We attended Blockchain Festival Asia 2024 this month to get insights on the latest regulatory happenings within the crypto space. Here’s a recap on discussions around crypto regulations at the event.
Regulations and compliance were the order of the day at Blockchain Festival Asia 2024 this year. Taking place within the walls of the Marina Bay Sands Expo & Convention Centre, the event aimed to fostering dynamic engagement and discussion about the blockchain and cryptocurrency space with its lineup of panel experts.
Here’s a recap of the key discussion points and discussion that went down at the event.
Governance and Regulation In An Increasingly Decentralised World
Decentralisation is still the name of the game in the Web3 space, and cryptocurrencies have taken the spotlight again with the bullish uptick in the market. Moreover, Web3 projects that have hunkered down to build their products and community through the crypto winter are now seeing the fruits of their labour. Is it fair to say that centralised entities are fast becoming a thing of the past?
For the first panel at Blockchain Festival Asia 2024, the discussion saw Lim How Pin, Coinhako’sDeputy General Counsel, agreeing that centralised entities are still leading the crypto space currently. With more authorities taking the idea of crypto regulations seriously, centralised platforms present a tangible way for such authorities to meet and lay out solid regulation guidelines.
But are financial authorities truly privy to the ins and outs of cryptocurrencies as an asset? How Pin notes that crypto-specific services such as staking are not clearly defined by the former, but the general understanding is there. This affects how products and services need to be structured and regulated.
But crypto assets are a broad umbrella. With different products such as staking and asset tokenisation coming into play, will these subsets be accompanied by their specific regulations? Wang Hao, Chief Operating Officer of digital platform SGTOX, seems to think so; he describes tokenised assets as finance-specific, which in turn require its own set of regulations and expertise.
Such regulatory grappling isn’t uncommon even for Singapore’s Monetary Authority of Singapore (MAS), which is already in the lead within Southeast Asia in drafting regulations and guidelines for cryptocurrencies. Athena Miao, Vice President of Business Development at BigONE Exchange, notes that even MAS is occasionally vague on guidelines surrounding decentralised assets, yet are obsessive when it comes to guidelines for companies seeking to operate in Singapore’s Web3 space.
Miao compares this with the Kazakhstan authorities, which she appreciate the Central Asian country’s conversational approach when setting up shop in the country; a 180 degree change as compared to MAS’s dictative approach. Yet while staying compliant, Miao highlights the need to focus on the business goal of bringing in trade and revenue on their exchanges. Therefore, teams need to manage expectations and plan ahead to avoid losing focus.
Crypto regulations have come a long way since the conversation around it started in 2017; Erika Evasdottir of Centrium Advisory reminisced on how the crypto space used to be a literal wild west with no clear precedence or legal framework. Nowadays, new projects must adopt a regulations-first mindset to progress and grow further down the road.
‘Words matter more than sticks and stones’, said Evasdottir, emphasisng the importance of reviewing current legal frameworks to a T. With ample planning, compliance and regulation hurdles could even become marketing tools to get an edge over competitors.
Blockchain and Identity Verification: Addressing Security and Privacy Concerns
Security and verification, the key topic of the next panel at Blockchain Festival Asia 2024, has been a longstanding issue within the blockchain space. The problem has only become more urgent with the increasing sophistication of hacks being carried out on decentralised finance (DeFi) platforms, along with clear regulations by authorities that require projects to verify customer identities.
According to Jag Foo, Head of Business Development at MPC custody platform Safeheron, the situation in the crypto space is promising with its continued technological advancements, but technical hacks such as private key compromises still prove a threat to the space, along with socio-based hacks such as phishing attacks on Web3 users.
User identities are not safe from hacking attempts too, and it brings with it a new set of challenges in the Web3 space. Elton Tay, founder of social decentralised application (dApp) Chatmint, sees the benefits of creating a decentralised identity (DID) to interact with various dApps rapidly while still having control over one’s digital data, yet Chief Strategy Officer of UKISS Technology, Tan Ze Chong, sees this as an innate weakness of DIDs due to the assumption that the technology is infallible, and over-reliance on it to connect to, and verify, one’s identity on a large number of platforms could spell trouble down the road.
At the same time, the panel also touched on the concerns surrounding blockchain interoperability. Whilst interoperability has become the de facto goal for all blockchains to build towards, it has become an avenue of attack for hackers, with bridges facilitating interoperable transactions being the key target.
For Stephen Browne, co-founder of Sorted Wallet, the more pressing concern is the interoperability of digital identities across chains. Identity keys have been a field of interest for blockchain builders since 2017, but more needs to be done to allow decentralised identities to interact with assets on different chains. By reaching its full potential, it could enable the goal of DeFi in banking the unbanked and allow those who may not even have physical identities to vote and access financial services.
Recent developments in blockchain technology, and the tech space in general, have propelled efforts towards better Web3 security and verification. One key focus is the development of zero-knowledge proofs (zk proofs), which allow users to only reveal information that is necessary to obtain verification without revealing their entire personal data.
From an institutional perspective, Jag believes that sharding keys through multi-party computation adds another layer of decentralised security on top of zk-proofs, which is another essential security implementation for billion-dollar assets that needs to be securely stored or custodied.
Artificial Intelligence (AI), a rapidly rising technology, also plays a crucial role in boosting blockchain security. With its swift learning capabilities, Ze Chong notes that it could be used to pinpoint issues to be patched and should ultimately protect blockchain or platform users.
Trading On DEX Versus CEX. What’s The Difference And What Are The Risks?
Are decentralised (DEX) or centralised exchanges (CEX) better? That’s an age-old question in the crypto space that has divided users, and it is the discussion topic for the next panel at Blockchain Festival Asia 2024. Those that believe in a decentralised approach purport the benefits of self-custody as being better than CEXes, while others swear by the latter’s ease of usage and convenience.
For Amelia Chan, Strategic Partnership Lead at HTX, both platforms are essential to facilitating a healthy trading environment in the crypto space. Centralised exchanges play an introductory role for new users entering the crypto space, and they act as middlemen to ease their user experience while educating on the fundamentals of cryptocurrencies. On the other hand, decentralised exchanges cater to advanced traders familiar with the technicalities and terminologies that come with DEX platforms. Nevertheless, she believes that DEXes will subsequently improve their user experience.
Kishore M, the founder of Crowdfundjunction, echoed a similar sentiment by reiterating the quasi-symbiotic relationship of both sides. CEXes help bring in market capital by providing an easy on-ramp for fiat currencies, while DEXes unlock advanced trading functions such as futures and options for traders that may ordinarily be out of reach for non-accredited traders.
Yet despite the ongoing bull run in the market, there is an ominous trend of CEXes going under due to messy management or non-compliance with tightening regulatory practices. Roopa Sushil, Head of Compliance at Anchorage digital Singapore, faults both CEXes and the authorities for the mess. Some CEXes make the mistake of engaging in unsafe trading practices, resulting in their licenses being revoked when the regulatory guidelines catch up with the exchange.
On the flip side, financial authorities continue to show a lack of understanding with crypto assets by regulating them as securities. In summary, Sushil notes that regulators need to work closely with crypto companies and projects to accurately convey the requirements needed.
Speaking of crypto projects, what strategies do new projects need to account for if they wish to list on exchanges in the future? Cecilia Wong, founder of yourPRstrategist, highlights the importance of taking in their user base and the cost of listing on exchanges at the start.
While projects are pressured by their community to go straight for large, centralised exchanges, sometimes aiming for a lower-tier exchange could benefit them instead. Wong also urged project founders to get onto launchpads to boost their visibility whilst receiving support from said platforms too.
The panel concluded with the takeaway that user experience and ease of trading is still key for traders with centralised exchanges, but decentralised alternatives are fast catching up as a viable solution. At the same time, regulations should play the role of a guide by listing clear guidelines whilst enabling financial tools and access to new crypto traders.
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