"Regulatory Compliance Challenges for decentralized exchanges"

abdullahw2 (71)S4B [MOD]in Steem Alliance • 7 days ago

*Assalam O Alaikum*

Hello dear friends! Well come to my post! How are you all? I hope you will be doing well by the grace of Almighty Allah. I'm also fine and enjoying my day. Today I'm here to share my knowledge with you about the topic "Regulatory Compliance Challenges for decentralized exchanges" in this Steem Alliance community. So let's start without any more delay of time.

_Sharding Technique and its Advantages For Blockchain Networks__20240630_100813_0000.png

_{Created With Canva}

Dear friends in the evolving ecosystem of blockchain technology and Cryptocurrencies the digital exchanges play a pivotal role as they allow the people to exchange, trade and sale their assets with one another. In this regard there are two types of exchanges are present i.e decentralized exchanges and centralized exchanges. They both are different from each other in terms of their functions and algorithms on which they are based.

data-safe-storage-center-isometric-composition-illustration_1284-55932.jpg

_Freepik

Since the past few years, the decentralized exchanges has gained a lot of popularity in the ecosystem of blockchain technology and digital currencies they they operates without the presence of any single authority like centralized exchanges. Also they allow the people to do peer to peer transaction of their assets with one another. In this way they enhance the security, transparency and reliability of their assets.

Anyways, besides all these positive aspects of the decentralized exchanges they also facing numbers compliance challenges on the other side which creates a lot of problems for the people like users, developers and regulators as well. As a whole these problems take them away from their positive points as people don't want to bear that kind a problem during utilizing these exchange.

*Regulatory Compliance Challenges for DEXs*

Actually the decentralized exchanges faced numerous challenges regarding their compliance and regulatory frameworks and among one of major challenge faced by DEX is Jurisdictional ambiguous. This is because most of the centralized exchanges operates under the legal frameworks of a specific country the but DEXs don't depends on it as they operate on a global scale which make it difficult for the regulators to understand that from which country the user is using it.

Also according to their that nature the decentralized exchanges can easily be accessed anywhere from any part of the world which is actually a major challenge for the regulators. Know your customer (KYC) is another critical compliance challenge of decentralized exchange. This is because the KYC is a very important component of finance which keep the platform away from the hackers, frauds and thefts because it requires their complete information to sing up.

beautiful-cryptocurrency-hologram-design_23-2149250206.jpg

_Freepik

All the traditional exchanges required KYC before operating but here in decentralized exchanges the things are different as they don't require any of users data in the form of KYC which create a lot of challenges regarding their security and Privacy. So the lack of KYC leads towards the misuse of decentralized exchanges which ends in hacking, frauds and money laundering.

As we all know that the decentralized exchanges are based on smart contracts and digital algorithms which may prone to various problems regarding their structure, nodes failure and errors which create significant difficulties for the people and also for the regulators. Also such situations create a sense of security and Privacy vulnerabilities among the people.

3d-background-with-product-management-solutions_23-2150668980.jpg

_Freepik

In the traditional exchanges a central authority is present which control the working of that exchanges and we can make it accountable when any of mishap happen within the platform regarding security, privacy and transparency. But here in decentralized exchanges no any authority is present as each action is controlled by the nodes so we can make them accountable as they are computerized which create compliance challenges.

The protection of participants and their data is one of the key factor of digital exchange and in centralized exchanges a single authority control their accounts which aims to keep them safe. But in case of Decentralized Exchanges users are responsible for their accounts and data as they have to hold all the important private keys of their action which sometimes results in loss, errors and other security breaches.

*Conclusion*

Friends in conclusion the decentralized exchanges has a great role in digital currencies and blockchain ecosystem as they promise to provide a great level of facilities to the people in terms of assets exchange, trading and investing. Besides provide a high level of security and transparency these compliance challenges are significant which can't be denied. Also these problems required solutions to make them more secure transparent and reliable for the people.

Written by @abdullahw2

ij42VfeLLLL7WCxzYedv2KU7aUqHk3RNyfwHxuumhaYnHDokdbjRLxXkrL7DSe5jzS8jzGDd29gtGG4pvuDJSmxLPGt9GXUQJ72g1AB1fe5qt8DvgzMKW6QWvU4qnL7RCP9XNvs8xoiQDu52RHULmxg9jntMKRVMobRLqEiV5oKKho3MoMJgpUxyzHMbJSmzDNuPnJgSwTrwpTq5YBkjyML1T.gif

Thanks All ❤️

#steemexclusive #pakistan #club5050 #steem-alliance #cryptocurrency

7 days ago in Steem Alliance by abdullahw2 (71)S4B [MOD]

$12.66

Sort:

Trending

[-]

steem.history (77) 7 days ago

Thank you, friend!
I'm @steem.history, who is steem witness.
Thank you for witnessvoting for me.

_{please click it!}

_{(Go to https://steemit.com/~witnesses and type fbslo at the bottom of the page)}

The weight is reduced because of the lack of Voting Power. If you vote for me as a witness, you can get my little vote.