Bill > S1405

This bill, known as the PROOF Act (Proving Reserves Of Others' Funds Act), establishes comprehensive regulations for digital exchanges and digital custodians in the cryptocurrency and digital asset industry. The bill requires digital exchanges to maintain strict accounting standards to protect customer assets, mandating that customer funds must be held separately from the exchange's own assets and cannot be commingled or used to guarantee other trades. Each digital exchange and digital custodian must obtain monthly attestations from an independent auditing firm proving their reserves, which will include cryptographic proof of possession of customer assets and verification of the entity's liabilities. The bill introduces detailed definitions for terms like digital assets, digital commodities, and investment contracts, and establishes a system of civil penalties for non-compliance, with penalties calculated based on the number of users and total assets under management. The penalties range from 25 cents to 90 cents per user, depending on the frequency of non-compliance, with a yearly cap to prevent excessive fines. The Public Company Accounting Oversight Board and the American Institute of Certified Public Accountants will jointly develop an industry standard for these attestations, with the goal of increasing transparency and protecting customers in the digital asset marketplace.

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https://www.congress.gov/bill/119th-congress/senate-bill/1405/all-info