Much good cheer came out of this year’s Consensus 2018 Blockchain Summit in New York, without the Lambos. However, there are many industry professionals who still feel that the space needs to develop a sounder structure.
The well-used traditional banking model requires expensive multiple participant involvement for every transaction and underlies a system which is sagging to the degree that many global banking systems are now being wooed by blockchain for their own ends. Tradition banking’s potential to simplify and create speed and efficacy at low cost remain bank-central with little apparent regard for the user or client, although this would be denied by many institutions. Bank profits remain the ultimate concern rather than client usability, transparency and low fees.
All the reason why the word cryptocurrency has rocketed into the lexicon of all but the most closeted of individuals. The decentralized market offers the user control and removes it from the service provider; one of its main attractions.
However, the cryptocurrency space is not without flaws and these can be seen with reports of hackings, fraud, crypto exchange misconduct and rule bending. Mike Belshe of Pensions and Investments sees this liberal climate as one that needs more “checks and balances”, citing the Coinrail and Coincheck hacking losses of this year as an illustration of this lack of security.
Belshe suggests that it’s a case of a solid infrastructure which he argues the industry is still lacking, as ironically decentralization hasn’t prevented the onset of centralized exchanges taking on the role of custodians of user assets. The solution to this, according to Belshe, is custodianship which is not built around exchanges and is independent of them, differentiating the exchanger role from the holder role in terms of responsibilities. He argues this qualified custodianship may even be mandated by the SEC.
He said, “If you didn’t have a bank to store your savings, what would you do? Put bars on the windows? Install a safe in a secret wall? Bury it in the backyard? No. You entrust it to people who know how to keep it safe, who know how to make sure you have access to it and who have all the safeguards in place to protect the assets you are managing for others.”
The fundamentals of custodianship require complete and transparent security, storage and regulatory compliance as an absolute guarantee for investors and until this can be guaranteed, the industry is not ready to gain the confidence of every user, be it institution or individual.
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