arise in the customers’ access to or use of Binance.us’s Services, the customers have absolutely no right to challenge the issue.”

Further, the document claims that the plan “unfairly discriminates against Texas consumers.” Since Texas is not a supported jurisdiction by Binance.US, customers in the state would have their digital assets held by Voyager for six months after the agreement, during which time Binance.US would seek licensing in the state.

According to the objection, however:

“It will be almost impossible for Binance.us to be licensed by the Texas SSB and the DOB within six months and, as such, holding the Texas consumers’ coin for six months accomplishes nothing.”

The filing comes just a few days after the Securities and Exchange Commission (SEC) submitted a filing to a bankruptcy court in New York alleging securities law violations in some aspects of the restructuring plan. Binance.US and related debtors are being investigated by the SEC for possible anti-fraud, registration, and other violations of federal securities laws. 

In the document, the SEC expressed concerns about the security of assets acquired through the proposed acquisition, among other issues.

Binance.US did not immediately respond to Cointelegraph’s request for comments.

El Salvador to open a ‘Bitcoin Embassy’ in the United States

After debuting a Bitcoin Embassy in Switzerland’s city of Lugano, El Salvador continues expanding its BTC strategy with a new partnership with Texas.

The world’s biggest cryptocurrency, Bitcoin (BTC), is connecting more countries as the government of El Salvador is opening a “Bitcoin Embassy” in the United States.

El Salvador, a country that adopted Bitcoin as legal tender in 2021, is expanding its Bitcoin strategy in a new partnership with the government of Texas. The intergovernmental collaboration aims to set up a Bitcoin Embassy, or El Salvador’s representative office, in Texas to work on new joint projects to promote Bitcoin adoption.

Milena Mayorga, the Salvadoran Ambassador to the United States, announced the news in a statement on Twitter on Feb. 14.

Texas Deputy Secretary of State Joe Esparza and El Salvador’s U.S. ambassador Milena Mayorga. Source: Twitter

“In my meeting with the assistant secretary of the government of Texas, Joe Esparza, we discussed the opening of the second Bitcoin Embassy and the expansion of commercial and economic exchange projects,” Mayorga said.

The latest Bitcoin initiative comes a few months after El Salvador opened the first Bitcoin Embassy in Switzerland’s southern city of Lugano in October 2022. As part of the efforts, the two pro-crypto jurisdictions started working to establish a physical governmental presence to promote cooperation in education and research institutions related to Bitcoin.

According to former Blockstream chief strategy officer Samson Mow, the phenomenon of the Bitcoin embassy is the next step in nation-states and cities adopting Bitcoin. He said that such initiatives imply cooperation between countries to develop new initiatives like establishing alliances between places that have adopted Bitcoin.

Related: El Salvador’s ‘limited’ use of Bitcoin prevents forecasted risks, says IMF

The news comes amid Texas lawmakers reportedly considering a new bill calling for a “a master plan for the expansion of the blockchain industry.” The legal initiative aims to turn Texas into the crypto capital of the country by introducing tax-free shopping with Bitcoin, among other proposals.

As previously reported, Texas has emerged as one of the crypto-friendly U.S. states, passing crypto-friendly laws aiming to better adapt commercial laws to blockchain innovation and digital asset regulations. Texas is also home to some of the largest Bitcoin miners in North America, with major mining companies like Riot Blockchain, Core Scientific and Genesis Digital Assets operating in the state.

Riot reports 17K miners offline due to Texas weather

The mining firm reported two of the buildings at its Whinstone facility in Rockdale were damaged in December as Texas experienced days of sub-zero temperatures.

Crypto mining firm Riot Platforms — formerly Riot Blockchain — reported that 17,040 rigs deployed at its operations in Texas were offline due to “severe winter weather” in the state.

In a Feb. 6 announcement, Riot reported that two of the buildings at its Whinstone facility in Rockdale, Texas were damaged in December as the state experienced days of sub-zero temperatures. From Dec. 22 to Dec. 25, temperatures across many parts of Texas — and the United States — dropped below freezing.

“Some sections of piping in Buildings F and G were damaged during the severe winter storms in Texas in late December,” said Riot CEO Jason Les. “As a result of this damage, our previously announced target of reaching 12.5 [exahashes per second] in total hash rate capacity in Q1 2023 is expected to be delayed.”

Les said that the damages initially lowered the facility’s hash rate capacity by 2.5 EH/s, with the company later able to restore 0.6 EH/s following repairs. According to Riot, there were 82,656 rigs running with a hash rate capacity of 9.3 EH/s as of Jan. 31, when the company reported producing 740 Bitcoin (BTC) — worth roughly $17 million at the time of publication.

Though many parts of the United States experienced severe temperature drops in December amid holiday travel, major cities in Texas including Dallas and Austin also went through a major ice storm in early February. Thousands of residents were without power and many tree branches and limbs broke from the weight of accumulated ice, damaging power lines and cars and blocking roads.

It’s unclear whether Riot miners were similarly affected by the storm. However, the company did not report curtailing operations due to demand on Texas’ energy grid during the recent freeze.

Riot also reported selling 700 BTC for roughly $13.7 million in January, with the company holding 6,978 BTC as of Jan. 31. The mining firm reported selling coins following extreme heat in the Lone Star State last July.

Related: Crypto miners in Texas shut down operations as state experiences extreme heat wave

That month, Riot said it planned to move many of its mining rigs from a New York facility to Texas in an effort to reduce the firm’s operating expenses. On Feb. 6, Riot stock closed down 2.3% at $6.68 on the Nasdaq.

Cointelegraph reached out to Riot Platforms, but did not receive a response at the time of publication.

Argo Blockchain mines 25% less Bitcoin due to winter storm at Helios

Argo Blockchain mined less Bitcoin than expected in December due to the firm curtailing mining operations at Helios amid extreme weather conditions.

Publicly-listed Bitcoin (BTC) mining company Argo Blockchain saw a significant drop in mining activity in December 2022 due to a winter storm in Texas.

On Jan. 11, Argo released its first operational update since selling its flagship mining facility Helios to Mike Novogratz’s Galaxy Digital. The company said it mined 147 Bitcoin or BTC equivalents in December, compared to 198 BTC in November 2022.

The firm said that as of Dec. 31, Argo held 141 BTC, with its December mining revenue amounting to $2.49 million. Argo’s total debt was approximately $79 million and its bank balance was about $20 million.

According to the announcement, the decrease in the amount of mined BTC was mainly due to Argo curtailing mining operations at Helios in response to a major winter storm in Texas.

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In late December, the United States Department of Energy declared a power emergency in Texas, citing a shortage of electricity due to the impact of severe winter weather. Amid a massive temperature drop accompanied by high winds, the demand on the Texas power grid reached an all-time winter peak in excess of 74,000 megawatts (MW).

Argo CEO Peter Wall pointed out that the company’s mining results were lower than expected because the firm had to reduce power usage on the grid due to extreme weather conditions.

Related: Bitcoin miners see mixed successes in tackling debt-fueled overexpansion crisis

During the winter storm, Argo joined other Texas Bitcoin miners in reducing power usage by an estimated 1,500 MW, Wall said, adding:

“After the winter storm and associated freezing temperatures had subsided, we safely brought Helios back online and resumed operations.”

Wall mentioned that Argo eventually decided to sell its Helios facility to Galaxy Digital, announcing the $65 million deal on Dec. 28. The transaction aimed to reduce Argo’s total debt by $41 million and improve liquidity and operating structure.

Despite the sale, Argo will still continue mining at the Galaxy-owned Helios facility. Argo’s total hash rate capacity continues to be 2.5 exahashes-per-second, the announcement notes.