There is no understating of the tumultuous year 2022 for the market. Yet, with all of the issues arising over the last twelve months, none are more pressing than the collapse of some of the biggest industry names. That has fueled cryptocurrency companies’ continued efforts of addressing of transparency and trust. These virtues are their to start 2023.
Whether it be the collapse of FTX or Celsius, investors were certainly scorned by fraudulent finance this past year. For the crypto realm, there is an impending regulatory battle set to ensue. Companies ensuring investors feel at ease and protected is undoubtedly a vital task on the agenda.
2022 Losses Fuel Crypto Perspective Shift
With the de-pegging of the Terra stablecoin, blockchain analytics firm Chainanalysis noted weekly-realized losses of $20.5 million. Yet, the most worrisome aspect of the revelation is that it doesn’t encapsulate the magnitude of losses occurring over the course of the year.
The collapse of Three Arrows Capital and Celsius during the summer saw those weekly-realized losses hit $33 billion. Moreover, the FTX fraud saw billions in customer assets still unaccounted for. Subsequently, with criminal and bankruptcy court proceedings set for the coming months, there is no telling when that will correct itself.
These developments have made real the very inherent risk of digital assets. Specifically, they have actualized the volatility that made heavy investments such tricky practices. Yet, they have resulted in a complete restructuring of the transparency. A transparency necessary to move forward to 2023, to which investors feel comfortable embracing.
However, the losses accruing in digital assets don’t speak for the good work being done in blockchain technology. Conversely, the utilization of the two leads them to be intermingled in the public’s point of view.
Dan Morehead, the CEO of Pantera Capital, said it best when he told investors that the narrative often missed the point. “The collapse of FTX had nothing to do with blockchain technology. It’s not crypto that failed. Bitcoin and all the other protocols worked perfectly.”
2023 Sees Consistent Approach to Trust
Blockchain leader at EY and a member of the Enterprise Ethereum Alliance board, Paul Brody, echoed those sentiments. Telling Cointelegraph his hope for a future where firms “welcome regulatory inspections.” Adding, “There also a role for more standardization of how firms in this industry report their data.”
This idea has led to a plethora of companies already taking that step to close out 2022. Transparency in the form of proof-of-reserve audits was a highlighted topic in the final few months of the year. Specifically, for the purpose of ensuring that these companies and platforms can be trusted.
Jordan Kruger of Vesper Finance also notes that the audits, and these kinds of practices, are not just efforts for specific platforms, but the industry. “Our focus on software quality means that when other DeFi protocols integrate with us, they can partially draft behind Vesper’s significant investments in auditing.”
This same kind of auditory practice was seen in Jake Spinowitz of Courtyard, an NFT marketplace. He told CoinTelegraph that companies need “a proven ability to securely vault, handle, and transport those assets,” of these individuals investing.
It isn’t simply the audits that are the step toward trust and transparency, but also the embrace of regulatory efforts. Binance recently announced its status as one of the first cryptocurrency firms to join the Association of Certified Sanctions Specialists (ASCC). Conversely, this would help the platform better navigate the waters of regulation and global sanctions that are still developing.
Crypto’s intention has been to create a new decentralized financial sector, and although that is still the ideology of most in the industry, the past year has proven a need for regulatory practices to protect those who cannot protect themselves. Thus, to help the market bounce back, adopting that mentality is a step forward for those embracing digital assets which already using blockchains effectively.