Huobi’s regulator-friendly financial blockchain money laundering
Regulation

Huobi’s regulator-friendly financial blockchain launches beta

Singapore-based cryptocurrency exchange owner Huobi Group today announced that it has begun public beta testing its new Huobi Chain distributed finance blockchain.

Huobi’s regulator-friendly financial blockchain framework is aimed at DeFi applications ranging from payments and tokenized assets to lending and identity verification systems, according to a release. It also can host distributed exchanges (DEX) and private blockchains, among other services.

The public testnet of the open source blockchain went live on March 2. 

DeFi has great potential, said Ciara Sun, VP of global business at Huobi Group. But she added, “its future requires both sides—regulators and enterprises—to work together to establish the standards and guidelines of the new decentralized economy.” 

Huobi Chain’s broader goal, said Sun, is to “provide the decentralized framework that facilitates industry-wide collaboration, which is critical to the widespread adoption of DeFi.”

It does this with a flexible governance model that includes features like regulatory nodes, which would allow agencies like the U.S. Securities and Exchange Commission to act as validators. Of course, Huobi doesn’t currently accept U.S. clients to avoid falling under SEC guidelines.

Competitor Binance recently launched a separate, more regulated exchange, Binance.US, to access the American market. Whether Huobi’s embrace of an oversight-focused blockchain suggests a similar goal remains to be seen.

On Jan.21, the company launched Huobi Brokerage, a licensed brokerage platform offering trading products and services to institutional and high-net-worth investors in digital assets.

Focus on finance

The most obvious feature of a financial industry-focused blockchain is scalability, and the company said Huobi Chain has the ability to handle a large number of transactions all at once. 

Financial blockchains will have to be able to compete with networks like Visa, which can process up to 65,000 transactions per second.

Huobi Chain is also designed to allow separate blockchains built on top of it to interoperate, support many different cryptocurrency tokens, and make it easy to create sidechains and multiple chains that can speed and simplify transaction verification.

To enhance adherence to know your customer (KYC) identity tools needed to comply with anti-money laundering (AML) regulations, Huobi Chain uses a “decentralized Identifier (DID) system to provide verifiable, decentralized digital identities on its network, making cross-border compliance and regulation more easily achievable at scale,” the company said in its statement.

The Financial Action Task Force (FATF) global regulatory body, recently mandated that countries following its guidance—virtually all nations, in practice—heighten cryptocurrency AML and countering the financing of terrorism (CFT) standards.

Huobi Chain uses a variation of a delegated proof-of-stake model to validate transactions. So instead of mining new coins to create new blocks, it has a governance system based on putting up—staking—coins that can be lost if a validator acts badly. The larger the stake, the more influence. 

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.