By: Bhojani H.B. No. 5067

A BILL TO BE ENTITLED

AN ACT

relating to 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. Title 3, Property Code, is amended by adding Chapter 16 to read as follows:

CHAPTER 16. DISTRIBUTED LEDGER-BASED TITLE REGISTRY PILOT PROGRAM

Sec. 16.001. DEFINITIONS. In this chapter:

(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) "Like-kind exchange" means a transaction in which a contractually agreed-upon amount of digital assets are exchanged for a specific parcel of land or property by delivering the assets to a trustee who completes the transaction and disburses the funds as agreed.

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

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

(6) "Pilot program" means the distributed ledger-based title registry pilot program, as established by this chapter.

(7) "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.

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

(9) "Stablecoin" means a digital asset that remains stable in value against a pegged external traditional asset class.

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

Sec. 16.002. PILOT PROGRAM. (a) The office shall establish and implement the distributed ledger-based title registry pilot program in partnership with the working group described in Sec. 16.003 to record title transfers with distributed ledger technology. Recording of title transfers in connection with the pilot program shall be in addition to existing recording methods.

(b) The office shall ensure that the pilot program:

(1) includes at least two counties of which at least one is a rural county and one is an urban county;

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

(3) collects 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) determines whether existing data must be migrated to an immutable and public ledger for backwards compatibility;

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

(A) costs;

(B) security;

(C) transparency; and

(D) overall complexity; and

(6) considers the guidance that would be necessary to:

(A) allow title companies to utilize government regulated stablecoins as an acceptable form of good funds for closing a real estate transaction; and

(B) allow escrow agents to accept digital assets in transactions involving stablecoins or like-kind exchanges.

(c) To accomplish the goals of the pilot program, the office shall:

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

(2) identify counties to be included in the pilot program;

(3) determine the costs of the pilot program;

(4) work 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

(5) partner 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.

Sec. 16.003. WORKING GROUP. The office shall establish a framework for a working group to discuss ideas, give feedback, and explore other opportunities relating to the subject of the pilot program. 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.

Sec. 16.004. PARTICIPATION OF REGULATORS. The office shall engage appropriate regulators to participate in crafting guidance that includes protection for all parties involved in a real estate transaction the title transfer for which is recorded with distributed ledger technology.

Sec. 16.005. RULES. Not later than October 1, 2023, the office shall adopt rules necessary to administer the pilot program.

Sec. 16.006. REPORT. Not later than January 1, 2025, the office shall submit to the legislature a report on the findings of the pilot program and any recommendations for legislative or other action.

Sec. 16.007. EXPIRATION. This chapter expires September 1, 2025.

SECTION 2. This Act takes effect September 1, 2023.