DeFi to the rescue
In 2022 I wrote an article about what I thought the next bull market (i.e. the current one) will be all about: "The Next Bull Market Will Be About Privacy and Freedom". It seems that idea has aged rather well with the current regulatory crackdown on crypto. As such, it makes sense to assume that DeFi will get a tremendous push from all of these developments centered around control and ending privacy. But there is another simple reason why I think DeFi will grow much more in the coming years: the UX for using CEXs is becoming absolutely awful.
I covered the upcoming regulatory framework lat year and it is now slowly coming into effect. Many people are surprised by what is happening with the CEXs, but it was all laid out last year. The idea, essentially, is to adapt the standard we already have in the finance industry: e.g. the travel rule (of course the (intended) side effect is that the crypto UX will become so terrible that people might just stop using it).
Enter the Travel Rule
Do I even need to comment it? These are screenshots circulating on X from Bitfinex:
it requires just a few data points; fortunately, it doesn't need the blood group type yet:
... and "What if you don't want to?" :) ... Rest assured you will actually have no say in this at all really, since they are almost always required to share this info. If you read the legislation above you can see that they also require to collect this data when "suspicious activity" is involved, which just so happens when you try to send several smaller amounts just under the limit...
CEXs are the antithesis of what crypto is all about
Using a CEX for crypto related things is complete nonsense, really. Not only will the UX for handling cryptos be downright awful (unless you choose to just hodl in which case you could just hold any other kind of asset), but there are at least 3 more reasons why it is inferior to DeFi:
Fees: CEXs charge quite a bit of fees for using them. There is generally a trading fee for buying and selling, and also fees attached to withdrawing crypto. Some have also pointed out "hidden fees" that are hard to spot at first glance.
Custoial: You do not own your assets on a CEX. Period. You are being given access to them and a promise that you may withdraw them at some point in the future. At any point, a CEX can simply freeze your funds which might take days or weeks to unlock. A CEX can also go bankrupt and you can lose all your funds...
KYC: Starting this year there will essentially be no more bigger KYC-less CEXs left. Essentially all of them now require KYC. This means that your data will be at risk of being stolen (see Binance, Bitfinex etc.) It also means that there is zero financial privacy involved. As soon as we accept this as a norm, privacy will soon seen be something negative - which of course is the goal of the whole regulation: "You don't have anything to hide, right?"
Conclusions
Crypto was supposed to be everything that CEXs and regulators are now trying to remove: it is supposed to be a permissionless and trustless system intended to restore financial privacy and thereby empowering people to trade and transact without a middle man. It's clear that this is not something the "system" can accept. But does it even matter? It does not as long as DeFi can continue to innovate and keep its sovereignty. No doubt that this will lead to a parallel system with growing divides on either side, but without crypto and DeFi we would have never gotten the choice where we want to participate in the first place.
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