Crypto Exchanges are on “E,” will governments allow them to continue?

A common quote we all see in the crypto communities is “When Exchange?” This sentiment shows you that the usefulness of most tokens right now is ability to trade across different exchanges. But what happens when the exchanges can no longer operate or have to enact new rules due to the Federal Services Agency (FSA) of Japan or the Securities Exchange Commission (SEC) from the United States? Where will we trade our beloved crypto? Decentralized exchanges (DEX) are still operating with some centralized figures and have a founder that handles management of the system, so this solution will also most likely be privy to oversight from a foreign or domestic regulatory agency.

Japanese crypto exchanges need to register with the FSA and now subject to five key requirements.

1) Stricter management on systems to enact and employ cold storage and 2FA options.

2) For “large” transfers, customer identities will need to be verified to prevent money laundering.

3) Customer assets need to be managed separately from the exchanges’ own assets. Operators must also check customer account balances numerous times daily for suspicious activity.

4) Some coins will be banned, as mentioned in last weeks’ article here.

5) The FSA will expect stricter internal regulations and a clear organizational structure for any exchange operator.

In order for exchanges to continue operations and not scare away new businesses and entrepreneurs, IAM confident that the Bridge solution offers a strong compromise for protecting the crypto community and appeasing regulators. Bridge will suffice for point #2 with our identity management system. We will remove some of the anonymity from a users’ public-address transaction, but our focus will be built on protecting that individual. Once verified, our chain will not store social security number or specifics. It will hold things like Name, Over 21, U.S. citizen. These “check-marks” are what is needed to stay compliant, not the storing of users sensitive data. One of the challenges is compliance across multiple jurisdictions and battling crafty criminals. Bridge is being built to tether real data to a blockchain identity and this will make it portable with the customer across exchanges to reduce redundancy and risk of breach; this will also suffice for requirement #3 with a system to monitor and flag “suspicious” activity.

As a business owner in the blockchain space, our passion is deregulation and free markets. We also realize as a business that government cooperation is mandatory to be successful. I saw this over a year ago and was looked to for providing solutions for Know-Your-Customer (KYC) and legal navigation. My first company, ProjectICO provided these solutions through “traditional” providers that cost each new ICO upwards of $200,000 for their package to remain compliant. I can personally attest that as a start-up, $200,000 is a lot of money especially when bootstrapping everything out of your own pocket. This figure seemed counter-intuitive to the automation nature of what a blockchain can provide.

It is time for a blockchain solution for a blockchain crowdfund.