US lawmakers unveiled proof-of-reserves proposals in a bill aimed at establishing safeguards that will avert replicating the FTX-type collapse in 2022. The move by two Senators drawn from the Republican and Democrat parties won the support of the crypto advocates as a delayed necessity.
Bipartisan Bill Proposes Audit-Backed Monthly Reserves’ Report
The crypto advocates hail the legislative action initiated on Friday, October 20, by Senators Thom Tillis and Democrat John Hickenlooper. The Proving Reserves of Others Funds (PROOF) Act targets guarding the digital assets sector against potential unethical conduct involving commingling customer funds. The PROOF Act provides for the monthly proof-of-reserves (PoR) report on the customer funds prepared by an independent third-party audit firm.
The bill obligates the crypto exchanges to integrate proof-of-reserves standards regarding the customer funds. Also, the bill directs the digital assets to prioritize verification of the cryptographic proof-of-reserves. The verification extends to the company’s liabilities.
The PROOF Act proposes the imposition of civil penalties alongside the pecuniary fines payable whenever one commits an offense.
Castle Island Ventures partner Nic Carter supported the move by the congressional duo to table the bill that will dictate the auditable reports on reserves’ proof. As an experienced member of the investment firm exclusively targeting blockchain-related projects, he restated his support for erecting law-backed safeguards.
Proof-of-Reserves Bill Fate Lies in Bipartisan Support
Carter expressed concerns about the bill garnering lawmakers’ support and passing. He admitted that Congress is divided, with plenty of lawmakers advancing the anti-crypto stance.
Carter expressed optimism that the Democratic Party would likely support the PROOF Act as it aligns with their past stance against crypto industry advancement in the U.S. He opined that the
Proof-of-Reserve bill would probably win support in both the Senate and House of Representatives as it yields additional oversight to the firms providing exchanges and custodian services.
Carter indirectly referenced the presence of anti-crypto crusader Senator Elizabeth Warren. She leads fellow Democratic lawmakers to secure votes for the Anti-Money Laundering (AML) Act aimed at addressing the risks inherent in the crypto industry.
Carter observes that the lower chamber hosts several anti-crypto lawmakers towing the Democratic stance. Their presence is cemented by Representative Maxine Waters, who jumpshiped from the pro-industry camp. The Democratic lawmaker now sits in the House Financial Services Committee (HFSC).
Carter observes that the proof-0f-reserves constitute a desired public policy that would bring much-needed transparency to the digital assets industry. The investment executive admits that proof-of-reserves existence gained prominence following the sudden FTX implosion in November 2022. Today, the crypto community understands and supports its existence as inevitable.
Satoshi Action Fund chief executive Denniss Porter lauded the bipartisan PROOF Act as progressive in its scope. The executive at the non-profit advocacy group for Bitcoin admits that the proof of reserve should mirror Texas’ HB1666 bill that effectively demonstrates the essence of proof-of-reserves.
Porter delved into the debate concerning the BitLicense bill in California by urging states to consider lighter touch regulations. He hailed the move by the Golden State.
PROOF Act Prioritizes Regulatory Compliance and Consumer Safety
Porer considers that lawmakers are likely to prioritize sensible digital asset policies at the state level. Senators Tillis and Hickenlooper seek to replicate the approach at the Federal level.
The approval of the Proof-of-Reserves Bill is easier to accomplish, given the computational features inherent in the digital assets. Its achievement would position the digital assets sector on a higher pedestal of transparency than the legacy system.
Galaxy Research’s head, Alex Thorn, considers the PoR bill as offering a powerful yet practical and effective mechanism to facilitate consumer safety while guaranteeing regulatory compliance. The researcher admitted that while several bills made their way through Congress, none captured a detailed scope to avert recent blowups as outlined by the PROOF Act.
Thorn is confident that the PROOF Act delivers an environment that nurtures better practices across the digital assets ecosystem. As such, the executive is optimistic that the policymakers would pursue an in-depth understanding, recognition and integration of benefits offered by the digital assets to the U.S. and global economy.