Texas could still become a hub for crypto companies, even if it passes a bill that curbs bitcoin mining incentives.
Texas Senate Bill 1751 would prohibit tax abatements on certain mining property and would require bitcoin miners to register as flexible load operators with the Electric Reliability Council of Texas (ERCOT) — the state’s energy operator.
It would also limit miner participation in demand response programs to 10% of the total load required by a program.
Lee Bratcher, president of the Texas Blockchain Council, spoke to Blockworks about the state of the digital assets industry in Texas and what he expects to happen to bill 1751.
“Our official position is we’ll continue to advocate for mining and against Senate bill 1751,” Bratcher said. “At this point in the session, we would say that it’s unlikely that it would pass but we’re not going to rest until the gavel lands and the session ends with it not passing.”
One key provision of the bill “suggests that Bitcoin miners should register with” ERCOT, according to Bratcher.
“We agree on one of the components of a bill which suggests that bitcoin miners should register with ERCOT as a large, flexible load,” Bratcher said. “That’s just a registration process. The miners are eager to do that.”
The Texas power grid has faced outages in the past few years as a result of deadly winter storms and heat waves.
After registering under a specific ERCOT designation, miners receive incentives for shutting down when demand is high. The idea is to prevent a grid meltdown by redirecting power.
The bill has faced pushback from Riot, a bitcoin miner that operates in Texas.
“This bill is bad for rural jobs and economic growth,” Pierre Rochard, vice president of research at the publicly traded Riot, tweeted in April.
But the bill “doesn’t really speak to the broader industry,” according to Bratcher, who added that it’s “really important to have to include bitcoin miners in the ancillary services.”
Beyond bitcoin, Texas warming up to crypto
The mining bill isn’t the only piece of legislation Bratcher is focused on. Texas has moved closer to passing a proof of reserves bill, which would define digital asset companies as companies with over 500 customers and $10 million in customer funds.
It would also impose certain reserve restrictions on customer funds.
The bill would also require “exchanges that have money transmission licenses in the state of Texas, to be more transparent with their auditors and their customers.”
And outside of current legislation, Bratcher wants to ensure that Texas is “the jurisdiction of choice for the digital asset industry.”
And the lack of regulatory clarity could give Texas an opening to cement its spot as a crypto-friendly hub, according to Bratcher.
“The United States is disincentivizing innovation and pushing innovators overseas, which is the exact opposite of what we want to happen,” Bratcher said.
States, though, “have a role to play in reversing that behavior,” according to Bratcher, adding that state regulators can “[assert] their authority” when it comes to the federal Uniform Commercial Code (UCC) — as well as “money transmission laws and all sorts of regulatory structures.”
“The federal government seems to think that they can regulate 100% of the industry, whereas a good bit of that is actually state regulation,” he said.
US crypto regulation is still in flux.
Multiple — and sometimes competing — parties have been weighing in, ranging from the New York attorney general’s office to the SEC. And the CFTC, meanwhile, has increasingly looked to flex its own regulatory authority over the industry.
“This is an opportunity for innovative states to push back against the overreach from the White House and assert that states their state and the US as a whole to remain a bastion for innovation for free markets and light touch regulation,” Bratcher said. “We don’t want crippling regulation…We do need to be a regulated industry.”
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