Senators reintroduce PROOF Act to ban crypto fund co-mingling

U.S. Senators Thom Tillis and John Hickenlooper have reintroduced the Proving Reserves of Others Funds Act.

This act is a bipartisan bill designed to prevent crypto custodians from co-mingling customer assets with company funds and to strengthen reserve transparency requirements.

The legislation, first introduced in 2023, would require digital asset institutions to undergo monthly third-party proof-of-reserves audits. 

These audits verify that firms hold sufficient assets to match customer liabilities. Results would be submitted to the U.S. Treasury Department and made public. Firms failing to comply would face escalating civil penalties.

Post-FTX bill 

The bill responds to the collapse of FTX, which misused customer funds and lacked adequate reserves—factors that led to billions in losses. 

The PROOF Act aims to standardize the industry’s solvency reporting practices and adopt PoR as a regulatory requirement rather than a voluntary practice.

Senator Tillis said the bill would “build trust” in digital markets by combining a ban on fund co-mingling with the transparency of PoR. 

Hickenlooper called the measure “commonsense” and said it would hold crypto firms to the same standards as other financial institutions.

The reintroduction of the PROOF Act comes amid ongoing efforts in Washington to create a comprehensive regulatory framework for digital assets.