While trust has long been the main issue preventing institutional investors from entering the cryptocurrency market, Covesting, one of the first ever exchanges to receive a highly sought DLT license, is set to break this barrier.
“Imagine you’re a portfolio manager at a prominent hedge fund with very clear risk management policies. When you’re responsible for the assets of others, you simply can’t dive into trading digital assets due to risks associated with an unregulated exchange. There’s over $80 trillion in managed assets globally that are sidelined waiting for regulation to occur before investing in blockchain and cryptocurrencies,” – said Dmitrij Pruglo, CEO of Covesting, in response to a recent research paper published by “big four” auditor PricewaterhouseCoopers, which claimed that regulatory uncertainty and trust are major barriers to blockchain adoption among businesses.
The study, entitled “Blockchain is here. What’s your next move?” surveyed over 600 executives in 15 countries to better understand where businesses are in developing blockchain-based solutions. According to the data collected, businesses are pursuing their own blockchain initiatives in a fear of being left behind by the emerging technology – but fears around trust and regulation remain a constant.
84% of respondents claimed to be actively involved with blockchain projects, however, nearly half of all respondents believe that trust could delay mass adoption. Blockchain is expected to generate as much as $3 trillion in annual business value by 2030, so it’s easy to see why blockchain has piqued the interest of businesses globally.
Trust is a widespread concern throughout the industry, and rightfully so. Cryptocurrency related cyber crime has tripled in 2018, and exchanges have become easy targets due to a combination of a lack of development experience around a new technology, a lack of overall security, and managerial negligence. For example, Coincheck had over $500 million in customer funds stolen, spurring regulators in Japan to tighten up regulatory guidelines and whip exchanges into shape so consumer’s funds will be safe and secure in the future.
The team at Covesting understands that mistrust remains an issue and seek to be pioneers of a “new era of crypto world” focused on compliance and trust. Covesting is taking a major step toward that goal by becoming one of the first ever exchanges across the globe to receive a highly sought Distributed Ledger Technology license (DLT license) from the Gibraltar Financial Services Commission (GFSC).
A DLT license is a new regulatory requirement put in place by the GFSC to become the guiding principles exchanges follow to ensure investor’s funds are kept safe. The license offers investors a set of guarantees to provide peace of mind, including annual independent audits, and an assurance that the exchange has been properly vetted to verify it has the expertise and resources necessary to ensure asset and data security.
The DLT license also grants exchanges eager to comply an edge in the market. Because an exchange has received a DLT license, they’re able to work with banks to offer fiat on-ramps so investors can easily exchange fiat currencies for digital assets. It also proves an exchange is willing to go the extra mile for their customer’s safety, adding an ever-important layer of trust.
While speaking about the current success and future of the Covesting platform, its COO and Co-Founder, Tim Voronin, said:
“Until recently, not a single cryptocurrency-exchange has been able to boast of having an operational 24/7 support team, or tools that can be compared to the level and capability of a traditional stock exchange or forex brokerage, or even the ability to offer clients some guarantees and regulatory licensing.
The Covesting team came to the cryptocurrency markets only with our experience in traditional markets, and we are working hard to offer a solution to industry problems by combining the rules of one environment and the possibilities of the other.
The result of our hard work: we have a 24-hour multilingual support service, fully legal and compliant operations with both cryptocurrency and fiat, clear policies and procedures, as well as mandatory reporting to regulators and an annual audit from an independent auditor – all like traditional, regulated, companies.”
Indeed, that trust has long been the main issue preventing institutional investors from entering the cryptocurrency market, but in time and with regulatory support such as the DLT license, the trust barrier will be broken and institutional investors will become comfortable with entering the digital asset space. This will take exchanges like Covesting to continue to set a new benchmark in the market by actively seeking regulatory compliance and thus building valuable customer trust.