CoolBitX has been a dedicated and evolving player in the cryptocurrency industry for over 5 years. Founded in 2014, our initial mission was to help make the use of virtual assets safer and more convenient, in order to truly appeal to a mainstream market and support the journey to mass adoption.
Our pioneering CoolWallet, the world’s first Bluetooth mobile hardware wallet solved the first part of the challenge we set ourselves. With more than 150,000 happy users, we have now come to the second part of our mission-“How do help the industry reach mass adoption?”
One in two Americans is invested in the stock market. Over 80% own at least one credit card. Yet, less than 1 in 10 US citizens own cryptocurrency. Virtual assets such as Bitcoin are currently mainly used as an investment tool and has yet to catch on as a universal tool of payment or trade.
It’s early days still. The foundation for the future of finance is still being laid. Yet as with any new industry, change is the only constant. And we have to evolve too. To do that we need to understand what is holding the cryptocurrency industry back.
What currently stops mass adoption?
Despite great advances in recent years, the virtual currency industry’s lack of regulatory oversight and its users’ focus on anonymity features has put this new asset class on a collision course with authorities worldwide.
Authorities rightfully fear its innate ability to facilitate unchecked money laundering, funding of international crime and terrorism and tax avoidance. This standoff between the industry and authorities presents a major impediment to the continued growth and eventual mass adoption of digital assets.
Current KYC/AML – inadequate
Compounding matters, current Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) solutions and processes utilized by exchanges and other relevant companies tend to be stopgap fixes to achieve basic compliance with government regulations. While this helps to deflect the full wrath of regulators globally, the solutions are fragmented and hampered by systemic problems such as partitioned databases, uneven compliance standards, and a lack of scalability. This is not a tenable situation if the industry wishes to achieve mass adoption in the years ahead.
Regulation is inevitable
Just as bad actors participate in traditional finance, fraudulent and criminal behavior sometimes occurs in the virtual currency industry. However, with virtual currencies, it is much harder to prevent malicious activities due to the technology’s intrinsic protection of user anonymity. Without the support of a clear and coherent KYC policy, it is nearly impossible to ascertain whether particular addresses are used for illicit purposes. Because both good and bad actors have equally obfuscated accounts, regulators may perform a blanket assessment and treat all actors as bad until their innocence is proven.
Mainstream technology requires ease-of-use and safety
Another barrier facing individuals is the technical skill and knowledge required to securely manage their private keys. The loss of user funds is common because it is incredibly difficult for non-technical users to even understand what the blockchain or a private key is, least of all know how to protect it from increasingly sophisticated bad actors.
It is common for inexperienced users to mismanage, mislay, or forget their keys. Whether their funds are hacked by outside parties or locked up through user neglect, the end result is equally devastating to the user – and there is little recourse for users in these instances.
Risk currently outweighs the reward for the mainstream investor
Today, most insurers do not provide insurance coverage to individuals in crypto, and most exchanges are uninsured. Combined with the user experience challenges described previously, this lack of insurance further disincentivizes individuals and organizations from investing in virtual currencies if they are not already certain about doing so.
Finally, there is a general distrust of virtual currency based on the industry’s history to date. Since its inception, the cryptocurrency industry has been mired in controversy; its reputation suffered from an early association with criminal activities, and the many instances of scams and hacks have kept the worst aspects of the industry in the news. Reversing these perceptions is a monumental challenge that will take time to overcome.
Authorities vs the Cryptocurrency Industry- a standoff
Despite the risks involved, it’s no secret that the cryptocurrency market has rewarded early investors with staggering returns exponentially bigger than almost any other form of investment vehicle in the past ten years. And with this windfall, it’s no surprise that tax authorities are beginning to pay closer attention to virtual currency investors. Global regulation is imminent.
As recently as May 2019, CoolBitX was invited to attend and speak at the Financial Action Task Force (FATF)’s Private Sector Consulting Forum in Vienna, Austria.
The distrust and divide between authorities and virtual asset service providers (VASP) have never been more tangible. From the private sector, they feel that authorities are trying to fit archaic and impossible measurements from a different era on to the first pure digital form of asset. on
From the governments’ perspective, without a transparent and traceable path of assets transfer, it’s virtually impossible to enforce AML and CFT regulation. Therefore, regulation and new rules are coming. There is no main adoption possible without it, as the true global finance gatekeepers, the authorities and the traditional banking industry, simply won’t allow it.
The question is, do we resist change or try to lead the way again?
This is why we started Sygna.
A solution is needed that not only complies with KYC/AML regulations, but goes one step further and actively protects all parties from malicious transactions through user identification and, when necessary, intervention.
Sygna, CoolBitX’s proposed system, offers an end to this impasse with a complete KYC/AML solution that will benefit all three parties, namely Exchanges, Individuals, and Governmental Institutions.
Sygna maintains a validated virtual currency user profile to a large global directory that can be shared between numerous parties. It actively supports and enforces institutional AML efforts by preventing users from transferring funds from KYC addresses to non-KYC addresses.
As a result, Sygna will foster optimal regulatory compliance and greatly improve the reputation and operations of the virtual currency industry at large, giving them access to an ever-increasing new market.