Large Liquidity Providers (LPs) often cannot interact with the DeFi space because of regulatory constraints and lack of clarity. Similarly, platforms within the DeFi space can't explore funding potentials because of the small opportunity space relative to the total potential addressable market assuming regulatory compatibility. Having seen no guidance from the DeFi ecosystem, regulators must comprehend the sector through the lens of potentially obsolete and irrelevant past environments to which regulations were applied.
As the popularity of DeFi grows, the threat of regulation will always linger, and facing it head on is the best way to deal with it.
Our goal is to create a massively-adopted, compliant and scalable DeFi ecosystem with comparable market depths across centralized and decentralized markets.
Traditional financial institutions strictly adhere to KYC, AML and CFT guidelines to ensure their compliance with the set regulations. Blockchain-based institutions fail to do so since they are permissionless, opt-in, trustless p2p networks without a central authority to enforce these requirements.
DeFi is plagued by various issues like smart contract errors, user errors, market volatility, and lack of proper insurance on loans and other decentralized financial instruments. There is also the likelihood of complete failure of the DeFi price mechanism that would be catastrophic.
The ecosystem is prone to trust issues since participants conduct activities anonymously, which violates compliance requirements imposed on financial institutions.
Large Liquidity Providers (LPs) often cannot interact with the DeFi space because of regulatory constraints and lack of clarity. Similarly, platforms within the DeFi space can't explore funding potentials because of the small opportunity space relative to the total potential addressable market assuming regulatory compatibility. Having seen no guidance from the DeFi ecosystem, regulators must comprehend the sector through the lens of potentially obsolete and irrelevant past environments to which regulations were applied.
Regulators, having seen no directionality from the DeFi ecosystem, are forced to comprehend the space with the lens of (potentially obsolete/irrelevant) loosely-matching, past environments that regulations were applied to.
Looking to partner with Shyft on a compliant-DeFi solution? Connect with our team today.
DeFi can benefit by being compliant as it opens up the ecosystem to mainstream financial institutions, non-technical investors, and mass adoption.
Shyft Network will change that in the following ways:
Shyft Network provides an opt-in framework for gathering, storing, and sharing user identification data on a need-by basis. Our platform acts as a trust anchor and a bridge between users, DeFi platforms, and centralized organizations by providing the required data in a secure manner.
The network can also facilitate trustless transactions in a decentralized environment by helping the parties to comply with all the regulatory requirements imposed on centralized systems. The platform achieves this by acting as a Trust Anchor that validates the personal data and transaction details by publishing their proof on the blockchain.
Only verified individuals and organizations will be able to create compliant DeFi assets and asset pools such as loans, liquidity pools, derivatives, governance tokens etc.
The Shyft Network can function as a validator for DeFi participants. Verified players will have their addresses whitelisted, enabling them to participate, create, and have access to compliant assets.
Malicious and suspicious actors will be blacklisted as a precaution to other users, which is aimed at minimizing risk.
As part of its continuous development plan for 2021/2022, Shyft Core plans to deploy a blockchain-based credit scoring method that relies on users’ data stored on nodes rather than using their credit scores from the legacy financial system.
This framework will help generate better credit scores for an open and independent DeFi ecosystem. Its goal is to tackle the over-collateralization problem in DeFi, improve access to credit, and open the door for legacy lending institutions’ entry into the ecosystem.
For a decade, jurisdictions have been looking for secure and efficient software for managing and sharing citizen data within a consent-based framework. Shyft Network has partnered with 3 governmental bodies to build a user-facing interface through which citizens can complete KYC process with legacy institutions, track custody as their data moves between these institutions, and consent to borderless data-sharing with new custodians, bringing transparency, security, interoperability and efficiencies to highly-regulated, legacy services. Participating institutions added to the network by these government partners include:
This solution will be fully transparent and auditable by regulators (subject to relevant privacy laws).
