Major crypto firms such as Coinbase (NASDAQ: COIN) and Ripple have suggested a framework for crypto and digital asset regulation.
Overall, their approach is meant to provide a proper way for the blockchain and crypto industry to move forward. Crypto analysts believe that an effective approach to regulation would account for the key capabilities of virtual currency platforms and give them an opportunity to develop their products and services.
Industry analysts believe that ideal public policy outcomes may be achieved by close collaboration between public-private entities. A truly effective approach should be able to help with adapting applicable regulatory frameworks while encouraging the establishment of crypto innovation sandboxes.
Digital currency and blockchain or distributed ledger tech (DLT) platforms require clear regulatory and licensing frameworks, which can address the different challenges the industry has been facing.
DeFi Industry Needs More Regulatory Clarity
The suggested measures in these proposed digital asset frameworks intend to offer more legal clarity to industry participants as well as a better alternative to regulation-by-enforcement, which is a controversial (and heavily criticized) approach taken by the US Securities and Exchange Commission (SEC).
Lawmakers in the US and other nations are seriously looking into learning more about the wide range of cryptocurrency and decentralized finance (DeFi) platforms. It has become imperative to create a comprehensive policy framework for crypto-assets and this may be achieved through clear communication between private and public actors, according to industry experts.
Crypto professionals also believe that public-private collaboration needs to be at the center of any meaningful legislative proposal. Any policy framework that’s meant to regulate digital currencies needs to encourage continuous dialogue between regulatory authorities and crypto industry participants. Moreover, public-private collaboration could result in improved policy outcomes for the crypto sector as well as individual consumers.
US financial markets are globally recognized because of their effective regulatory framework under which they consistently operate.
Astra Protocol May Help Authorities with Regulating Crypto Platforms
An innovative platform launched by developers of the Astra Protocol aims to serve as the decentralized compliance layer for DeFi. The Protocol’s developers have noted that the Chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, has pointed out that consumer protection needs to improve in the crypto-asset industry.
Gensler and other US policymakers have called for improved regulations for the nascent crypto and DeFi space in order to prevent fraud and other serious issues. The Astra Protocol team also notes that large-scale money laundering cases across different DeFi platforms has led to regulators paying a lot more attention to this emerging industry.
According to the Astra Protocol team, we need a highly secure, decentralized compliance platform to address these serious concerns while being able to seamlessly adapt to ever-evolving and sophisticated criminal activity.
Notably, the platform needs to be able to handle the constantly-changing regulatory landscape, as laws including the “Cryptocurrency Bill 2021” and the “Keep Innovation in America Act” are passed.
As explained by Astra, the Bank Secrecy Act requires decentralized institutions that are trading regulated financial instruments to conduct KYC and ensure proper AML compliance rules are being implemented.
As noted by the Astra team, one of these updated requirements is “Independent testing for compliance to be conducted by the futures commission merchant or introducing broker in commodities’ personnel or by a qualified outside party.” In order to address these guidelines, Astra Protocol has specifically developed their platform to fulfil this role for DeFi and crypto networks.
As noted by Astra, the “Travel Rule” is an effective way to address issues involving money laundering, terrorist financing, and other types of illicit activities. At present, virtual-asset and DeFi platforms have a wide range of approaches to ensuring due diligence, KYC, and handling AML/CFT procedures.
US Crypto Investors Still Facing Serious Risks
But there are still a fairly large number of platforms still accessible to US investors that have no standardized or proper KYC processes. Moreover, weak KYC is still a serious issue as would-be criminals are able to circumvent these barriers. And investors are still at considerable risk from exploits/hacks, fraudulent activities, and theft as long as they are not working within a system that offers robust KYC/AML solutions.
As DeFi gains more users, it will definitely require a proper regulatory system so that investors are afforded the protection they need. In order to play by the rules, DeFi protocols will have to make significant investments in a proper compliance layer as soon as possible. If they don’t take such measures, then governing entities could strictly penalize those who violate applicable AML rules, as the SEC has clarified on many occasions.
Astra further notes that their mission is to provide all DeFi protocols and Virtual Asset Service Providers (VASPs) with a completely decentralized compliance layer. Their product offerings include KYC/AML services to act as a tool to tackle everyday compliance issues by leveraging the industry know-how of reputable legal firms.
As noted by its creators, Astra has been specifically designed to bridge the gap between regulators and crypto/DeFi industry innovators. Astra Protocol’s offering aims to support the best quality KYC and other appropriate due diligence procedures via applicable frameworks from renowned legal organizations.
Astra Protocol to Offer Comprehensive LegalTech for Different Jurisdictions
Their platform provides decentralized organizations and VASPs a proper mechanism to follow various regulations implemented by jurisdictions throughout the world. For novice DeFi traders or investors, their patented tech calls upon industry professionals from different legal and accounting companies to carry out relevant AML/KYC processes.
They aim to provide a secure service to all customers that has been tailored to any jurisdiction’s specific requirements. In addition, they provide clients a comprehensive analysis of various risks for any DeFi user based on recognized money laundering / terrorism financing flags. With Astra, decentralized platforms are able to regularly demonstrate that they’re aware of and effectively reacting to serious dangers while preventing suspicious transactions as needed.