Crypto Meltdown Calls for a Decentralized Compliance Layer to Protect User Interests
In recent weeks, the cryptocurrency market has been rocked by extreme volatility. The price of digital assets has fallen sharply. The collapse was so great that the entire market cap has fallen below $1 trillion, surpassing $3 trillion at the peak of the bull cycle.
Being an emerging market, high volatility is a common phenomenon at this growth stage. That said, this volatility has made crypto so attractive to investors and speculators. However, volatility does not always mean only a significant advantage, but also a notable disadvantage.
And that’s what we’re seeing in this fourth crypto cycle, so all this carnage is not unprecedented. A 70% to 80% drop in Bitcoin and Ether prices from their all-time high could be seen as a golden ‘buy the blood’ opportunity to plan for the future with a focus on research and invest only what you want. can afford to lose.
However, this time we also witnessed the significant decline in crypto prices being exacerbated by the lack of good risk management practices employed by some of the biggest names in the industry.
Extreme market conditions
One of the largest centralized lenders in the crypto space, Celsius Network, was one of this deluge of bad news, as it abruptly froze withdrawals, swaps, and transfers between clients’ accounts due to what it said were “extreme market conditions.”
This interruption in withdrawals led to increased volatility and raised concerns about Celsius’s solvency. According to the experts, it was a liquidity problem, a classic banking problem.
At the end of last year, Celsius Network raised $400 million in a Series B financing round at a valuation of $3.5 billion. In October, the cryptocurrency lender had $25 billion in assets from more than 1.7 million users, falling to about $11.8 billion last month.
In addition to deterring investors and the market, it draws the attention of government and legislators 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 to research Celsius Network’s decision to suspend customer redemptions this week.
It is expected that the proposed regulation to regulate stablecoins by the President Working Group could extend to the entire crypto space to “reduce the risks of these assets”.
The PWG report calls for federal regulatory oversight, restricting institutions from lending customers’ digital assets, and compliance with liquidity and capital requirements.
Need a better solution
Like a bank, the centralized lender Celsius used the crypto deposits of more than a million retail customers and invested in the crypto market, including DeFi, but failed to implement proper risk management and offer security measures to its users.
So the market needs a truly decentralized solution that doesn’t obscure how they handle their money. Astra protocol is one such decentralized solution that provides a compliance layer for the web3 economy.
Collateralized loans are gaining traction in the DeFi sector. While they offer the advantage of no centralized control, they pose significant risks in terms of lack of asset liquidity and immediate payment. Astra’s truly decentralized project uses traditional players for financing, enabling loans on the Astra network and eliminating the need for these collateralised 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 sacrificing the benefits of decentralization or endangering investors.
Decentralized Compliance Layer
Amidst the mainstream global adoption of crypto and the regulatory challenges that come its way, Astra has designed its network to be the only fully KYC (know your customer) compliant decentralized blockchain ecosystem available globally, where the protocol performs all compliance practices.
This regulatory compliance is offered through a variety of DeFi protocols to reassure users that their investments are fully protected while maintaining their anonymity.
The Astra network further provides its infrastructure to countries and their treasuries to issue financial products such as regulated and sustainable CBDC bonds and financial instruments, while taking advantage of the incredible returns available through digital assets.
To achieve this, Astra has equipped all DeFi smart contracts with a fully decentralized compliance layer, including KYC and AML capabilities, and leveraged the expertise of trusted law firms to solve real-world compliance issues.
To provide the best available KYC/AML services, Astra has developed a unique decentralized legal network (DLN), an ecosystem that includes large, global legal and audit firms.
As for the consensus mechanism, the system that allows distributed systems to work together and stay secure, Astra uses the environmentally friendly Proof-of-Stake (PoS), which is a perfect fit to build a true solution for billions of users through its improved scalability and increased transaction throughput. .
A huge network
Compliance isn’t the only feature Astra offers. 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 rapidly increasing as the crypto market continues to get more people on board and the capital invested in the sector skyrockets. Not to mention all the challenges the industry faces, such as lack of certainty for smart contracts, recurring disputes over derivative contracts, high legal risks in connecting real assets to the blockchain, and poor management of claims disputes in the chain.
Astra certainly has the potential to break into the market here with its customizable services that provide security when retrieving erroneous transactions, create secure escrow accounts to prevent unexpected withdrawals, provide a decentralized legal layer for user protection, and equip insurance protocols with built-in claims 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.