The responsibility behind a crypto lender’s asset listing


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Crypto lenders are the institutions between consumers and the untamed, blockchain-based, and often unregulated space of cryptocurrencies. As such, they are in a special position when it comes to responsibility towards their customers and the assets for which they are serving. As a result, lenders perform a delicate dance of responsibility in choosing which currencies to support, a balancing act between satisfying public demand and adding sustainable, rewarding, and secure cryptocurrencies.

Demand vs. Consent: The Question of Consent

Unsurprisingly, in an emerging industry full of new investors, a lender’s asset integration is often viewed as an endorsement. What is often overlooked when businesses add new assets to their service offerings is that crypto lending is actually a business and any asset integration is ultimately a response to demand – a good market opportunity that generates profits for businesses and customers. how. Perhaps this is because lenders are influential entities in a space historically lacking the institutional seal of approval and seeking it through the pioneering companies that shape the industry.

In June 2021, Coinbase CEO Brian Armstrong posted a series of tweets about the rapid integration of multiple assets in the exchange and their intention to keep this pace. Armstrong wrote that “listing on Coinbase should not be viewed as an endorsement of that asset,” which describes the subtle discrepancy between working with an asset and endorsing it. Even if they operate differently from an exchange, the same principle applies to crypto lenders: it’s not an endorsement, it’s just a business. And there are many ways to build customer-centric and socially responsible companies.

If no confirmation, what then?

Listing an asset on a lending platform may not be an endorsement, but it is an indication of some level of legitimacy, stability, and security. A crypto lender’s dealings with a particular coin mean that owning, investing in, and using financial services for it are regulatory and technical. Lenders have a lot to lose when dealing with unreliable cryptocurrencies, including funds, as well as their customers’ trust and the future of their business. Therefore, they adhere to high standards for the technical robustness, market-wide liquidity, price stability and legality of an asset. While the due diligence of these companies cannot serve as the aforementioned stamp of approval for investors, they can a Crypto wind indicator a type that provides a general indication of the stability and safety of an asset without endorsing it.

Crypto lenders have thus become the beacon for regulatory action, and it is worth noting that this intricate interdependence is two-way – suspending services for cryptocurrencies immediately, even if there is even the potential for new regulatory issues with a coin or token . That exact scenario played out on December 23, 2020 when several major exchanges and crypto lenders shut down their XRP services in the face of Ripple Labs’ SEC lawsuit. The valuable lesson is that the immediate reactions of these institutions to even possible legal issues with XRP show a tendency towards full compliance, competent legal assistance and willingness to act immediately according to the circumstances. In essence, responsible crypto companies are the first reactors in the industry and can come in handy when navigating space.

Related: SEC vs. Ripple: A Predictable But Unwanted Development

Listings and the [Insert company name] effect

Although coin integrations on credit platforms do not imply endorsement, the actions of companies still have a strong collateral effect on cryptocurrencies. The largest crypto exchanges in the world both have their respective so-called “Coinbase Effect” and “Binance Effect”, which lead to newly listed coins increasing in value. This is partly because they are suddenly available to a wider investor audience, but moreover, their inclusion by these stock market giants gives buyers a sense of credibility.

A similar phenomenon was observed in 2020 when PayPal announced its plans to work with Bitcoin (BTC): news spread quickly and had an overall uplifting effect on the market. That year, the prevailing example was the “Tesla” or “Elon Effect” which began with Tesla accepting Bitcoin as payment for its vehicles in March 2021 and then withdrawing that opportunity – of course, both actions caused a wave in crypto Industry. A few months later, Elon Musk himself triggered a market downturn with a single tweet that lasted almost two months.

Related: Expert answer: How does Elon Musk affect the crypto space?

These examples of the impact of non-crypto-native companies on crypto prices are nowhere near complete and show the impact big brands can have in the volatile crypto market. They signal a sense of responsibility of all companies active in the blockchain area, especially the crypto lenders who are to become the banks of the new financial system. It is a volatile market with many smaller private investors and new players. In the absence of regulation, the industry must self-regulate and acknowledge and moderate the severity of its listings, investments, statements, and even tweets.

The technical side of asset listing

In general, there are two main approaches to adding new assets to crypto lending platforms. The first is a full blockchain integration and the second is a more inward implementation. The former allows users to deposit and withdraw assets in their wallets, which gives them more flexibility overall. The downside is that such integrations take a little longer, require scarce technical talent, and depend on finding suitable and reliable third party custodians to ensure complete security of assets at all times.

The alternative to full integration is an approach similar to Revolut’s crypto offering, where users only buy cryptocurrencies and digital assets on the lender’s platform, cannot withdraw them to an external wallet, and therefore have no access to their private keys . Behind the scenes, the provider takes care of the assets on behalf of its client, providing user-friendly exposure to crypto investments, which can be implemented on the crypto lender’s platform much faster than a standard integration. While Revolut has received criticism from the crypto community for finally launching limited bitcoin withdrawals in May 2021, in an area as dynamic as blockchain funding, this method has intrinsic value to assets like Polkadot (DOT) , Cardano (ADA), Dogecoin (DOGE) and the newest addition from Solana (SOL).

True to their struggle for ultimate security, the crypto community’s famous mantra “not your key, not your coins” has been a natural hurdle for internal integrations. Regardless, they are thriving on Nexo with $ 11 million, $ 28 million and $ 12 million in revenue from DOT, ADA, and DOGE purchases, respectively, in the first month after these integrations were rolled out. Although they cannot hold their own assets in custody, customers make extensive use of them. People want and need to grapple with the new assets that keep popping up in the rapidly growing space. Crypto lenders simply cannot keep up with this demand using only the slower and extremely resource-intensive blockchain integrations that give customers more control over the assets, thereby limiting exposure to many novel and high performing coins.

“Not your keys, not your coins” embodies one of the main advantages of crypto – the ability to hold and secure your funds yourself instead of having to trust an institution. But maybe the rate will be reduced a bit as crypto starts to scale quickly. For lenders and other companies using in-house asset integrations, this strategy should be a stepping stone to full integrations, a means to keep up with the industry, grow their business, and offer their clients lucrative investment opportunities in a timely manner.

The way forward: Social Obligations> Legal Obligations

Ultimately, crypto lenders need to soften the messages behind their asset listings, carefully weigh the words and actions behind their brands, and employ various methods of integration to enhance their users’ experience in the dynamic industry. In an environment where regulations and common standards are lacking due to its emergence, many of these actions depend mainly on crypto business social responsibility and blockchain-based corporate social responsibility (CSR).

This may include: 1) proactively shaping regulation for crypto, as we’ve seen industry leaders do with pending US infrastructure law; 2) Presentation of audits of the reserves, as carried out by Nexo through its real-time confirmation via Armanino; or 3) educating customers – through articles, question-me-anything sessions, support groups, even Metaverse Worlds – about the resources they work with, the services they offer, and how they can be used safely and beneficially .

The development of unclear regulation is something that most industries have not yet addressed. Hence, the new value behind crypto lenders and blockchain companies taking on more social responsibility and self-regulatory roles from the start lies in the potential to create a refined ecosystem with healthier relationships among customers, businesses and regulators. As crypto companies mature from startups to institutions of serious importance in the blockchain and beyond, these principles of self-regulation and socially minded services pave the way to an ethically and morally guided financial world that is not based solely on profit and legal obligations.

This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.

Magdalena Hristova is PR manager at Nexo. With her penchant for writing and her natural curiosity about everything that is technically complex and causes a stir in established industries, she began working as a copywriter in the crypto industry before moving to the new communication space of cryptography.