Legislation, introduced to the House by Rep. Don Beyer D-VA. on Thursday, aims to bolster transparency around digital asset transfers that are not recorded on a public blockchain.
The Off-Chain Digital Commodity Transaction Reporting Act, being touted as a consumer protection bill, would require digital asset trading platforms to record transfers in a repository registered with the CFTC.
Amendments are being sought within “the Commodity Exchange Act with respect to reporting digital commodity transactions.” Transactions would need to be reported within a 24-hour period after they’re executed, a copy of the bill’s text reads.
Off-chain transactions can encompass a variety of activities, including private peer-to-peer transfers and the movement of funds between different accounts on a centralized exchange.
“As consumers increasingly turn to large digital asset trading platforms to conduct their business, thousands of transactions each day are conducted off the publicly verifiable blockchain,” Beyer said in a statement.
“Unfortunately, internal record keeping among these private entities can vary wildly and this can leave investors and consumers vulnerable to fraud and manipulation.”
Following the collapse of FTX and other centralized entities, criticism by industry proponents has been levied at the way in which digital assets are recorded and transparently communicated to the public.
In response, major exchanges including OKX, Binance and Crypto.com, among others, have attempted to assuage customers using a “proof-of-reserves” model, soliciting third-party accounting firms to bolster credibility and legitimacy.
This model seeks to provide a verification mechanism to ensure that customer-held assets align with the reserves the institution maintains on its client’s behalf.
Legislation Thursday could potentially add an additional layer of transparency surrounding the health of a given institution.
“Many platforms maintain internal private ledgers that track transactions, but these records can be of varying quality. Discrepancies can lead to disputes, manipulation, or fraud,” per the statement.
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