What Uber and Bitcoin Have in Common
September 29 2021 - 8:58AM
NEWSBTC
Designed Model vs. Customer Experience Products and services never
wind up functioning exactly as they were planned. Every person and
business has experienced many changes over the past year, and these
changes have also impacted the financial industry. Society is built
on the foundation of trust and civil relations (both individuals
and corporations), but everything changes once participants have
malicious intentions. These bad actors are the cause of sponsoring
weapons, drugs, corruption, and venal practices. This is why
regulations relating to AML (anti-money laundering) and KYC (know
your customer) procedures are so critical in maintaining the
integrity of society. Bank Role KYC is designed to be part of the
identification process. While KYC processes help identify a
particular person, doest not prevent malicious actions from taking
place for the people who are accepted. This is why procedures also
need to be aimed towards monitoring and preventing specific types
of activity as well. Embily is always asking how can we best design
these systems while not over-reaching into information that
financial institutions should not have access to? Every year AML
restrictions are becoming more and more stringent. Banks are
willing to restrict money flow unless there is a clear explanation
of the source and purpose of funds. While this is critical in
preventing funds from an illicit activity from being accepted by
the bank, it also requires many resources to maintain these
programs. It can potentially stop individuals from using funds
there were derived for legal purposes. This is why we have seen
attempts by wealthy people and PEPs (politically exposed persons)
to control various financial institutions in an effort to
circumvent these restrictions. The future is likely to bring even
more restrictions imposed by the regulatory agencies, which would
be facilitated by advanced and automated monitoring systems. No One
is Dissatisfied Right now, many parties are satisfied with the
status quo. Banks have oversight by government regulators, central
banks target key GDP indicators, and the IMF processes global SDR
asset distributions. However, we must acknowledge that politics
also plays a significant role in every process as well. For
example, in Venezuela, Russia, India – financial freedoms are
nipped in the bud. While there have been small innovations in tools
for creating freedom for both individuals and businesses, they have
been designed to be limited to small institutions with EMI
licenses, and are ultimately still part of a system that has the
same restrictions as banks. That is a huge fault of the world
economic system – political infiltration across the board.
Cryptocurrencies were designed as a tool to achieve financial
freedom for everyone. “Be your own bank” is a main concept of
Bitcoin, but it is often seen as outside the acceptable practices
applied in the traditional financial market. This is why it is
critical new businesses incorporate KYC and AML practices. Fake AML
AML for crypto assets is very difficult. Imagine you’re a financial
institution and you have an individual customer receiving an
incoming transfer above the thresholds set by your regulator. To
facilitate the transaction, you would have to request specific
documentation such as bank statements (from another bank), or other
relevant agreements. But even these documents would not necessarily
be enough to prove the ultimate source of the funds. There is no
denying that these traditional models still have many pitfalls and
shortcomings that are very difficult to correct. P2P Mistake When
Uber was just launched, everyone said, “Uber breaks traditional
centralized market,” but what do we see right now? Countries
attempt to restrict Uber’s operations, forcing local partnerships
or exclusive rights in specific markets. For example, in Russia,
it’s Yandex. In Singapore, it’s Grab. Is that how the free market
is meant to function? The same issue exists with Airbnb – it’s
designed as a trustful marketplace, but there are still cases of
fraud and ways for locations to artificially improve ratings.
Decentralized platforms like Polkadot have their regulatory and
fraud prevention frameworks built into the very foundation of their
models. Imagine that! In this way, decentralized systems were
designed to oppose traditional governments and financial
institutions and create their systems promoting equality, fairness,
and safety. Unlike traditional governments and financial
institutions, P2P platforms are also able to adapt quickly and
change when vulnerabilities are discovered. The best solution for
new players does not lie in breaking the existing systems but
instead in integrating safe and ubiquitous global tools. Hopefully,
established institutions look for solutions in collaboration with
innovators embracing new technologies instead of placing endless
layers of additional restrictions or attempting to ban these new
and exciting developments. Author: Eugene Khashin, Managing
Partner at Embily Inc.
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