“…Only laws can create fertile ground for business, and business is the main operator of the world’s funds.”, he adds
The intense scrutiny by several regulatory bodies across different countries calls for all crypto exchanges, trading platforms, and companies dealing with digital assets to sit up. Many countries are introducing rules regulating digital asset ownership to provide users and investors transparency and security.
While many exchanges and platforms will take a huge fall due to their failure to comply from the onset, others will thrive even more in a regulated market. Swisstronik, a Layer-1 solution building scalable dApps that ensures users’ data protection and privacy, is one such company that will record exponential growth amidst these regulations. The company was built to be compliant.
Swisstronik also helps non-compliant companies avoid the effects of these regulations by providing them with tools such as KYC, ZK, AML, and more. The company is making more substantial moves towards ensuring the full building of a more regulated crypto market.
Recently, we had the opportunity to interview one of the genii behind Swisstronik and the brain behind the works done there. It is no other than Constantin Guggi. Constantin is the CEO of Swisstronik, a trader and entrepreneur with 26 years of experience.
He worked in the oil & gas sector at TOTAL, TEXACO, and SIBIR ENERGY in different positions, including as the Head of the Trading Division. He has a Ph.D. in Economics and multiple certificates from top universities worldwide, including Cambridge, Oxford, IMD, etc.
In this interview, he gave further insights into current crypto regulations and why it is important for a sustained, transparent, and secure market. He also spoke more about the works done at Swisstronik and how they contribute to achieving a regulated market.
- Many countries are now laser-focused on introducing strict, transparent regulations to guide virtual asset trading platforms. How will these steps move the crypto industry forward?
Laser-focused regulations in the long-run are definitely better than the lack of thereof. They lower the risks for both blockchain companies, users, and investors. They also create new opportunities for all of them as the growing adoption brings more liquidity – including from the giants of the traditional financial markets. This unlocks whole new use cases for crypto and blockchain-based solutions both within the industry and beyond, which is definitely beneficial for all.
- Most trading platforms and companies might take a hit from these intense regulations, and this is because they failed to be compliant from the onset. However, Swisstronik is different. How is Swisstronik able to remain compliant while still maintaining decentralization and users’ privacy?
Yes, many crypto companies will fall behind as the regulation tightens up. But Swisstronik offers an easy remedy to such companies for becoming compliant.
Swisstronik is not only compliant by design and adapts to regulations in real time. It also helps other companies become compliant with minimum coding, zero legal expertise and at low fees. Even if their product functionality originally wasn’t compliant, they can integrate Swisstronik modules and access other services to fix that.
How do we achieve that?
- The Swisstronik platform and the dApps built on top of it are powered by the Swisstronik Compliance Suite. It consists of a distributed network of legal service providers who together ensure KYC, AML and DPR compliance of the whole system. They can also help the App builders to streamline their internal compliance procedures, run KYC checks and manage other tasks. As a result, the compliance is achieved in a decentralized way and the whole system can adapt to local regulations in real time. Legal services become cheaper and more efficient.
- But full compliance DPR wouldn’t be possible without Swisstronik’s unique combination of programmable and cryptographic protection tech (ZK-SNARKs and Intel SGX). It lets all user data stay private & secure during the identity checks and other compliance-related procedures.
- To further facilitate the compliance of Swisstronik-based apps, we launch a whole set of customizable modules, which can be easily integrated to Apps on any blockchain. For example, Swosstronik Digital Identities module (DID) for KYC & AML compliance. Or our Zero Knowledge Proof transactions that make the company’s native token transfers compliant in the given jurisdiction. Or many other tools that are intrinsically compliant and chain-agnostic so can easily help other projects maintain compliance – be it a crypto exchange or a simple dApp.
- The intense scrutiny has implicated two of the largest crypto exchanges, Binance and Coinbase. The SEC recently sued Coinbase for operating as an unregistered broker, violating federal security laws. This demonstrates the need for clear regulatory frameworks. How will Swisstronik help provide solutions to power the crypto ecosystem and a compliant Web3?
What happened to Coinbase and Binance was just a matter of time. Operations in the USA require full compliance with the local laws. The problem is that as of today, current laws are both strict and partially unclear.
Swisstronik plans to enter the US but only once the crypto regulation framework fully solidifies there. Our approach will likely be similar to that in other countries. First, we will provide compliance-related services to Web3 projects through our Compliance Suite. It will include KYC issuers and other service providers in the US. With it, Web3 projects will gain the necessary legal support in the US and be able to automatically adapt to the evolving regulations there. Second, we will offer our ready-to-use modules and the Swisstronik blockchain itself, but both will be specifically adapted to the rules in the US. Meaning whenever external parties use them, they can be sure that their products will be compliant per se.
- What are your thoughts on zero-knowledge (ZK) tech, and how can companies or crypto trading platforms use it to cushion the effects of these regulations?
The Zero Knowledge Proof technology, just as the blockchain technology, offers numerous use cases. But in order for it to truly be useful for the users, it shouldn’t just be a buzzword. It has to be applied to solve a real task. For example here’s how we use it:
We let other companies wrap their tokens through our Zero Knowledge Proof transactions module to make them compliant with local regulations.
First, accessing such tokens may only be possible when passing the KYC & AML checks through Swisstronik Digital Identity solution.
Second, this wrapping will limit the token’s functionality to only that, which is allowed in the US. For instance, staking of such tokens likely wouldn’t be possible in order to avoid the security token status.
Third, all user and transaction data will be stored, processed and shared in accordance with the local Data Protection regulations. This is where our built-in data protection mechanisms (ZK-SNARKs and Intel SGX) come in handy.
Summing up, this and other adaptations could make these token versions available in the US in a fully compliant way. Yet the company itself will not have to launch a new token or tweak their internal system (which in most cases is impossible anyways).
- Hong Kong and UAE central banks recently joined hands to enforce more crypto rules and FinTech development. What are your thoughts on this collaboration, and what should we expect?
It’s very pleasant to see that central banks not only work out their own frameworks, but also try to make them consistent country by country. I’m personally also waiting for the World Bank or other international organization to take action. Working out an international framework or at least some general principles that countries could include in their local regulations is of paramount importance given the crypto industry is intrinsically global.
- Do you think these regulations will get people excited again about investing in cryptos, especially after the huge losses witnessed in 2022 due to bankruptcies and fallouts?
I am absolutely convinced of this. Only laws can create fertile ground for business, and business is the main operator of the world’s funds. Where some suffer, others find their place, and instability in the traditional market somehow motivates them to try new, more reliable and faster tools. In particular, blockchain can be very effective in banking.
- What do you think the industry will look like with these emerging rules for the rest of the year, especially in 2024 when the EU finally releases MiCA?
I believe that products in the Web3 will be reborn and adapted. Any industry, as it matures, becomes more complex and regulated – and we should be happy to be part of this process. And as for the EU, MiCA is a very deep and interesting set of rules – we plan to release a number of materials on this topic soon.
Speaker’s bio:
Constantin Guggi is a trader and entrepreneur with 26 years of experience. He worked in the oil & gas sector at TOTAL, TEXACO, and SIBIR ENERGY in different positions, including as the Head of the Trading Division. He has a Ph.D. in Economics as well as multiple certificates from top universities of the world including Cambridge, Oxford, IMD, etc.
