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A Regulated Decentralized Exchange

September 28, 2018

 

 

Does regulation equal centralization?

 

In most cases, a Crypto purist would say yes. For many in the Blockchain industry, the whole point behind supporting any Blockchain project is to support the decentralized version of something over the centralized version of something. To recap, the centralized version of any product always includes some organization that controls how it operates. In the case of a network, that would mean that this organization controls the network and who can be on it.

 

In the case of a bank, this means that you do not really own any of your money and the bank does. In the event that it loses some of that money, it can, in theory, find a reason not to have to give it back to you.

 

Because of this debate between centralization and decentralization, especially with regards to money, services like decentralized exchanges have come into being. With a DEX, moving assets as well as exchanging assets is really as simple as only a few clicks and does not require any sort of identification on the part of the user.

 

Now, one particular DEX called Everbloom is looking to break this mold and become a licensed broker-dealer, which amounts to becoming the equivalent of a centralized exchange in every way possible, except in being owned by one organization.

 

Coindesk, who broke the news, chalked this move up to Everbloom’s desire to appear more safe and therefore, more attractive to institutional investors. Crypto businesses trying hard to attract more business to business customers is nothing new.

 

Arguably, the real question is: what sort of repercussions, if any, can come from  Crypto businesses actively trying to become regulated?

 

Regulators might say that nothing bad will come of this but a few possible problems come to mind. First and foremost, who is going to prevent Everbloom from becoming fully decentralized as a result? Some might argue that becoming regulated equals being open to centralizing control, as we already alluded to above.

 

In the end, on the other side of things, Everbloom has stated that it is important to remember that they are only applying to become a licensed broker-dealer, which is typically a lengthy ordeal. The company’s hope appears to be that if they attain that status, they will rise above the other Decentralized Exchanges, in terms of competitive advantage.

 

Still, it is logical to ask: will they lose non-institutional users in the process?

 

 

 

By: BGN Editorial Staff

 

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