The recent headlines surrounding FTX and other digital currency exchanges has led to a drop in trust regarding how some digital currency exchanges operate. In response to this, Clear Junction has been working closely with Finery Markets to develop a solution that provides peace of mind and restores trust in a sector that still holds significant potential.
With the new escrow accounts solution, Clear Junction acts as a settlement agent and provides a financial service that ensures each entity involved in a fiat/crypto transaction gets what they agreed to. Finery Markets has become the first digital asset marketplace to utilise this escrow accounts solution for its participants - Clear Junction provides them with the payment rails they need to safely settle the fiat part of the trades.
Importantly, Clear Junction is not involved in the settlement of the crypto assets but relies solely on the transaction data available publicly on the blockchain. Major blockchains are supported by the service. The team processes the fiat part of the transaction from the buyer’s to seller’s Clear Junction account and holds it in escrow. Once the crypto has been sent - and this is verified through the blockchain - Clear Junction releases the fiat funds to the seller of crypto. This ensures that all parties get exactly what they are expecting and Clear Junction acts as an independent entity providing the escrow accounts to guarantee peace of mind for both participants.
The escrow accounts solution is open to Clear Junction clients and is designed for use by crypto exchanges who want to provide their clients with an additional layer of security. Both companies saw the fall of FTX as an important consideration point in creating the escrow solution.
As we learned from our analysis article with Douwe Lycklama, founding partner at INNOPAY, situations like these can be prevented. The basic fix of prevention is not so complicated, as very basic hygiene factors of operational management were not attended to in the case of FTX. Such a large-scale business failure is not specific for crypto and not specific for regulators.
Probably FTX completely outpaced regulators’ ability and willingness of action, partly because they were lured into believing the bonafide intentions of FTX. Also, Alameda probably was falling under other jurisdictions as it is headquartered in Hong Kong, despite being financially heavily intertwined with FTX.
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