Crypto regulation is a must, says AllianceBlock CEO
Swiss-based AllianceBlock recently announced it would be joining the Open Wealth Association.
The company said the move would help bridge the divide for Swiss banks and wealth managers keen for better access to the emerging decentralised banking environment.
AllianceBlock is one of the first DeFi players selected to join the Swiss OpenWealth Association and Coin Rivet spoke with its co-founder and CEO Rachid Ajaja.
He explained the company chose Switzerland back in 2019 when it was part of the Kickstart Innovation Program in Zurich.
“There we met lots of people, start-ups and business leaders who we found were forward-thinking and willing to help” he recalled.
“After this trip, we knew that, one day, we would take AllianceBlock to Switzerland.”
Ajaja added that opening a new office in Zug was a “no brainer”.
“We wanted to place ourselves in a jurisdiction that is as supportive and forward-thinking as Switzerland, where we can play our part in this vibrant ecosystem,” he explained.
“We’ve already joined organisations such as OpenWealth and the Crypto Valley Association, whose mission is similar to ours.
“Our positioning in Switzerland will enable us to lend our expertise and learn from those who are working at the forefront of these changes.”
Asked how exactly AllianceBlock was bridging the gap between traditional and decentralised finance, Ajaja said it was a challenge – how can institutional and decentralised financial actors work together easily and in line with regulators’ needs?
“The bridge between DeFi and TradFi needs to be compliant and that’s what we’re building at AllianceBlock,” he added.
“We’re bridging the gap between DeFi and TradFi through an interplay of products that allows the two worlds to interact and share in each other’s opportunity.
“Amongst the array of products we’re building is the Cross-Border Regulatory Compliance Rules Engine, which allows for automatic pre-trade checks, where non-compliant transactions are greyed out and cannot be accessed.
“This new technology automates compliance checks, streamlines processes, and lowers costs.”
The CEO added that, in the same vein, the company’s Trustless KYC/AML product meets regulatory requirements while reducing the compliance burden placed on institutions, by enabling users to undergo KYC just once.
Differentiation between fintech and crypto companies
Ajaja also emphasised that, right now, the world still often differentiates between fintech and crypto companies.
“We hear many discussions of ‘fintech companies integrating crypto elements’ into their platforms,” he said.
“I think it’s clear that soon, there will be no difference.
“Every fintech company will have an element of crypto as our worlds collide.”
He explained blockchain has impacted the fintech industry in a number of ways, “most obviously in facilitating faster transaction times, lower costs, and increased transparency”.
“But I think blockchain’s full potential is much bigger than that,” he added.
“When large amounts of small players are locked out of the financial system, the growth of the global economy is hindered.
“In its ability to lower barriers to entry, a blockchain-based financial system would bring about a more inclusive, collaborative and equitable financial system.”
Ajaja took the traditional lending industry for example of a rigid structure, heavily controlled by a few small players.
“Decentralising lending and borrowing, increase capital flows and equalise wealth distribution by removing these barriers and making access to capital easier and fairer, while keeping security and compliance front and centre,” he said.
Talking about the future of blockchain, Ajaja stressed “DeFi has begun to transform the global financial ecosystem as we know it and this is where the future lies”.
“However, right now, compliance and regulation remains a significant stumbling block for many,” he said.
“KYC and AML solutions, as well as cross border rules checks, will play a significant part in increasing institutional exposure in this area.
“Additionally, more and more countries are now exploring the possibility of implementing CBDCs and digital currencies that will facilitate secure, instant, and direct transactions so that’s another area worth keeping an eye on.”
However, he stressed that regulation and compliance were a huge challenge right now.
“As we know, the blockchain industry is moving really fast and year-on-year, new innovations and products are introduced,” he said.
“It’s difficult for regulators to keep up with these technical developments and on the flipside, there is also the risk of hampering innovation.
“Regulation is a must and KYC/AML structures have to be in place if we’re going to merge the two financial worlds.”
Ajaja added that, even though the crypto and blockchain industry had grown immensely over a short period of time, we were still in the nascent stages.
“There is vast potential in upcoming innovations that can bring new growth and possibilities to the space,” he said.
“However, in order to successfully reach these, we must ensure that we continue to prioritise and develop user experience and push to educate users if we are to achieve universal adoption.”
When looking at the institutional side, Ajaja emphasised it was essential to develop compliant gateways so that investment and legacy banks can participate in markets.
“By bringing both of these worlds together we will overcome current challenges and see widespread success,” he concluded.