Crypto supporters hail the legislators’ proposals to enact the proof-of-reserves bill. The lawmaker’s intervention is evident in the bill introduced by two United States senators from the two sides of the aisle. The legislators seek formulation of a framework that advances consumer protections designed to avert a repeat of the sudden FTX implosion witnessed last year.
US Lawmakers Introduce New Bill Demanding Monthly Audit of Reserves’ Reports
Senators John Hickenlooper (D-CO) and Thomas Tillis (R-NC) are the Proving Reserves of Other Funds (PROOF) bill promoters. On Friday, they shared the legislation’s draft, which seeks to protect against commingling clients’ deposits with company’s funds.
Additionally, it recommends engaging an autonomous audit firm to examine the crypto firm’s monthly proof-of-reserve (PoR) report.
The bill highlights the need for exchanges to develop baseline account standards that guarantee client funds. Additionally, it suggests the need to verify cryptographic proof of reserves and evidence of a firm’s liabilities. It also indicates a group of civil consequences, including the monetary fines for committing a wrongdoing.
Nic Carter, a Castle Island Ventures partner, hailed the input by the congressional duo behind the introduction of the bill advice. Castle Island Ventures is an investment company that focuses on blockchain projects.
Despite Carter claiming he is uncertain about its likelihood of passing, he said ‘there is a lot to desire for those opposed to crypto.’Nic hinted toward the Democratic Party supporting the proposals as they align with the safeguards long sought by the digital assets stakeholders.
For some time, it has opposed the crypto industry’s progression in the nation. Carter revealed in a statement that the ‘Democrats must embrace proof-of-services’ as it guarantees extra oversight for custodians and exchanges.
Policymakers in the US Calls for Stringent Crypto Rules
Senator Elizabeth Warren (D-MA), as well as several other democratic senators, have been pushing to acquire the votes for an Anti-Money Laundering Act that affirms to address crypto industry-associated risks. On the other hand, the lower chamber comprises several Democratic legislators opposed to crypto.
This includes Rep. Maxine Waters (D-CA), who previously supported the industry. At present, she is one of the House Financial Services Committee members.
Nevertheless, proof-of-reserves seems to be a vastly desired public policy offering the industry some
significantly required transparency. Carter claims that despite this not being something new, it was only after Sam Bankman Fried’s tragedy that people started comprehending its real significance.
Satoshi Action Fund’s founder and chief executive officer, Dennis Porter, agreed with the proof-of-reserves concept. He cited Texas’s latest HB1666 bill as an ‘excellent case’ of a PoR requirement at a state level.
Porter criticized the recently ratified BitLicense in California (which experts claim is a contentious crypto bill) and called for states to utilize the ‘light touch’ approach when passing regulations.
Importance of Proof of Reserves
The approach resembles that of Texas. Porter hopes for additional common sense when formulating the digital asset policy and its replication at a federal level. Hickenlooper and Tillis are also pushing for this policy.
Computational properties of digital assets can be utilized to do a PoR. In terms of transparency, this can place the industry on a more significant platform than the legacy system.
According to Alex Thorn, Galaxy Research’s head of firmwide research and crypto advocate who played a role in the bill, proof-of-reserves is a ‘robust, effective, and real-world measure to enhance customer safety and compliance with regulations.’
Thorn admitted that it is an industry best practice. He also said that despite numerous bills working slowly via Congress, they fail to focus on the crypto industry’s latest vulnerabilities. He exceptionally hailed the provisions in the PROOF Act, currently in the draft stage.
Thorn also hopes that in the future, these forms of innovation can result in improved practices. He concluded that they are confident about policymakers recognizing, understanding, and including the technological advantages digital assets provide as they evaluate policy alternatives in the future.
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