Crypto Meltdown Calls for a Decentralized Compliance Layer to Protect User Interest

Over the last few weeks, the cryptocurrency market has been rocked by extreme volatility. There has been a steep decline in the price of digital assets. Such has been the meltdown in that the entire market cap has fallen under $1 trillion, which surpassed the $3 trillion mark at the peak of the bull cycle.

Being a nascent market means high volatility is a common phenomenon at this stage of growth. That said, this volatility has made crypto so attractive to investors and speculators. However, volatility doesn’t always mean just a significant upside but also a remarkable downside.

And that’s what we are seeing in this fourth crypto cycle, so all this carnage is not unprecedented. In fact, a 70% to 80% drop in Bitcoin and Ether prices from their all-time highs can be seen as a golden ‘buy the blood’ opportunity to plan for the future with a focus on research and only investing what you can afford to lose.

However, we also witnessed this time that the significant drawdown in the crypto prices was exacerbated by the lack of proper risk management practices adopted by some of the biggest names in the industry.

Extreme Market Conditions

One of the biggest centralized lenders in the crypto space, Celsius Network, was among this torrent of bad news as it abruptly froze customer withdrawals, swaps, and transfers between accounts due to what it said were “extreme market conditions.”

This pause in withdrawals resulted in more volatility and raised concerns about Celsius’ solvency. It was a liquidity issue, according to the experts, a classic banking problem.

Just late last year, Celsius Network raised $400 million in a Series B funding round at a valuation of $3.5 billion. Back in October, the crypto lender had $25 billion in assets from more than 1.7 million users, which fell to around $11.8 billion as of last month.

Besides spooking investors and the market, this is catching the attention of the administration and lawmakers during times of economic uncertainty, including high inflation and global market instability.

State securities regulators in Washington, Alabama, Texas, Kentucky, and New Jersey are now investigating Celsius Network’s decision to suspend customer redemptions this week.

It is expected the proposed regulations to regulate stablecoins by the President Working Group could extend to the entire crypto space in order to “mitigate the risks of these assets.”

The PWG report calls for federal regulatory oversight, restricting institutions from lending customers’ digital assets out, and compliance with liquidity and capital requirements.

Need for a Better Solution

Much like a bank, the centralized lender Celsius was using the crypto deposits from over a million retail customers and investing them in the crypto market, including DeFi but did not apply proper risk management or provide any safety measures to its users.

Thus, the market needs a truly decentralized solution that doesn’t obscure how they deal with their funds. Astra protocol is one such decentralized solution that provides a compliance layer for the Web3 economy.

In the DeFi sector, undercollateralized loans have been gaining traction. Still, while they offer the benefit of no central control, they carry considerable risks in terms of a lack of asset liquidity and instant payment. Astra’s truly decentralized project onboards traditional players for funding, allowing for lending on the Astra network, and eliminating the need for these under-collateralized loans.

By converging the power of Web3.0 and traditional financial ecosystems, Astra Network aims to create the next iteration of decentralization and become the largest network in the industry.

Zurich, Switzerland-based Astra basically allows protocols to comply with society’s numerous regulations without giving up the benefits of decentralization or putting investors at risk.

Decentralized Compliance Layer

Amidst the mainstream global adoption of crypto and the regulatory challenges coming its way, Astra has designed its network to be the only fully KYC (know your customer) compliant decentralized blockchain ecosystem which is available worldwide with the protocol performing all compliance practices.

This regulatory compliance is offered across a vast number of DeFi protocols to reassure users that their investments are completely protected while preserving their anonymity.

The Astra network further offers its infrastructure to countries and their treasuries to issue financial products such as regulated and sustainable CBDCs bonds and financial instruments while taking advantage of the incredible yield available through digital assets.

To achieve this, Astra has equipped all DeFi smart contracts with a fully decentralized compliance layer, including KYC & AML capabilities, and leveraging the expertise of trusted legal firms to resolve real-world compliance issues.

To provide the best KYC/AML services available, Astra has developed a unique Decentralized Legal Network (DLN), an ecosystem that contains major, global legal and audit firms.

In terms of consensus mechanism, the system that allows distributed systems to work together and stay secure, Astra is using the environmental-friendly Proof-of-Stake (PoS), which is the perfect fit to build a real-world solution for billions of users through its improved scalability and increased transactional throughput.

A Vast Network

Compliance is not the only feature offered by Astra. The project provides several other services, including enhanced vetting, a dispute resolution platform, AML, and reporting for process feedback and improved procedures.

The demand for these services is increasing rapidly as the crypto market continues to onboard more and more people and capital invested in the sector skyrockets. Not to mention all the challenges faced by the industry, such as lack of certainty for smart contracts, recurring derivative contract disputes, high legal risks in connecting real-world assets to the blockchain, and poor management of claims disputes on-chain.

Astra here certainly has the potential to gain market fit with its customizable services that offer security in retrieving incorrect transactions, create secure escrow accounts to prevent unexpected withdrawals, provide a decentralized legal layer for user protection, and equip insurance protocols with an in-built claim verification tool.

Overall, with its KYC, KYB, and AML services for decentralized organizations, Astra aims to ensure that all DeFi and crypto platforms keep pace with the ever-changing regulatory landscape.

 

Image by Gerd Altmann from Pixabay