Crypto enthusiasts have been celebrating over the past fortnight as the value of many digital currencies has shot up, following an extended slump since the fall of FTX last November. Whilst the crypto market had recovered most of its losses as January came to a close, it wasn’t until recent startling news that it really picked back up.
The cause of these events has been the collapse of Silicon Valley Bank and Signature Bank earlier in March, the collapse of Credit Suisse after that, and the rumors of Deutsche Bank troubles. The failure of these banking giants have overshadowed everything else in financial news and the crypto market has seen a resurgence as a result.
Created as a direct response to the 2008 banking crisis, this new banking crisis in 2023 has led to people once again seeing the benefits of cryptocurrency and looking at the events it's not too hard to see why. A component of the failure of Silicon Valley Bank seems to have been poor risk management and flawed financial models, whereas Credit Suisse’s issues over the past few years included compliance failures - notably tax evasion - and various scandals. Parallels can be drawn between FTX, Credit Suisse and SVB and in all three (and possibly more as the crisis unfolds) a key concern is improper practices being put in place and a failure to comply with basic standards and regulatory measures.
Looking into these various financial problems, human nature could be seen as the main problem: incompetence and greed can both be seen in failures to implement adequate risk management due to incompetence and attempts to circumvent taxes. This is the same as back in 2008 and there seems to be little reason to think in another 15 years time that similar problems won’t arise again; without intervention, the financial industry shows that history is doomed to repeat itself. Outside forces are required to provide oversight and establish a measure of trust and stability, which is why the role of regulators is so important.
Calls for regulation to strengthen have been growing for years for crypto and it appears that better oversight is needed for traditional banking options too. Whilst a public blockchain is transparent, the motives behind it and the identities of those using it are not always immediately clear - this applies just as much to financial institutions using more outdated technology and they don’t have a transparent, immutable ledger to prove their transaction history.
Though a blockchain-based system seems like a perfect choice for regulators and auditors, it doesn’t do the job by itself. With proper regulatory oversight in place and clear rules to follow, the visibility and permanence of transaction records is nothing without a way to identify those behind them. It is already possible to identify users of crypto, despite the common-held but misplaced belief that it is anonymous, but every legitimate entity conducting transactions on the blockchain would benefit from a secure identity profile in order to prove who they are, preventing fraudulent and other criminal activities. Naturally this raises privacy concerns when personal details are linked to a transparent and immutable ledger but fortunately there is a solution.
Blockpass has been working on identity verification solutions for the crypto space for years and all Blockpass’ solutions are built around the principles of privacy, security and the individual’s ownership of their own data. Whatever form new regulations take, or however existing regulations expand to fit either crypto or traditional markets, Blockpass is ready to provide a safe and easy-to-use solution. The genesis block of the bitcoin blockchain held a message from Satoshi Nakamoto: ‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.’; a second financial disaster looms this millennium, Blockpass is ready to assist in averting a third.
The Blockpass platform is fully automated and hosted in the cloud, with no integration or setup fee. Businesses can sign up to the KYC Connect console in a matter of minutes, test out the service, and start conducting identity documents verification, KYC and AML checks. Take a look at Blockpass' groundbreaking crypto compliance solutions:
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By Matthew Warner