Regulators in Argentina are looking into the possibility of including strict requirements in their forthcoming crypto regulatory framework. The nation’s securities watchdog, the CNV, is likely to examine the inclusion of proof of solvency requirements for exchanges and custodial services following the collapse of a major cryptocurrency exchange, FTX.
Crypto Exchanges May Need to Pass Solvency Test by Law in Argentina
The government of Argentina is preparing to issue a set of stringent regulations for crypto businesses to allow them to operate in the country. According to Bloomberg reports: The country’s securities regulator (CNV) is considering introducing proof of solvency requirements for firms that deal in cryptocurrency deposits for third-parties.
CNV President Sebastián Negri said that this regulatory framework will be implemented gradually, but he did not confirm the inclusion of proof of solvency requirements. Negri further clarified that all measures will be taken in a collaborative effort with crypto businesses in Argentina. He said:
We will create a working group with the industry to agree on new regulatory parameters, which will include companies that meet the asset and solvency requirements to support the risk they assume.
Solvency Test
A proof-of-solvency report reveals whether a crypto firm or exchange holds the cryptocurrency it claims to have, while at the same time its funds are on the blockchain, certifying that they have sufficient funds to cover any liabilities the company might present to its customers.
The potential inclusion of this measure in the upcoming Argentine Crypto law would prevent a situation such as the disappearance of FTX, formerly one of the biggest cryptocurrency exchanges. It filed for bankruptcy last year, leaving its users without access to their funds.
This is an opportunity for other cryptocurrency exchanges to host similar initiatives on a voluntary basis. This is the case for Binance, Crypto.com, Kucoin, and others which have been in the process of verifying reserve procedures. However, these audits were conducted by Mazars, the firm in charge, who abandoned these commitments in December, citing that it would “cease its work with all its crypto clients globally.”
Some local exchanges such as Lemon Cash have already stated that they will provide this information in the coming days. “The community has lost trust in cryptocurrencies, so we have to get them back,” declared Lemon Cash blockchain manager Francisco Ladino.
What are your thoughts on the potential inclusion of proof of solvency requirements in the upcoming cryptocurrency legislation in Argentina? Please leave a comment below.
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