Will Argentina Add Proof-of-Solvency Requirements to Its Cryptocurrency Regulations?

Argentina’s regulators are considering including strict criteria in their upcoming bitcoin regulation framework.

In the wake of the failure of the top cryptocurrency exchange FTX, organizations like the country’s securities regulator, the CNV, are reportedly investigating the inclusion of proof-of-solvency requirements for custody institutions and exchanges in Argentina.

The Argentinian Law May Require Cryptocurrency Exchanges to Complete Proof-Of-Solvency Procedures

Argentina’s government is getting ready to implement strict restrictions that cryptocurrency businesses will need to follow to do business there.

Bloomberg reports that the national securities regulator (CNV) is considering requiring institutions managing cryptocurrency deposits for third parties to confirm their financial stability.

According to statements made by CNV president Sebastian Negri, the law that is presently under development would be more concerned with the activities of exchanges and less with the classification of cryptocurrencies and tokens.

Negri also clarified that the regulatory framework’s implementation would be gradual. That said, he did not clarify whether the proof-of-solvency standards will be included.

Negri made it clear that all actions would be performed in coordination with Argentine crypto firms. He said, “To agree on new regulatory criteria, we will form a working group with the industry, which will comprise businesses that satisfy the asset and solvency requirements to support the risk they accept.”

Proof of Solvency

A proof-of-solvency report certifies that an exchange or cryptocurrency corporation has the cash necessary to cover the liabilities it discloses to its clients. It examines the blockchain to see if it really has the quantity of cryptocurrency it claims to have.

The goal of including a provision like this in the impending cryptocurrency law in Argentina is to prevent a situation like FTX’s death, which left its users without access to their money after it filed for bankruptcy protection last year. FTX was once one of the largest cryptocurrency exchanges.

Following this incident, other cryptocurrency exchanges started making plans to voluntarily implement similar efforts. Kucoin Crypto.com and Binance were planning proof-of-reserves procedures in this situation.

Although Mazars, the company in charge of these certificates, announced in December that it would “stop their work with all their crypto clients globally,” it has since abandoned these endeavors.

It has already been announced by a few national exchanges, including Lemon Cash, that they will present this information soon. Blockchain manager for Lemon Cash Francisco Ladino remarked, “We have to restore the community’s faith in cryptocurrencies.