Crypto Giants Are Pushing Greater Transparency To Build The Trust Lost To Past Exchange Blunders
Even though blockchain technology is all about transparency and security, the current centralized and decentralized exchanges scenario paints a different picture.
As retail and institutional investors continue entering the crypto market, it has become quite evident that most, if not all, crypto exchanges have three significant problems – liquidity, regulation, and transparency. At the same time, prominent exchanges and DeFi platforms have become targets of hacks, which further adds to the problem.
Transparency Can Answer The Misconceptions Clouding Cryptos
Over the years, CEXs and DEXs have been in the news for alleged and proven narratives of facilitating transactions that don’t meet anti-money laundering (AML) and other similar policies. Take, for instance, the ongoing regulatory fiasco with Binance. As one of the largest centralized exchanges (CEX), Binance is continuously finding itself on the wrong end of regulatory policies in several countries, including the UK, Singapore, and China. Decentralized exchanges (DEXs) like Uniswap have also come under the US Securities & Exchange Commission (SEC) scrutiny.
And if these problems weren’t enough, prominent exchanges and decentralized finance (DeFi) platforms have become the go-to targets for cybercriminals. For instance, the recent exploit on Ethereum-based DeFi protocol, CREAM Finance, where the attackers stole $130 million worth of ETH and ERC-20 tokens, or the Squid Game coin scam, where the “creators” stole an estimated $2.1 million from investors, both underline the importance of transparency and regulation within these platforms.
Since the global crypto market cap has crossed $2 trillion, it has become essential for exchanges and DeFi platforms to implement and meet the required licenses and compliance measures per the operating jurisdiction. For instance, any exchange operating in the US must be registered as a Money Services Business (MSB) and ensure that any new coin or token listed on the platform meets FINTRAC’s compliance obligations, including AML and CTF procedures.
Classic “rug pull” or “pump-and-dump” schemes aren’t new to crypto investors, but the lack of transparency has time and again led to catastrophic problems for both exchanges and the investors alike. Given the distributed ledger technology (DLT) and the overarching clarity of blockchain networks, CEXs, DEXs, and DeFi platforms can, without a doubt, guarantee absolute transparency to their customers and the regulators.
In fact, other platforms should take a hint from Coinbase, one of the most highly regulated crypto exchanges committed to publishing transparency reports for its customers. Unlike most platforms that keep their regulatory policies and financial statements under wraps, Coinbase releases regular “transparency reports” that offer in-depth insight into how many government requests the platform has received and how the team has handled them.
Likewise, another significant crypto platform, Bybit, contributes immensely towards bringing more transparency to the current market. To date, Bybit is one of the fastest-growing cryptocurrency exchanges globally, with a keen focus on upholding its pledge of transparency and reliability. The platform claims to invest about 25% of its budget in security measures to safeguard its infrastructure, almost double the industry standard.
Owing to its track record of performance, positive user feedback, clear and transparent pricing, and financial records, Bybit bagged the “Most Transparent Exchange” award at the recently concluded Crypto Expo Dubai (CED) Awards 2021.
Since financial data is susceptible, especially when listing new and unvetted tokens on an exchange, the information about the project, its members, and other relevant details shouldn’t be in the dark. Accordingly, exchanges and DeFi platforms should implement greater transparency to ensure customers aren’t subjected to Ponzi schemes and scam coins.
Doing so will enable exchanges to foster long-term relations with customers while safeguarding their assets and help them build better regulatory guidelines for the overall benefit of the crypto ecosystem.