idscapt：The Root of the Problem

 Armstrong believes that a part of the problem stems from the lack of clear regulatory certainty in the U.S., which has spurred 95% of crypto trading to develop overseas. These offshore companies engage in “more opaque and risky business practices.”

“We should continue to work with policy makers to create sensible regulation for centralized exchanges/custodians in each market (as we’ve been doing for some time), but then we need to see a level playing field enforced, which hasn’t happened to date,” he said.

In the long run, Armstrong said that decentralized finance will help mitigate the risks associated with trusted third parties, as all activity will be publicly auditable on-chain. 

Unfortunately, Defi is currently prone to hacks and exploits which have lost users over $3 billion this year alone. Due to its anonymity, it can also be difficult to bust criminals when they steal funds from a given smart contract. 

To avoid similar issues to FTX, Binance CEO Changpeng Zhao said on Tuesday that his exchange would soon introduce “Merkle-tree proof of reserves”  in the interest of “full transparency.” 

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