Texas has become a popular destination for crypto companies and miners due to its abundant energy resources and relatively lax regulations. However, the state is currently considering a bill—Senate Bill 1751—that could curb incentives for Bitcoin mining within its borders. Despite this potential regulatory hurdle, the head of the Texas Blockchain Council, Lee Bratcher, remains optimistic about the future of crypto and blockchain businesses in the state.
Senate Bill 1751 targets Bitcoin mining operations in Texas in several ways. First, it would prohibit tax abatements on certain mining property. Second, it would require Bitcoin miners to register as flexible load operators with the Electric Reliability Council of Texas (ERCOT), the state’s power grid operator. Finally, the bill would limit miner participation in demand response programs, where they are incentivized to shut down during periods of high energy demand, to 10% of the total load required by a program.
Bratcher and the Texas Blockchain Council are actively advocating against Senate Bill 1751. While they agree with the provision requiring miners to register with ERCOT, they believe that the overall effect of the bill would be detrimental to the growth of the digital asset industry in Texas.
Riot Blockchain, a major bitcoin mining company operating in Texas, also opposes the bill, arguing that it would harm job creation and economic growth in the state’s rural communities. Despite the pushback, Bratcher does not believe that the bill will ultimately pass, stating that it is “unlikely” at this point in the legislative session.
In addition to Senate Bill 1751, Bratcher is also focused on other pieces of legislation affecting the digital asset industry in Texas. The state is moving forward with a proof of reserves bill that would impose reserve restrictions on customer funds for digital asset companies with over 500 customers and $10 million in customer funds. The bill also aims to increase transparency for these companies in dealing with auditors and customers.
Overall, Bratcher’s goal is for Texas to be the “jurisdiction of choice” for digital asset and blockchain businesses, and he hopes that the state can serve as a counterpoint to the federal government’s lack of regulatory clarity on crypto issues.
He contends that the United States is “disincentivizing innovation” and forcing crypto innovators to work overseas due to a lack of clear and consistent regulation. Rather than folding under federal pressure, however, Bratcher believes that state regulators can “assert their authority” through state-specific regulations, such as the Uniform Commercial Code (UCC) and state money transmission laws.
Indeed, US crypto regulations are still in flux, with multiple competing agencies and entities attempting to assert their authority over the rapidly growing industry. As a result, states like Texas have an opportunity to establish themselves as leaders in the crypto space by adopting more forward-looking, innovation-friendly policies.
In the end, Bratcher acknowledges the need for some level of regulation, but calls for a “light touch” approach that encourages rather than stifles innovation. Whether or not Senate Bill 1751 ultimately passes, it is clear that the digital asset industry in Texas will continue to face challenges and opportunities as it grows and matures.