The regulators are shutting down. It is one thing to combine market functions in their functions – custody, aggregate and prime brokerage – to satisfy institutional compliance departments. Another is to keep regulators happy.
From the Financial Action Task Force to guidelines for complying with travel rules in the growing European market in the crypto-assets regulatory framework, and the somewhat stylish US infrastructure bill, regulators are slowly tightening their nets, and I fear it could be a multi-year Match-to-match decentralized finance (DFI) with the market is now firmly in their view.
Related: Defy: In a borderless, code-controlled world, who, what and how will control?
Can digital identity help?
Whenever I’ve been asked what the Bitcoin (BTC) killer app will be in the last 10 years, my answer has always been “digital identity”.
Today, the world stands at a turning point. One turn leads to a growing and privacy-attacking oversight that means money eventually follows the information on the rails of the Internet. On the other hand a road that shows personal data in the hands of individuals and outside the mega AI-crunching database controlled by a handful of corporations and governments.
This may be turbulent for early bitcoin purists but the reality bites and, throwing the growing controversy over the Covid-1 digital digital passport into the mix, we see a perfect storm cloud on the horizon that could probably become the main narrative. The years ahead.
Since central banks everywhere are throwing crypto assets all over the roulette table chips, in favor of their own “fully based” CBDC, the excitement in their realization that they can now do both monetary policy and oversight.
Unfortunately, crypto markets have already fallen victim to their success, with regulators getting everything to boot. The higher these “market cap” numbers (reaching $ 2 trillion earlier this year), the more itch regulators have become. The Chinese have simply resorted to the sledgehammer approach and banned everything (except of course their recently launched CBDC), while in the West, regulators are (optimally) taking a subtle approach or fighting with others under whom it should come under.
Related: Authorities want to close the volatile wallet gap
While most cryptocurrency activities are still flowing through major crypto exchanges and OTC desks, the FATF may force a virtual asset service provider (VASP) to comply with travel rules, leaving the gene in its bottle for the time being when these ramps are easily on / off. Can be done. But what if, or when, a self-contained crypto economy emerges where the majority goes beyond speculation and, instead, gets “in” and stays “in”?
Or if DFI grows to its size, then niche, outside the plapen?
Flexibility, clarity and ‘stigmatized’ currency
For the past decade or so of forcing anonymous “physical cash” out of the system, which requires reporting transactions for hundreds of dollars, can you imagine whether Brohaha would really expand Satoshi’s realistic view of the “anonymous cash system”?
If you want to know the answer, look at what happened when Mark Zuckerberg suggested his Dime (formerly Cotton) Stablecoin project to come up with an idea that might end up in the hands of three billion users overnight – and an egg (what a regulator’s dream should be). Digital identity is strictly baked in protocol by design from the very beginning!
Related: Stablecoins looms mass adoption as presenting new dilemmas for regulators
Sometimes these guys can’t really see the wood for the trees.
There has already been an endless debate in recent years about the fungus of Bitcoin (or other crypto), how they can be “stigmatized” if or when they find abuse. Blockchain transparency has proven to be an effective tool not otherwise available to law enforcement agencies, although it is not easy for hackers to turn their swag back into a “useful” fay.
But of course “money” itself can’t be “clean” or “dirty”, “good” or “bad”? Surely this is a stupid object (or database, or “blocked” entry)? Surely this is just the identity of a trading group that can be considered (albeit thematically) good or bad? Not that this is a fancy debate from afar. You can go back to an 18th century British legal case, it has long been argued (and amended).
Aside from Zack’s real motives for Dime, fortunately I was not alone in my long-standing opinion on the role that Decentralized Identity (DID) could play in both my crypto and non-crypto futures.
Related: Decentralized identity is the way to fight against data and privacy theft
Self-sovereign identity and technology giant
For all the excitement of crypto Twitter, even from the whispers of interest in Bitcoin from a famous tech brand, the fact that the annoying old Microsoft introduced digital identity as the preferred use-case of “blockchain” started in 201 started. Relatively low attention.
Not that others in the crypto industry were not equally aware that it would become an important part of the infrastructure. Projects such as Civic (2017) and GlobalID (2016) have already been the subject of several years of development and self-sovereign identity, allowing individuals – not a huge central database – to maintain personal control over their identities and decide for themselves who is a technology associate. Share with them instead, back to the program.
With data security becoming such a problem for regulators and a challenge for most organizations, including an online user base, you would think that these ideas would be adopted by regulators and agencies alike.
And maybe, maybe, regulators will join our side if the crypto industry proves that it can create a safer and more powerful system. These systems need to meet regulatory requirements to identify transaction groups in peer-to-peer payments এবং and by doing so, their compliance officers are able to sleep at night to allow more institutional participants to safely enter the crypto market.
After all, Google and Facebook, which have to lose the most, should have a decentralized digital identity. Without our data to pump, they are royally bad.
Related: Data economy is a dystopian nightmare
Disputes are already raging Being The current World Wide Web Consortium (W3C) has heard about the response to the call for a review of Decentralized Identifier (DID) v1.0.
Will the Turks deliberately vote for Christmas or will they finally find a way to survive their inevitability as the main telcos had in the 90’s when they were armed with the idea that VoIP-user upstarts such as Skype were far from enabling free telephony for everyone? Can go
My idea is that the masses, once equipped with the right tools, will win in the end but one thing is for sure: the line of battle has been drawn. So grab the popcorn and sit back. This fight has barely begun and there are several years left to go but, when it is over, crypto nerds everywhere can finally dream of global acceptance.
This article does not cite its references or sources. Each investment and trading move involves risk and readers should conduct their own research when making decisions.
The opinions, thoughts and opinions expressed herein are the sole property of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Paul Gordon In 2012, one of the first Bitcoin meetup groups in the world, founder of Coinscram, organized more than 250 events and had more than 6,500 members. Paul has been a derivatives trader / broker for over 20 years.