In this edition of "Crypto Currents," The Fly conducted an exclusive interview with Sakhib Waseem, Chief Innovation Officer and Chief Technology Officer for Astra Protocol, a decentralized compliance solution for the crypto space.
DECENTRALIZED COMPLIANCE: Astra Protocol, based in Zurich, Switzerland, is building a decentralized compliance layer for the Web3 economy. The company is focused on bringing legitimacy to the blockchain and crypto industry with its Know Your Customer compliant decentralized blockchain ecosystem, where every network participant is validated prior to onboarding. “Compliance practices are completely necessary in this industry,” Waseem said. “If we assess the landscape of crypto and decentralized finance right now, it’s quite plain to see that we need rules and regulation. It cannot continue like the Wild West.” He noted there are a huge number of scams as well as illicit finances in the space, sparking concerns from governments all around the world. “If we draw out what the world is doing in response to this, we have the Financial Stability Board providing frameworks to the G20 to provide this overarching view on how we should handle regulation across the industry,” the CIO said, adding individual nations are also developing regulatory plans. “We have MiCA in the EU, imposing regulatory reform around Know Your Customer and Anti-Money Laundering techniques across the industry,” he said. “If we look across the pond as well in North America, it’s quite similar. The U.S. Treasury is looking at enacting similar regulatory requirements.”
Real regulation is needed for a crypto market recovery, Waseem said, and with the help of Astra, protocols can comply with those numerous regulations without giving up decentralization or putting investors at risk. “I don’t mean that we’re an anonymous solution that is facilitating the movement of illicit funds,” he said. “In fact, we do the opposite. We bring in decentralized techniques that fit this new innovative technology called blockchain. You can plug us into virtually any application and then validate your customer base if you’re a decentralized application.” Astra can validate individual identities in 280 territories and over 155 countries globally to ensure people are not attempting illicit financing in the space, the CIO said. “We use a technique that leverages all our technology called the Decentralized Legal Network, which is a massive consortia of major compliance, audit and legal firms from around the world,” he said. “We can provide an impartial evaluation of that validation and we can put anonymous points of that transaction on the blockchain itself. We can prove through this massive network of ecosystems of wallets in the crypto space that we’re bringing in more regulatory techniques to keep illicit finance out and quell some of the scams involved in this industry.”
COMPETITIVE EDGE: As competition continues to rise in the crypto industry, Waseem pointed to a couple of areas in which Astra differentiates itself with technology as one of the key components. “From a technology lens, we’ve globally patented our solution,” he said. “The apparatus for our technology has globally granted patents around it, which means there is a significant barrier for other people to do what we do in this space.” Additionally, the CIO cited the Decentralized Legal Network as another factor that sets Astra apart, as the network improves the fairness and transparency of compliance techniques taking place. “With centralized compliance checks, you shoot your information over to one central entity and they’ll validate you,” he said. “If they say no, it’s a no, whereas we believe in a fairer approach with multiple validators to come from different businesses or individuals separate from each other.” Information can be validated impartially, Waseem said, then enabling Astra to use a mechanism to show what the risk is against that individual or wallet.
He added Astra is also a Web3 compatible technology layer, fitting into blockchain better than traditional technology. “One of the benefits of having this Decentralized Legal Network is having the ability to drive the cost basis down as well,” the CIO said. “Imagine that we are creating effectively Uber for compliance in the crypto space, connecting individuals to pre-validated major organizations all around the world. It allows us to scale efficiently and drive the cost basis down for our customers.” Moreover, Astra also boosts trustworthiness from a reporting perspective, he said. “In a traditional setting you would have to comply with regulators, and you would need external auditors to review the information, make sure that it is accurate and that you’re being truthful,” Waseem said. “Our technology, because it prints to blockchain, it provides an immutable truth. We have multiple accredited organizations globally putting that information on chain, which means that we’re more trustworthy.” The company has also built an all-star team, he noted, pointing to advisors Phil Hogan, former European Commissioner for Trade, Mick Mulvaney, former White House Chief of Staff and Kirstjen Nielsen, former United States Secretary of Homeland Security. “We have a whole raft of other major professionals leading different industries on our board,” the CIO said. “We are a highly trustworthy organization, respected by these major individuals and that affords us access into a lot of the right rooms to ensure that our message is heard correctly and taken seriously.”
PARTNERSHIPS: In August, Astra announced partnerships with blockchain development companies Limechain and Concise Software. The companies will help Astra further its mission of making blockchain technology accessible to businesses and individuals globally and safer for all. “If we look at the crypto industry right now, most of the markets are in a little bit of dismay,” Waseem said. “We see a little bit of rise in activity in general market cap of the crypto industry and that means that a lot of massive companies have started to scale down their building efforts. It’s quite the opposite for Astra Protocol.” Some of the best businesses have been built in a bear market, he said, crypto platforms especially, so Astra has continued scaling its technology department. “That meant bringing on two really strong third parties to assist in our development,” the CIO said. “This was a great opportunity for us to form a partnership with these two companies and bolster our technology workforce from an external department perspective whilst we also bring on more internal hires.” The collaborations will allow Astra to build bigger and faster, while staying focused and achieving milestones on the technology side, he said. “Both companies work with major organizations as well, so it affords us some good relationships from a partnership perspective and it may drive some more business development,” Waseem said. “We’re in early-stage discussions with a couple of partners as a result of joining forces with these two development agencies. Like everything in technology, having a tight knit community, having trusted partners grows your reputation.”
REGULATION: When asked about what global regulators need to do to address the current crypto crisis, Waseem said he believes the increased regulatory pressure around the space is a major industry flaw and a result of immature practices. “I mean immaturity when you look at the age of this industry compared to the traditional financial sector,” he said. “We see a lot of scams, a lot of rug pulls and lots of issues surrounding this industry, which is what has caused this regulatory pressure. Regulators are trying to get their arms around this and that is in the best interest of their citizens globally that crave safer parameters for crypto and DeFi.” The CIO added everyone in the space will agree that there needs to be safeguards to protect users, whether enforced by regulators or self-corrective in the industry.
Waseem pointed to three key measures in the space currently that can help boost the legitimacy of the industry, with the first being Know Your Customer. “As an entire sector we need to be able to validate individuals to ensure we don’t have people involved in illicit finance, so we can build a safer financial ecosystem out of crypto to allow more adoption from a retail consumer perspective,” he said. “Secondary to that would be anti-money laundering techniques. Ensuring we can provide continuous monitoring activity from an on chain perspective and from a traditional perspective as well.” Enabling continuous validation to ensure that the barrier to illicit activity will not slip is important, the CIO said, as well as clearer recordability. “The final thing is if we’re able to achieve this, if we can drive more KYC, more AML practices, better reporting, more trust in this industry through some of the offerings that Astra provides, it’s also going to allow more capitalization of this market,” he said. “It will actually increase the throughput of finance from the traditional finance sectors.” Counterparty risk has impeded those moves in the space as a result of anonymity in crypto, Waseem said. “With Astra, an user could say I only want to engage in a trade with people who have been through validation and there’s bifold benefit to that,” he said. “For a native crypto user, it means you will have better strike prices on your trades and you will be able to execute faster as there’s more capitalization going into those markets. From a traditional finance perspective, it means you gain access to a whole new asset class and get exposed to the crypto marketplace.” The CIO noted an influx of traditional capital into the market will resolve a lot of the big swings happening currently and help boost mainstream adoption.
CHALLENGES: When asked about the largest hurdles facing the crypto space, Waseem pointed to regulatory compliance. “Let’s tidy up this industry as a whole and ensure there’s proper safeguards and good practices built into this industry across the board,” he said. “We see from our perspective, a lot of willingness from the crypto side. More regulatory clarity is needed on the other positions, the regulators they need to come out with frameworks and the clarity.” Implementing regulation will drive more capital influx into the market, the CIO said, so the industry can grow to a more comparative size against traditional finance. “Bring out clearer regulation and let’s support regulation without overregulating,” he said. “We’ll have the makings of an industry that will be very healthy and that will start to grow at a more phenomenal rate than we’ve ever seen.”
OPPORTUNITIES: As the crypto industry develops, Waseem noted the market has grown across several sectors and he remains very excited about opportunities in cryptocurrency. “Crypto, more generally speaking, has proven that its way more efficient than anything we’ve seen in a traditional financial sector,” he said. “Ease of access means that it can be adopted very quickly.” While security infrastructure needs to be enforced more seriously and regulatory compliance is a key component for the industry to build upon, the CIO said the future of the industry is always going to be bright in his opinion. “We’re still at a very early stage of this incredible technology,” he said. “We’re seeing monthly active users growing year-on-year at a phenomenal rate and the industry is really booming.” The next phase of this industry will include more incorporation of traditional finance into the space, Waseem said, and the next wave of retail adoption will come rapidly. “That’s easy to see from an outside perspective,” he said. “A lot of crypto companies around the world are bolstering their marketing efforts, taking on the licensing and imaging rights as well as branding opportunities and working with more mainstream Web2 brands. We’re going to see a lot of partnerships emerging out of this industry and it’s all positive.”
CRYPTO STOCKS: Publicly-traded companies in the space include Applied Blockchain (APLD), Bakkt (BKKT), Bit Digital (BTBT), Bitfarms (BITF), BitNile (NILE), Canaan (CAN), CleanSpark (CLSK), Coinbase (COIN), Core Scientific (CORZ), Galaxy Digital (BRPHF), Greenidge Generation (GREE), Hut 8 (HUT), Marathon Digital (MARA), MicroStrategy (MSTR), Riot Blockchain (RIOT), Sphere 3D (ANY), Stronghold Digital Mining (SDIG) and TeraWulf (WULF).
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