Digital assets: Great Potential, Major Risks

Learn about the challenges of digital asset compliance, manipulation, evolving regulation and how Solidus helps address them

The Great Potential of Digital Assets

Blockchain-powered trading enables digital assets and the prospect of more accessible and efficient capital markets, liquidity in formerly illiquid assets, and numerous other advantages. Beyond the prospect of new financial products, digital assets also provide a much-needed opportunity to drive the financial industry, which too often still exhibits legacy technology, culture and standards, into the 21st century.

At a time when the number of US IPOs is lower than in the 1970s, it’s no surprise Wall Street is keen on adopting this new asset class and unveiling its potential. Learn More

The Threat of Fraud and Manipulation

If the potential is so great, what’s holding back the mass adoption of digital assets? One of the major concerns for institutional investors is market integrity. With as much as 70%-90% of the volume traded in crypto exchanges driven by trade manipulation, and markets rife with fraud, the risk of regulatory fines, reputational damage and client protection is still too high.

Solidus is among the companies leading the effort for safer, more transparent markets. Learn more

The Challenge of Evolving Regulation

As crypto markets mature and expand, governments are trying to do their part and provide regulatory frameworks that would encourage better behavior and safer markets. Globally, legislation, regulation and enforcement is intensifying by the week, with new rules introduced, as well existing rules utilized to sanction bad actors. If in 2017, the crypto industry seemed like a Wild West with no supervision, in 2018 regulators made it clear that the state won’t last. In the US alone, authorities inflicted at least $2.3 million in fines on digital asset firms, and made it clear scrutiny will only increase in 2019.

For digital asset service providers, the need to be proactive and work towards compliance is more pressing than ever. Learn more

The Unique Challenge of Detecting Manipulation and Fraud in Digital Assets

New Tech – New Threats

The more complex a trading system is, the more opportunities exist for manipulation. Traditional trading is very complex as it is. Blockchain and its smart contracts, oracles, and distributed consensus mechanisms offer enormous value, but also add numerous new layers of complexity – However, it also introduces more complex trading workflows, data management challenges, and various other differentiators making manipulation-detection more difficult. Digital assets are powered by new cutting-edge technology, and they deserve infrastructure that’s also cutting edge.

The Unknown Unknowns

In the constantly evolving blockchain-based trading realm, there are plenty of unknown unknowns – what manipulation will look like in two, five, and ten years can be completely different from what we know in traditional trading and even from today’s digital asset trading. Financial service providers can no longer rely on systems that are only good at responding to known threats – Solidus’ solutions are forward-thinking, and since they rely on machine learning engines, can identify anomalies, not just known threats, and provide real-time alerts on new concerns

Crypto as a New Language

Beyond new typologies and crypto-specific threats, digital asset trading also presents a new ecosystem. 18-decimal trading, markets that never close, easily generated wallets and investment gateways all require special accommodation for surveillance systems. In other words, digital asset trading requires infrastructure that speaks crypto natively, not as a second language, to reduce

Legacy Solutions Aren’t Suited for Digital Assets

Faced by these challenges, traditional, decades-old surveillance systems are ineffective, resulting in high false positive rates, inflated compliance overhead, unreliable threat detection and burdensome workflows. Just like you can’t teach an old dog new tricks, you can’t use 20th-century solutions to ameliorate 21st-century problems.

$2,350,000

In fines and disgorgement, at least, enforced by regulators against digital asset businesses in 2018. Scrutiny is expected to increase in 2019.

132

Times the word manipulation appears in the SEC’s rejection of a Bitcoin-ETF application, a 90-page document. The word surveillance appears 120 times.

30%

Average reduction in false positives, reported by clients, when switching from a legacy solution to Solidus’ platform. And constantly improving.

The Risk of
Non-Compliance

Failing to comply with regulation can be cost millions and be a make-it-or-break-it for young startups and veteran institutions alike. Here are some recent crypto enforcement actions.

How Solidus Helps

Solidus’ Machine Learning powered surveillance and monitoring hub is designed uniquely for the challenges of digital assets and in order to make the lives of compliance teams easier. We already help crypto exchanges, broker dealers, market makers and other financial service provider reduce costs, protect their reputation and work towards compliance. Get in touch today for a product demo

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Press

09.30.19

SEC’s ‘Crypto Mom’ Hester Peirce Believes Digital Assets Could Be the ‘Money of Internet’

SEC’s Hester Peirce stated that cryptocurrencies prove to be important “transaction mechanisms” and their “store of value” is...

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09.30.19

SEC Commissioner Said Cryptocurrency Will Become “Money Of The Internet”

SEC Commissioner Hester Peirce speak about the views of U.S. Securities and Exchange Commission (SEC) on cryptocurrencies, how...

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09.30.19

SEC Commissioner Speaks Positively About Digital Assets Despite Recent Enforcement Flurry

The U.S. Securities and Exchange Commission (SEC) regularly draws the ire of crypto proponents who are frustrated at...

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