Senators Propose New Bill to Prevent Another FTX Meltdown

In Brief:

The PROOF Act mandates monthly reserve audits for crypto exchanges and bans fund co-mingling.

Bipartisan bill aims to restore trust and prevent systemic failures like FTX.

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A new bipartisan bill dubbed the PROOF Act has been introduced in the U.S. Senate, targeting crypto exchanges with stricter consumer protection requirements. Spearheaded by Republican Senator Thom Tillis and Democrat Senator John Hickenlooper, the bill seeks to restore trust in the crypto market by enforcing more transparency and accountability.

If passed, the PROOF Act would require digital asset exchanges and custodians to undergo monthly audits of reserves by neutral third-party firms. These audits would need to use cryptographic verification methods like Merkle Trees or zero-knowledge proofs to prove that customer funds are fully backed—no smoke and mirrors.

The bill also bans the co-mingling of customer assets with company funds, a practice that played a major role in the FTX collapse. Exchanges would be required to keep customer assets separate and prove solvency regularly.

Tillis emphasized the importance of adapting regulations without killing innovation, while Hickenlooper noted the need for baseline consumer protections amid rising crypto adoption. The legislation reflects a rare moment of bipartisan cooperation in the crypto policy space and signals Washington’s serious move toward preventive measures rather than reactive enforcement.

As crypto continues its path toward mainstream adoption, bills like the PROOF Act could help set a safer, more transparent standard for both investors and platforms.

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