Astra Protocol, which is focused on equipping all DeFi smart contracts with a decentralized compliance layer, including KYC/AML capabilities, in order to resolve real-world compliance issues, notes that the US Securities and Exchange Commision (SEC) Chair, Gary Gensler, has said that consumer protection needs to improve considerably in the digital asset industry.
Regulatory authorities in the US and globally believe that better regulations are required to prevent fraudulent activities and other potentially serious issues in crypto markets.
The Astra Protocol team points out that high-profile money laundering cases across multiple financial platforms have led to regulators paying close attention to the nascent decentralized finance (DeFi) space.
Decentralized Compliance Platform Needed to Address Financial Crime
Astra explains that an innovative, highly-secure, decentralized compliance platform is required to address these growing concerns and adapt to increasingly sophisticated criminal activities. Crucially, the platform needs to effectively deal with the fast-changing regulatory environment, as laws like the “Cryptocurrency Bill 2021” and the “Keep Innovation in America Act” become effective.
Astra Protocol developers further noted that under the Bank Secrecy Act (BSA), any decentralized institution found trading regulated financial instruments are required by law to carry out KYC while ensuring proper AML compliance. These measures must be taken to satisfy the appropriate regulatory guidelines.
As noted by Astra Protocol developers, one of these requirements is “Independent testing” for compliance to be carried out by the futures commission merchant or introducing broker in commodities’ personnel or “by a qualified outside party.”
Astra Protocol has been created to address these requirements for all DeFi and cryptocurrency platforms.
As noted by Astra, the “Travel Rule” is considered one of the most effective approaches to prevent money laundering and other illicit activities like terrorist financing. At present, virtual-asset firms and DeFi organizations have varied approaches to handling customer due diligence, KYC, and AML/CFT requirements.
US Consumers Still Accessing Loosely Regulated Crypto Platforms
But there are still many platforms accessible to US residents that have no proper KYC procedures in place, the Astra Protocol team reveals. They’ve noted that weak and porous KYC remains a critical issue as would-be criminals may be able to circumvent these barriers.
Investors and customers are currently at risk due to damaging hacks/exploits, Internet-based scams, and theft in cases where they cannot take advantage of a consistent approach to KYC and AML across the US and beyond.
Astra further notes that as DeFi continues to evolve, it will require a proper framework for adhering to appropriate rules determined by members of society.
According to the Astra Protocol team, DeFi protocols will have to make considerable investments in a proper compliance layer. If the fail to do this, then the relevant authorities will harshly penalize those in violation of money laundering and terrorist financing laws, as the SEC has confirmed.
Equipping DeFi Protocols with Decentralized Compliance Layer
Astra says its goal is to equip all DeFi protocols and Virtual Asset Service Providers (VASPs) with a fully decentralized compliance layer. Their service offerings reportedly include KYC & AML capabilities to serve as a tool to address real-world compliance matters using the expertise of trusted legal firms.
Astra has been designed to bridge the gap between regulators and innovators. The Protocol’s offering aims to support the highest quality KYC and various other due diligence processes using applicable frameworks from established legal firms.
Their platform offers decentralized organizations and VASPs a proper mechanism to help them with following appropriate regulations that are implemented by different jurisdictions.
For inexperienced DeFi investors, their technology calls upon professionals from well-known legal and accounting companies to conduct extensive KYC processes, and then return their decisions on the progress.
Astra offers a secure service to all customers, which is tailored to any jurisdiction’s specific requirements. They also provide clients with a clear breakdown of potential risks for any DeFi user based on recognized money laundering/terrorism financing flags.
By leveraging the Astra Protocol, decentralized platforms are able to reliably demonstrate that they are aware of and are addressing potential dangers while preventing suspicious or fraudulent transactions accordingly.