Plain Language Summary
# PROOF Act Summary **What It Does:** The PROOF Act (Proving Reserves Of Others' Funds Act) would require cryptocurrency exchanges and digital asset custodians to protect customer funds by keeping them separate from the company's own money and preventing their use in risky trades. The bill mandates that these exchanges regularly prove they actually hold the customer assets they claim to have—verified by independent auditors—and make these "proof of reserves" reports publicly available. The Treasury Department would oversee these reports and help establish industry-wide standards for how they're conducted. **Who It Affects:** Cryptocurrency exchange customers would benefit from stronger protections against losing their digital assets if a company fails or misuses funds. The regulations would affect digital asset exchanges and custodians that hold customer money.
Companies violating the rules could face civil penalties. **Current Status:** The bill (S. 1405) was introduced by Senator Thom Tillis (R-NC) in the 119th Congress and is currently in committee, meaning it hasn't yet been debated or voted on by the full Senate. It represents an effort to bring more security and transparency to the cryptocurrency industry, particularly following several high-profile exchange collapses where customers lost access to their assets.
CRS Official Summary
Proving Reserves Of Others’ Funds Act or the PROOF ActThis bill requires digital exchanges to protect customer funds and provide proof of reserves.Specifically, digital exchanges must minimize (1) customer risk of asset loss, and (2) delays experienced by a customer when accessing assets. With some exceptions, a customer’s assets must be separated from any other assets and may not be used to margin, secure, or guarantee a trade or account of a person other than the customer.Further, digital exchanges and digital custodians must report on their proof of reserves through an attestation from an independent auditing firm or a disinterested third party. The Office of Domestic Finance in the Department of the Treasury must make these attestations publicly available.The bill also provides for the creation of an industry standard for the attestations.Violations are subject to civil penalties.
Latest Action
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.