Today, Pierre Rochard, the vice president of research at Riot Platforms, shared new cryptocurrency regulations in Texas with his Twitter followers. "Texas will ban fractional-reserve 'crypto banks' like FTX, Celsius, and BlockFi by requiring proof of full reserve," Rochard announced in his tweet, which drew a strong reaction in the crypto community.
Rochard explained that financial companies that allow their customers to make deposits in cryptocurrencies will not be banned as long as they can provide proof of full reserve. It is a ban on "lending out deposits."
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It seems that the Texas government wants to protect its residents from losing their funds to financial companies that have a seemingly higher risk of collapse. Although some Twitter users appreciated this effort, many did not like the idea for two reasons.
The first was stated by Twitter user Dan Behrman, who said that "fractional reserve is problematic, but creates benefits," adding that consumers should have the right to make their own decision, but that they need all the information they can get about how the company they choose for their deposits is operating.
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Similar opinions were expressed by many other cryptocurrency users, who felt that this decision was "paternalistic" and that "adults should make and learn from mistakes" while citizens "do not need daddy government pushing infantilism on everyone."
Rochard’s argument against this objection is that "such an approach did not work over the past cycle."
Another issue raised by many Twitter users is the lack of similar regulations for traditional banking.
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"Imagine how much wealthier Texans would be if fractional reserve banking was banned for the legacy financial system too! We wouldn't have these massively leveraged ponzis that take down the entire financial system when they blow up every 8-10 years," Twitter user Phil Geiger, product marketing specialist at Bitcoin-backed lending firm Unchainedcom, responded to the news.
Demelza Hays, research director at Cointelegraph, also commented on Rochard’s tweet, saying, "Creating credit and fiduciary media backed by Bitcoin is demanded by some market participants. Banning a voluntary interaction with the use of force is misguided and the wrong take."
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The news about regulations came shortly after the release of the US bill on a responsible debt ceiling increase, which was published on May 29. US congressman Warren Davidson shared the bill with his Twitter followers, claiming that one of the victories was "blocking proposed taxes." This was Davidson’s response to Rochard, who said he found no information about Bitcoin mining in the document and asked the congressman directly if this meant that "the administration DAME excise tax proposal is gone?" The "victory" mentioned by Davidson implies the exclusion of the 30% tax on the costs of energy consumption by cryptocurrency miners from the bill.
