US Senators Reintroduce PROOF Act to Strengthen Crypto Custody Rules Amid FTX Fallout

In a bipartisan effort, US Senators Thom Tillis (R-NC) and John Hickenlooper (D-CO) have reintroduced the Proving Reserves of Others Funds (PROOF) Act, aiming to impose stricter regulations on cryptocurrency custodians. The legislation, initially proposed in 2023, seeks to prevent the co-mingling of customer funds with institutional or proprietary capital and mandates monthly third-party reserve audits. This move comes as regulators intensify scrutiny of crypto custody practices following high-profile collapses like FTX.

Senators Reintroduce PROOF Act to Tighten Crypto Custody Rules

US Senators Thom Tillis (R-NC) and John Hickenlooper (D-CO) have reintroduced legislation, the Proving Reserves of Others Funds (PROOF) Act, aimed at strengthening crypto custody regulations. The bill prevents digital asset custodians from co-mingling customer funds with institutional or proprietary capital and mandates monthly third-party inspections of custodial reserves. This measure was initially introduced in 2023 as a response to the collapse of the crypto exchange FTX, which was driven by the co-mingling of customer assets with corporate funds and the diversion of customer deposits to a related entity, Alameda Research. The PROOF Act builds on standards already informally used in the digital asset sector.

U.S. Senators Reintroduce PROOF Act Legislation To Prevent Crypto Catastrophe

U.S. Senators Thom Tillis and John Hickenlooper have reintroduced the Proving Reserves of Others Funds (PROOF) Act, aiming to enhance the regulation of digital asset platforms. The PROOF Act requires third-party audits of crypto reserves monthly and prohibits the mixing of customer funds. Exchanges and custodians must submit Proof of Reserves (PoR) reports to be audited by a neutral third party. Non-compliance with the PROOF Act could result in escalating penalties. The reintroduction of the bill follows the collapse of FTX, which has sparked a new regulatory push for transparency in digital assets.