Monday, January 30, 2023

Crypto consumer protection, proof of reserves bills introduced into US Congress

United States Congressman Ritchie Torres has introduced bills in the House of Representatives to prohibit misuse of customer funds by cryptocurrency exchanges and to require exchanges disclose proof of reserves to the Securities and Exchange Commission (SEC). The short bills are intended to supplement other legislation that is passed on cryptocurrency, Torres said. 

Torres introduced the bills, which have the titles of “Crypto Consumer Investor Protection Act’’ and “Crypto Exchange Disclosure Act,’’ on Dec. 1. The bills are very short. In copies obtained from Torres’ office, the body of the first bill, introduced as H.R. 9241, reads:

“A cryptocurrency exchange may not lend, leverage, or co-mingle the funds of a customer without the consent of such customer.”

The second bill, H.R. 9242, reads:

“A cryptocurrency exchange that holds assets on behalf of customers shall periodically (as determined by the Securities and Exchange Commission) disclose to the Securities and Exchange Commission information relating to proof of reserves of the exchange, including, with respect to the exchange at the time of the disclosure, the amount of assets held by the exchange compared to the liabilities of the exchange.”

The bills have been referred to the House Financial Services Committee.

“Crypto has a place in the American economy, but it must be carefully regulated,” Torres said at a press conference dedicated to the bills. He has a record of support for crypto, which includes authoring an editorial on the “liberal case” for crypto in a New York newspaper. On Dec. 5, he wrote a letter requesting a Government Accountability Office review of “the SEC’s failure to protect the investing public from the egregious mismanagement and malfeasance of FTX.”

Related: US lawmaker questions major crypto exchanges on consumer protection amid FTX collapse

There are several bills that Torres’ legislation might be matched with, including one drafted by Maxine Waters and Patrick Henry, currently the chair and ranking member, respectively, of the House Financial Services. Torres is also a member of that committee. In November, blockchain analytics company Chainalysis compiled a list of 20 bills before the U.S. Congress that could affect cryptocurrency.