The pandemic not only brought droves of retail traders into the stock market and crypto sector and sent the popularity of non-fungible tokens soaring, but also massively intensified issues around cyber-security, with people and businesses becoming more dependent than ever on digital infrastructure.
In terms of cryptocurrency, the 2022 bear market that followed the massive COVID-19 bull run exposed high levels of incompetence and/or fraud within the sector, which elevated the need for increased cyber-security to new levels and sent the term “not your keys, not your crypto” mainstream.
Cogni, a neobank that prides itself on allowing people to spend, hold and manage both cash and digital assets on a secure platform, has negated the risks associated with centralized exchanges and even traditional banking with decentralized architecture built on Web 3. The platform uses multi-signature security and data encryption and allows its users to take self-custody of their crypto and NFTs following a Know Your Client (KYC) process.
Identity security is of high importance considering the amount of time people spend online and the amount of apps and websites people depend on. “This is actually a source of a lot of problems that the U.S. government is now looking to solve. In fact, there is a consensus now that this year there’ll be new rules around KYC as it pertains to the Web 3 environment and a lot of people are now running around trying to figure out how to solve it,” Cogni Head of Web 3 Simon Grunfeld told Benzinga in a recent interview.
Cogni has already solved that problem, Grunfeld said, by “using a Solbound NFT to mark your wallet with information that we process as a traditional Web 2 company, but we transfer all of that information into a Web 3 environment.”
Simon Grunfeld On The Benefits Of Cogni Versus Centralized Exchanges
Grunfeld, a registered CTA, with a background ranging from capital markets, IT, crypto, blockchain and fintech joined Cogni in July 2022. Cogni is a multi-chain wallet that is designed to fit the modern lifestyle.
“I think that’s what it really means to me as the head of Web3 – it’s about preserving the internal lifestyle of an individual (who) wants to retain all access to all of their assets in one single app.”
“For anybody that’s banking, it basically means to be able to use the same app you're using for banking, but to use it to custody all your digital assets as well. Not just your fiat, but also your crypto (and) your NFTs,” he added.
"As opposed to centralized exchanges like Coinbase, Kraken, Gemini or Binance, when users come to us, and they get their wallet it’s a non-custodial wallet, which means you own the keys to it," Grunfeld said.
"As opposed to the centralized exchanges, number one, we actually do provide a lot of privacy, we don’t know what you have in your wallet, we don’t know what access you have and you don’t have. Two, and this is the real kicker, if those centralized exchanges go belly up you become a creditor, you have to chase those guys down. If Cogni goes belly up, or any neo bank for that matter, because that’s what Cogni is –a neobank –if any neobank goes belly up, two things, one your fiat is protected up to $250,000. Two, we can’t take your digital assets because we don’t have access to them."
“It is way more safe for an end user to come to a neobank and transact versus working with a centralized exchange simply based on the merit of sanctity of funds and who has access to it,” he said,
“You need to put your trust into Coinbase, and into Gemini, that they’re going to follow proper procedures and proper protocols. History has shown us it’s sort of a gamble.”
This became apparent during the bear market, when numerous crypto trading platforms started to go bankrupt, which caused fear to run rampant within the crypto sector, and rightfully so.
Simon Grunfeld On The Collapse Of Sam Bankman Fried’s FTX And Celcius
Regarding crypto app Celcius CEL/USD, which filed for bankruptcy in July 2022, Grunfeld saw red flags prior to the event. About a year before Celcius was delisted, Grunfeld contacted Celcius on behalf of a colleague who wanted to transfer a large account to the trading app, but Celcius said they weren’t interested, according to Grunfeld. “If you’re trying to bring legitimate business to an organization who says, ‘we’re not interested’ something smells,” he said.
Although Grunfeld doesn’t personally know the co-founder of Celcius, Alex Mashinsky, or many other people involved, he said, “they have tons of connections within the world of casinos and online gambling, and I’m 99% convinced that that’s exactly where they were making their money if it wasn’t just a huge Ponzi scheme.”
Speaking about the FTX debacle, Grunfeld said it was a case of incompetent individuals running an organization that was backed by large U.S. investors, who were enamored with Sam Bankman-Fried. “Massive red flags from day one. Anybody who sits on a gaming console playing games when you’re having a business meeting –you know there’s something not right.”
“So you had negligence, you had clear fraud, clear fraud, you can’t trust a word this guy is saying anymore,” Grunfeld said.
“It’s a good thing for Cogni, to be honest, even though it sucks for the industry as a whole,” he said, adding, "It just proves our point that at the end of the day digital assets and the world of Web 3 should be custodied with the owner. They should not be custodied with a third party."
“People make that choice to custody their assets with a platform because they feel safer trusting somebody else,” Grunfeld said. The job of these exchanges isn’t to protect investors’ assets, however, Grunfeld said. “They’re not focused on anything other than making money. So, they’ll take shortcuts, they’ll do fugazi things like we’ve seen with FTX, with Celcius, with Voyager, with Luna, with UST, the list goes on and on.”
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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