88R25378 KBB-F

By: Bhojani H.B. No. 5067

Substitute the following for H.B. No. 5067:

By: Burns C.S.H.B. No. 5067

A BILL TO BE ENTITLED

AN ACT

relating to a study by the General Land Office on the establishment and implementation by the General Land Office of a distributed ledger-based title registry pilot program.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. DEFINITIONS. In this Act:

(1) "Distributed ledger" means a peer-to-peer network that operates without a central administrator or database and uses a distributed network of devices to utilize cryptography to immutably record and verify the accuracy of data.

(2) "Hybrid model" means a method of recording title to real property in which basic information from the deed is recorded on a public ledger with an identifier to the full document that is held on a separate, permissioned distributed ledger.

(3) "Office" means the General Land Office.

(4) "Onchain recordation" means recording and verifying the accuracy of data through a central administrator or database.

(5) "Pilot program" means the distributed ledger-based title registry pilot program to be studied under this Act.

(6) "Public ledger" means a method of recording titles in which all records are documented on a publicly accessible distributed ledger where the county provides free public access to all documents.

(7) "Rural county" means a county that is outside the boundaries of a primary metropolitan statistical area or a metropolitan statistical area.

(8) "Study" means the study conducted under this Act by the General Land Office on the establishment and implementation by the office of a distributed ledger-based title registry pilot program.

(9) "Urban county" means a county that is partially or entirely inside the boundaries of a primary metropolitan statistical area.

SECTION 2. STUDY ON PILOT PROGRAM. (a) The office shall conduct a study on establishing and implementing, in partnership with the working group established by Section 3 of this Act, a distributed ledger-based title registry pilot program to record title transfers with distributed ledger technology.

(b) A pilot program considered by the study must:

(1) include at least two counties of which at least one is a rural county and one is an urban county and determine the potential impact of the pilot program on those types of counties in particular and counties generally;

(2) incorporate the recording of property liens simultaneously with existing recording methods so as to not disrupt current processes;

(3) collect cost data sufficient to allow comparison of the costs to a participating county of:

(A) continuing to facilitate onchain recordation; and

(B) adapting to a distributed ledger;

(4) determine whether existing data must be migrated to an immutable and public ledger for backwards compatibility;

(5) evaluate both the public ledger and hybrid model as methods of recording to compare:

(A) costs;

(B) security;

(C) transparency; and

(D) overall complexity;

(6) provide for the recording of title transfers in connection with the pilot program in addition to existing recording methods;

(7) determine the ability to expand the pilot program methods to other types of documents and information relating to real property;

(8) incorporate the requirements of existing statutes related to the recording of property liens; and

(9) ensure data privacy and proper protection against fraud.

(c) The goals of the study shall include:

(1) establishing a protocol for implementation of distributed ledger-based recording;

(2) identifying counties to be included in a pilot program;

(3) determining the costs of the pilot program and of converting to a statewide distributed ledger system;

(4) developing protocols for:

(A) working with the selected counties to implement the program by training, educating, and collaborating with the counties to ensure that the pilot program is successful, efficient, and complies with a budget established by the office; and

(B) partnering with a software company to create an application programming interface to integrate existing systems with the distributed ledger system and ensure that title transfer records are seamlessly incorporated;

(5) identifying and considering issues concerning transparency and regulation of a distributed ledger-based title registry system;

(6) determining funding sources for and other available resources to support implementation of the pilot program; and

(7) determining appropriate vendor selection processes.

SECTION 3. WORKING GROUP. The office shall establish a framework for a working group to discuss ideas, give feedback, and explore other opportunities relating to the study. The working group shall consist of representatives from:

(1) counties;

(2) title insurance agents;

(3) title insurance companies;

(4) the banking industry;

(5) appropriate regulators; and

(6) the Texas Blockchain Council.

SECTION 4. PARTICIPATION OF REGULATORS. The office shall engage appropriate regulators to provide information for the study regarding the manner in which regulators could participate in crafting guidance for a pilot program that would include protection for all parties involved in a real estate transaction the title transfer for which is recorded with distributed ledger technology.

SECTION 5. RULES. Not later than October 1, 2023, the office shall adopt rules necessary to administer the study.

SECTION 6. REPORT. Not later than January 1, 2025, the office shall submit to the legislature a report on the findings of the study and any recommendations for legislative or other action.

SECTION 7. EXPIRATION. This Act expires September 1, 2025.

SECTION 8. EFFECTIVE DATE. This Act takes effect September 1, 2023.