The Prisoner’s dilemma in crypto
According to the Consumer Financial Protection Bureau, fraud, scams, and transaction issues accounted for almost two-thirds of those complaints.
Basel Institute on Governance and Europol suggests that “As the use of crypto assets expands into practically every country and sector, so does its abuse to commit new forms of crime and launder criminal proceeds. Yet with the right tools, capacity, and cooperation, the unique characteristics of blockchain-based technologies offer an unprecedented opportunity to investigate organized crime and money laundering networks and to recover stolen funds.” The 5 Recommendations are :
1. Break down silos between “traditional” and “crypto”
2. Regulate broadly and make full use of existing laws
3. Take advantage of the blockchain to disrupt organised crime
4. Raise crypto literacy through capacity building and clear communication
5. Increase public-private cooperation
Whether the SEC wants new laws or not, Congress has made crypto a new priority this year, and lawmakers from both parties are expected to push for the first significant crypto legislation in the next session. To become official, legislation must go through a rigorous bill process and review before being signed into law. On the other hand, safety regulations are created by government agencies and are approved through a shorter public hearing and decision process.
As a new Congress prepares to work on pending crypto legislation next year, the SEC chairman says his agency needs nothing apart from more money and more reach overseas. Meanwhile, the SEC Tells US-Listed Companies They’d Better Disclose Crypto Damage. A few days ago, they issued letters to companies flagging the need to disclose any potential impacts from mayhem in the crypto markets.
Meanwhile, Nexo announces its departure from the US After Regulator Discussions Hit ‘Dead End’. As a consequence Nexo will immediately stop offering its Earn product in several U.S. states.
On the other hand, the two significant cryptos centralized exchange seems to be moving from the Innovator’s Dilemma to the Prisoner’s dilemma (PD), initially formulated by the American mathematician Albert W. Tucker. The irony of PD is that when each of two (or more) parties acts selfishly and does not cooperate with the other (that is, when he confesses), they do worse than when they work unselfishly and cooperate (that is, when they remain silent).
Stablecoins are today at the center of a discussion in crypto because they offer the “theoretical “ less risk and easy way out. In Centralise exchange, remember that the private keys to open the gate are in hand.
In today’s centralized exchange, Coinbase waives the conversion fees for users wishing to switch to a “trusted stablecoin” in a new campaign highlighting the quality of reserves that back Circle-owned USD Coin (USDC). Btw Coinbase is a co-founder of USDC. A few months ago, Binance stopped supporting USDC, auto-converting customer holdings into its own stablecoin BUSD.
The sage is not ending, and the least Binance’s Bitcoin over-collateralization raises some questions, according to Francine McKenna, lecturer in financial accounting at The Wharton School at the University of Pennsylvania. “They compared balances per public key address from a list they got from management. They did not compare any balances in independent banks or custodians or depositories,” said McKenna.
In this uncharted territory where the risk factors are amplified from the forecast for the future seem, instead of looking for a Nash Equilibrium that can be beneficial for the entire ecosystem, there is increasing complexity in mixing token economics with crypto-economics. Explaining underline assets for collateralization, custody, and insurance will be complex to review and clarify to auditors and regulators. Avoiding “mixology” between crypto vs. token and anchoring to conventional financial reserve could be a significant step to refining the business model.
Additional resource
Seizing the opportunity: 5 recommendations for crypto assets-related crime and money laundering
