Innovation and traditional industry considerations
As an industry born out of revolutionary ideas, the blockchain industry has historically been at odds with traditional business practices and regulatory guidelines. The consequence of this friction has been that blockchain has often been defined by its deficiencies, rather than its strengths. This demarcation has repeatedly resulted in the innovations of blockchain projects being ignored or overlooked.
As the blockchain industry continues to mature, the features that once fueled its creation are steadily being replaced by a drive to prioritize regulatory compliance in the name of real-world applications. Modern blockchain projects are starting to incorporate traditional industry considerations into their designs at the earliest stages. This development may be bittersweet to some, but it is a necessary step to ensure the long-term health of the industry. Any doubt that this isn’t true immediately vanishes upon examination of the current state of projects that did not sufficiently prioritize real-world applications and regulatory compliance.
Recently, Cointelegraph reported that Tether — the largest stablecoin by market capitalization — had blacklisted at least 39 Ethereum addresses, holding a combined USDT 46 million, this year alone. General counsel at Bitfinex, sister company of Tether explained:
“Tether routinely assists law enforcement in their investigations… Through the free address feature, Tether has been able to help users and exchanges to save and recover tens of millions of dollars stolen from them by hackers.”
While, at a glance, examples like reflect the increasing cooperation between blockchain projects and traditional institutions, these types of messy, on-the-fly solutions are only necessary when a project’s original design did not sufficiently dissuade money laundering, theft, and other unsavory behaviours. Projects that do not prioritize regulatory compliance face an uphill battle achieving real-world adoptions and are at risk of being banned outright by various regulatory bodies around the world. Conversely, projects that prioritize regulatory compliance in the name of real-world applications are well positioned for long-term success.
While most other major exchanges engaged in a misguided race to maximize their number of listed tokens, Coinbase — one of the most well-known cryptocurrency exchanges globally with more than 35 million users — settled on a different approach. They prioritized regulatory compliance. From the moment it was founded, Coinbase carefully vetted every project they listed in order to ensure that each project met their stringent requirements. While this decision allowed competing exchanges to momentarily dominate headlines, Coinbase’s strategy appears to have paid off. The New York Times recently reported that Coinbase is poised to become the first major U.S. cryptocurrency exchange to go public. Not only would a stock market listing prove to be a major milestone for the entire blockchain industry, it would also serve as testament to the importance of incorporating regulatory compliance into the earliest stages of project design.
In order to address the cumbersome inefficiencies that are plaguing the current financial industry, Velo Labs needs not only provide innovative solutions, but also ensure that its solutions are compatible with the current market landscape. To this end, Velo Labs prioritized regulatory compliance alongside innovation when designing the Velo Protocol. This design choice allows the Velo Protocol to scale as Velo Labs aims to add value to various types of financial services including remittance services, payment solutions, lending, loyalty points, and trade finance. Every industry in which the Velo Protocol will add value has established practices, rules and regulations. In order to successfully establish a footprint in these markets, the Velo Protocol supports a decentralized settlement network that allows established Trusted Partners to securely transfer value in a timely and transparent manner. Additionally, Velo Trusted Partners need to adhere to a set of fixed rules and regulations in order to issue digital credits that correspond to any fiat currency. Velo Labs leverages the unique traits of blockchain technology to improve a large swath of financial services with its Velo Protocol. The approach may seem cautious, but a thoughtful regulatory-compliant design is necessary to create a strong, sturdy foundation.