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Praised for its ability to liberate those living under strict government control or geopolitical warfare and provide a robust, secure platform to store and transact, it’s no wonder that the cryptocurrency has exploded over the past few years.
Despite its rapidly growing adoption, though, as with any new technology, cryptocurrency is still experiencing growing pains, one of these being regulation. Unlike traditional banks, cryptocurrency is not heavily regulated. A characteristic applauded by its first enthusiasts.
That said, cryptocurrency is inherently volatile and subject to market manipulation.
Take Bitcoin, for example, which dropped to $30k before jumping up to $69k within just months.
Hacking is also a prevalent issue in the cryptocurrency space. Cybersecurity attacks can put cryptocurrency investors and traders at risk of financial loss. Lack of regulation limits the government’s ability to protect investors’ assets and users are left to fend for themselves to reclaim lost investments.
Europe’s Fight Against Money Laundering
Although slow to start, governments and institutions are taking the steps to ensure a more regulated cryptocurrency sector. One example is the EU, which has proposed to implement a series of recommendations from The Financial Action Task Force (FATF) on how to reduce the risk of money laundering through transfers of crypto assets.
Among the FATF’s recommendations is that travel rules must also apply to crypto transfers. This means that when money travels, travelers must have some information regarding who is transferring and receiving the assets with them on the trip.
Another proposal from FATF is that crypto exchanges should be required to collect personal information about a person who transfers money from “unhosted” crypto wallets—those in which individuals can store funds independently. The EU proposal even goes one step further, recommending that crypto exchanges, in addition to collecting the information, must also verify the information and alert the relevant authorities about certain transactions.
By regulating exchanges, crypto products, and wallets, legislators are hoping to prevent money laundering (ML) and other illegal uses and also to protect consumers.
While many industry participants have brought up the negatives in legislation, it’s also true that there might be some benefits. Regulation could help promote trust amongst institutional investors and encourage mainstream adoption.
A new proof-of-stake (PoS) blockchain called Concordium, with its built-in ID, is dedicated to solving the trifecta of scalability, security, and decentralization. What sets the blockchain apart from competitors is its focus on being business-grade. Specifically, it believes that the key to enhancing blockchain adoption is solving the issue of ‘trust’ by providing ID mechanisms. This could also ease compliance to regulatory requirements needed to unlock many potential business cases.
In addition, the blockchain’s business model prides itself on transparent, stable, low transaction fees and encourages sustainable business models over time. It uses a price stability mechanism to ensure that transaction costs are fixed in real-world fiat terms rather than based on its native token (CCD) valuation on the date of transaction.
How is Concordium Different
Speaking on the matter was the CEO of the project, Lone Fønss Schrøder, who was also the past Chairman of Saxo Bank’s Board of Directors:
“Concordium was born out of a conviction that regulation will come.”
She explains that “the Concordium blockchain was created so that users can continue to operate privately, but only if they’ve been authenticated by an independent 3rd party. All transactions come with an encrypted ID stamp. If the need arises, and the courts so order, a user’s identity can be revealed by authorizing a formal ‘privacy revocation’ process.
“Our architecture ensures that individuals can be held accountable for their actions if the need arises, but more importantly research has proven that the knowledge that their identity can be uncovered is enough to make people act more responsibly,” says Schrøder. “Knowing that our users may be asked to comply with regulation, has prompted us to build a unique solution which ensures greater trust, responsibility and accountability – all due to our encrypted, authenticated identification framework,” says Schrøder.
Schrøder feels convinced that some competitors will be challenged to find solutions to the new requirements arising.
“In some cases, they may be severely limited by their communities. While we applaud the need for a decentralized future economy, this does not require anonymity as a basis.”