TWEETSTORM is an occasional feature on decentralize.today where we share threads , mostly from Twitter, that we think deserve a wider audience, some are informative, some educational, some amusing and others yet are controversial...we dig these out for you so you don't have to!
Many thanks to Miguel Cuneta for this industry insider view of things...
People are saying that the FTX shit show is happening because of lack of oversight and regulation.
I disagree. When we started our Bitcoin exchange & money transfer service in the Philippines in 2014, there was ZERO regulatory clarity.
Banks shut down our business accounts -
- as soon as they saw we were a bitcoin business.
There was no oversight from any government authority.
We experimented with a lot of different products and services to see what would stick.
Merchant adoption, payments, e-wallets, remittance, orderbooks, BTC via SMS, social media BTC apps, you name it, we tried it.
We never asked permission to do it and just did it.
It was a tiny niche market, yet we experienced hockey-stick growth those first couple of years.
Did any of us fuck around with user funds?
We all held ourselves responsible for the integrity & reputation of this nascent industry for which we were blazing a trail.
We then approached our central bank @BangkoSentral to help us create a framework for the industry.
By end of 2017, it became official:
Our Bitcoin startup received the first ever Virtual Currency Exchange license issued by the central bank, along with @coinsph.
We were finally able to operate like a normal business and engage with other businesses commercially.-
It raised the cost of doing business.
We were regulated as a money service business & reported to the anti-money laundering commission.
In the end, the trade offs were worth it.
It started a boom in our industry, with a total of 19 companies supervised today.
Today, if you want to operate as a VASP (Virtual asset service provider) in the PH, you have to apply for a license to operate & pass the rigid standards set by the BSP in this framework.
Just to give you an idea, there are some of the things you need to start an exchange here:
Minimum paid up capital: PHP 10M for non-custodial, PHP 50M for custodial
A sound business plan that will be assessed by the central bank.
A complete compliance framework that consists of tight controls with internal oversight and external audits as a requirement, -
- KYC implementation policies with strict limits / identity requirements, & a chief compliance officer that does not report to the CEO but only to the Chairman of the board, to external auditors, and to the central bank.
A corporate governance framework with -
- a board of directors consisting of at least 5 individuals with a minimum of 2 independent directors not affiliated with the company.
An IT infrastructure & outsourcing risk framework that identifies all potential points of failure, requires the implementation of full backups -
- , disaster prevention, customer protection, customer redress mechanisms, and customer education.
An Electronic Payments and Financial Service License.
This is a thorough assessment of the applications that will be used by the company & can take a few months to complete.
A thorough vetting of each person on the board of directors by the BSP, including requiring the ultimate beneficial owners to provide financial documents, police clearances, tax clearances, and the like.
Some might think this is too strict and can stifle innovation-
= but the trade off is you can’t run a fly-by-night crypto exchange in the Philippines.
We’ve had this framework for 5 years now, recently updated in 2019, and it took our small industry in this corner of the world almost 10 years of blood, sweat, and tears to build it up.
No, it isn't lack of regulation that caused this shitshow.
It's pure greed and hubris.
- with integrity & a love for this industry as a whole.
Some of them are still unregulated, yet operate with higher, self-imposed standards than many financial institutions in the world.
The damage from previous industry failures took years to undo.
This one is no exception.
How will the industry recover from this?
No different from how we did in the last decade of Mt. Gox, massive hacks, the fork wars, bitconnect, China mining ban, Luna collapse, state level attacks, & too many others to mention:
Just keep building.
It will seem bleak for a long while, but in my experience, as long as the #Bitcoin blockchain keeps producing uncensorable, permissionless, & transparent blocks of cryptographically & thermodynamically assured settlements, there is hope.
We will recover.
Tick tock, next block.
Also, not your keys, not your coins.
Withdraw your Bitcoins off exchanges unless you are actively trading.
Do it now and sleep soundly at night.
And to end this with good news, only 495 days until the next #Bitcoin halving.