Astra provides a way for all decentralized organizations to comply without comprising their offering. Astra has been designed and built to verify information in different settings. Our technology selects the most suitable experts (Delegates) to examine the evidence, data, and KYC information, then return a fair decision based on their findings. Transactions between decentralized financial organizations can then proceed unhindered by regulatory requirements.
This month we saw the Cryptocurrency Crime and Anti-Money Laundering Report from CipherTrace, which revealed some striking statistics. DeFi has been on the rise over the last 18 months by giving regular people access to the financial market. Without the need for intermediaries, many decentralized protocols offer much higher yields than traditional financial tools. Banks will provide around a quarter of a percent, while some DeFi platforms will offer as much as 6%. But as we all know, with high reward comes high risk. According to the crime report from CipherTrace, DeFi-related hacks ($361 million) make up 76% of major hack volume in 2021 and have increased nearly 3-fold since 2020.
One key theme of the report is how regulation can help reduce DeFi-related issues. In particular, the document explores how crypto companies comply (or not) with the Travel Rule. According to the United States Department of the Treasury Financial Crimes Enforcement Network, the Travel Rule:
“requires all financial institutions to pass on certain information to the next financial institution, in certain funds transmittals involving more than one financial institution.”
That information is typically the transmitter’s name, account number, address, and a few other details. Of course, decentralized protocols don’t usually store this information. As a result, the global financial crime watchdog Financial Action Task Force (FATF) declares that no jurisdictions reported being aware of any virtual asset service providers that fully complied with all elements of the Travel Rule.
Astra technology can verify the credentials of would-be DeFi users so that decentralized platforms can comply with regulations. We have developed a patented platform that operates as a decentralized compliance layer, allowing all protocols to adhere to the Travel Rule, regardless of jurisdiction. Upon receiving a request from a new user, the decentralized organization would use Astra as the decentralized compliance layer without requesting and storing KYC information themselves. Without this, compliance is nearly impossible in a decentralized world.