U.S Senators Reintroduce PROOF Act Legislation To Prevent Crypto Catastrophe
- The PROOF Act requires third-party audits of crypto reserves monthly.
- FTXs collapse sparks new regulatory push for transparency in digital assets.
- Non-compliance with the PROOF Act could result in escalating penalties.
Senators Thom Tillis and John Hickenlooper reintroduced the Proving Reserves of Others Funds (PROOF) Act. The bill seeks to enhance the regulation of digital asset platforms through measures such as preventing mixing of customer funds. Moreover, it requires exchanges and custodians to submit Proof of Reserves (PoR) reports to be audited by a neutral third party.
The PROOF Act outlines clear regulations about the management of customer funds by digital asset institutions. The Act mandates all digital asset platforms to present monthly PoR audit reports which shows that they have sufficient assets to cover customer deposits. These reports will be reviewed and submitted to the public by the U.S. Department of the Treasury.
PROOF Act Introduces Strict Crypto Regulations
This bill aims to prevent a similar case to the FTX collapse which occurred because of mismanagement of customer funds. The Act prohibits mixing of customer funds with institution assets and requires regular verification of financial reserves. The bill, through these regulations, seeks to increase transparency in the crypto market.
PoR requires digital asset custodians to prove that their reserves match their financial liabilities. The system uses cryptographic methods such as Merkle trees or zero-knowledge proofs which can prove reserves without disclosure of sensitive information. This allows independent verification of custodial practices which improves trust.
Non-compliance with the PoR inspection process could result in civil penalties for digital asset platforms. A tiered system will be established to enforce penalties, which would become more severe for repeat offenders. This initiative aims to improve credibility of cryptocurrency platforms as well as improve the confidence of investors.
FTX Collapse Sparks Concerns in Crypto Industry
The FTX collapse prompted industry-wide calls for enhanced regulation to supervise crypto platforms. The PROOF Act aims to be a regulatory framework to improve control procedures and protect consumers. This new regulatory approach aims to prevent future financial catastrophes in the digital asset ecosystem.
The proposed legislation by Senators Hickenlooper and Tillis demonstrates the increased security and transparency concerns in the crypto markets. The development of the digital asset markets requires improved security and accountability standards. The PROOF Act establishes important precedent for future regulation in the crypto market.
Read more: https://www.tronweekly.com/u-s-senators-reintroduced-the-crypto-proof-act/
Text source: TronWeekly
