At the end of 2022 the market for crypto assets was rocked by the FTX scandal. This article examine what investors who haven”t given up on the sector
should do next.
The stunning collapse of FTX in 2022, and the subsequent
arrest and court appearance of its founder and CEO, have sent
shockwaves through the sector. Where do crypto assets investors
go next and what options make most sense? To answer such
questions is Takashi Oka, CEO and founder of Øverlay. The editors
of this news service are pleased to share these views and invite
replies. The usual disclaimers apply. Email [email protected]
The start of the new year is a great time to assess the events
and lessons of the last twelve months and to be motivated to set
new goals for the coming ones. For the crypto industry, a good
dose of realism may follow a self-evaluation of what went down –
and what went wrong – in 2022.
Market turmoil has been rampant in 2022, reflecting a larger
concern. Following the collapse of FTX and the arrest of its
founder and former CEO Sam Bankman-Fried, many people may be
hesitant to invest in crypto, deeming it too risky. It’s true
that crypto keeps appearing in the news for all the wrong
reasons, but cryptocurrencies can still be a viable investment if
certain safeguards and assurances are put in place.
I’ve long been on a mission to bring authenticity, safety and
trust to crypto investments, and I believe that the unrest we’ve
seen in 2022 can prove the perfect opportunity for turning things
around for good.
In doing so, we can aspire to return to the original idea at the
heart of crypto, one where platforms can be used safely and
securely and investors don’t need to worry about the validity of
the products and people they put their trust in. Repeated asset
outflows and rug pulls are currently preventing the industry from
maturing and reaching mass adoption. The only thing that can turn
this trend around, in my view, is a framework for protecting
users from fraud and excessive risk while maintaining the
decentralised nature of what crypto is at its heart.
I believe we can do this using something known as Regulated
Decentralised Finance (RegDeFi), an innovative concept that is
starting to take the cryptocurrency world by storm and may turn
out to form the new backbone of the financial industry.
As a hybrid of Centralised Finance and Decentralised Finance,
RegDeFi brings together the advantages of each system, while
implementing more secure procedures for their processes and
improving on their commitment to user safety and investment
protections.
When it comes to Centralised Finance, users have very little
control over what they’re buying into – the operator’s behaviour
is entirely unverifiable, which prevents fraud from being
detected and prevented. In Decentralised Finance, verifiability
is not an issue but you cannot require or enforce KYC or similar
standards.
RegDeFi solutions protect the investments of individuals and
users through a compliance-ready structure with existing
frameworks, standards, rules and regulations, thus dispelling the
shady image that decentralised technology has come to be
associated with.
The idea behind it is quite simple: blockchain is the foundation
that cryptocurrencies are based on. While many abuse its
power for speculative purposes, we can use the same pioneering
technology to end this unfair and immoral cycle.
By putting blockchain technology to use for RegDeFi purposes, we
can use it to track scams and prevent them from tarnishing the
industry’s reputation. By changing the specifications of the
blockchain, and modifying them to comply with regulations while
remaining faithful to the main purpose of blockchain technology
itself, we can lay the necessary foundations for the economy of
the future.
In a hybrid model, this can be done by using blockchain
technology with a built-in self-sovereign ID (which directly
translates to KYC), like the Concordium blockchain. As a
public-layer 1 science-backed blockchain, Concordium is designed
to balance privacy with accountability through its ID layer. Its
aim is to allow companies to migrate their businesses to
blockchain in total safety, and doing the same for ordinary
people who wish to invest with peace of mind.
We need to rebuild the token-based funding market, and we can do
so by using Concordium’s ID layer with Zero Knowledge Proof ×
KYC, whereby both privacy protection and flexible compliance with
regulations can be achieved, allowing anyone to invest with
confidence.
