10 PRACTICES CRYPTO CAN BORROW FROM TRADFI TO BETTER PROTECT CUSTOMERS

The cryptocurrency landscape, a realm of innovation and boundless potential, often evokes images of decentralized freedom and financial revolution. Another thanks to the Cointelegraph Innovation Circle for inviting me to contribute to a conversation about what Defi can borrow from TradFi to better protect market participants. Since 2025However, this nascent industry still grapples with significant challenges, particularly concerning consumer protection.While crypto pioneers champion the democratization of finance, a crucial element often overlooked is the establishment of robust safeguards akin to those found in traditional finance (TradFi).The current wild west approach, characterized by regulatory ambiguity and insufficient security measures, leaves investors vulnerable to fraud, theft, and market manipulation.For crypto to achieve mainstream adoption and truly empower individuals, it must learn from the established practices of TradFi, adapting them to the unique decentralized environment. 10 practices crypto can borrow from TradFi to better protect customers UTC Crypto pioneers and decentralized finance companies often talk about their commitment to opening up financial opportunities to underserved populations, but that s only half the battle in achieving success for this fledgling industry.This involves embracing stricter compliance, implementing layered security defenses, and fostering a culture of transparency and accountability. Implementing these practices will help to improve customer trust and confidence, and make crypto a more attractive and secure option for users.By adopting these lessons, the crypto industry can build a more secure and trustworthy ecosystem, protecting users and paving the way for long-term sustainable growth.This article will explore ten critical practices that the crypto world can borrow from TradFi to enhance customer protection and build a more secure financial future.

1. Therefore, TradFi businesses could start adopting decentralized structures as more and more people demand financial inclusion and freedom. However, DeFi can also borrow TradFi s good practices, like protecting consumers and curbing illicit activities.Robust Regulatory Compliance: Bridging the Gap Between Innovation and Security

One of the most significant areas where crypto can learn from TradFi is in regulatory compliance. Below, 10 members of Cointelegraph Innovation Circle discuss some helpful things the crypto industry can learn from the TradFi industry, including practices DeFi companies shouldTraditional financial institutions operate within a well-defined framework of laws and regulations designed to protect consumers and maintain market stability. The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies on to protect consumers. Crypto pioneers and decentralized finance companies often talk about their commitment to opening up financial opportunities to underserved populations, but that s only half the battle in achieving success for this fledgling industry. Global consumers must beThis framework covers everything from anti-money laundering (AML) to know-your-customer (KYC) procedures, ensuring that institutions are accountable for their actions and that illicit activities are detected and prevented.

The crypto industry, in contrast, often operates in a regulatory gray area, leading to uncertainty and risk. Below, 10 members of Cointelegraph Innovation Circle sermon immoderate adjuvant things the crypto manufacture tin larn from the TradFi industry, including practices DeFi companies should see adopting and adapting for their ain lawsuit base. Establishing an security systemWhile some crypto companies have embraced compliance, others resist it, fearing that it will stifle innovation. Layered defense is critical. Effective fraud prevention requires a mix of people, process, and technology that ensures no single point of failure can compromise assets. Compliance is catching up, and the SEC is working to update digital asset custody rules to better protect investors.However, a lack of clear regulations creates opportunities for bad actors to exploit loopholes and harm consumers. The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies on to protect consumers.Implementing robust compliance measures, tailored to the specific risks of crypto, is essential for building trust and fostering sustainable growth.

Examples of TradFi Compliance Practices for Crypto:

• AML/KYC Procedures: Implementing stringent AML/KYC protocols to verify user identities and track transactions, preventing the use of crypto for money laundering and terrorist financing.
• SEC Registration and Oversight: Seeking registration with the Securities and Exchange Commission (SEC) for crypto assets that qualify as securities, subjecting them to the same regulatory scrutiny as traditional securities.
• Data Privacy Regulations: Adhering to data privacy regulations like GDPR and CCPA to protect user data and ensure responsible data handling practices.

2.Establishing a Comprehensive Insurance System: Safeguarding User Assets

In TradFi, deposit insurance schemes like the Federal Deposit Insurance Corporation (FDIC) in the United States provide a safety net for depositors, protecting their funds in the event of bank failures.This insurance system instills confidence in the financial system and encourages participation.

The crypto industry lacks a comparable insurance system, leaving users vulnerable to losses in the event of exchange hacks, platform failures, or other unforeseen events. Crypto pioneers and decentralized finance companies often talk about their commitment to opening up financial opportunities to underserved populations, but 10 practices crypto can borrow from TradFi to better protect customersWhile some crypto companies offer limited insurance coverage, it is often insufficient to cover the full extent of potential losses.Establishing a comprehensive insurance system for crypto assets is crucial for building trust and attracting mainstream investors.

How Crypto Can Implement Insurance:

• Developing a Crypto-Specific Insurance Fund: Creating a dedicated insurance fund, potentially funded by contributions from crypto exchanges and other industry participants, to cover losses resulting from hacks, fraud, or platform failures.
• Partnering with Traditional Insurance Companies: Collaborating with established insurance companies to develop insurance products tailored to the specific risks of the crypto industry.
• Implementing Smart Contract Audits: Mandating rigorous audits of smart contracts to identify and mitigate potential vulnerabilities, reducing the risk of hacks and exploits.

3.Layered Security Defenses: A Multi-Faceted Approach to Asset Protection

TradFi institutions employ a multi-layered approach to security, combining physical security measures, cybersecurity protocols, and fraud detection systems to protect assets. News that are related to the article cointelegraph.com: 10 practices crypto can borrow from TradFi to better protect customers from papers and blogs.This layered defense ensures that no single point of failure can compromise the entire system.

The crypto industry needs to adopt a similar approach, implementing a combination of technical and operational security measures to safeguard user assets. The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies on to 10 practices crypto can borrow from TradFi to better protect customers - XBT.Market Market Cap: $2,848,891,624,796.21This includes measures such as multi-factor authentication, cold storage of funds, and regular security audits.

Examples of Layered Security in Crypto:

• Multi-Factor Authentication (MFA): Requiring users to use multiple forms of authentication, such as passwords, OTPs, and biometric scans, to access their accounts.
• Cold Storage of Funds: Storing the majority of user funds in offline wallets, inaccessible to hackers.
• Regular Security Audits: Conducting regular security audits by reputable third-party firms to identify and address potential vulnerabilities.
• Intrusion Detection Systems: Implementing systems that monitor network traffic and system activity for suspicious behavior, alerting security personnel to potential threats.

4.Enhanced Transparency and Disclosure: Building Trust Through Open Communication

TradFi institutions are required to provide transparent disclosures about their operations, financial performance, and risk management practices. 10 practices crypto can borrow from TradFi to better protect customersSource: CointelegraphPublished onThis transparency allows investors to make informed decisions and hold institutions accountable.

The crypto industry often lacks transparency, with many companies operating in secrecy and providing limited information to users.Enhancing transparency and disclosure is crucial for building trust and attracting mainstream investors. The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies on to protect consumers. Read more at from Brian D. Evans ofThis includes disclosing information about platform operations, fee structures, and risk management practices.

How to Improve Transparency in Crypto:

• Publishing Regular Financial Reports: Publishing regular financial reports, audited by independent firms, to provide investors with insights into the company's financial health.
• Disclosing Platform Operations: Providing clear and concise information about platform operations, including how orders are executed, how fees are calculated, and how risks are managed.
• Implementing Transparent Governance Structures: Establishing transparent governance structures, with clear roles and responsibilities for key decision-makers.

5. Posted by u/Cointelegraph_news - 1 vote and no commentsFraud Detection and Prevention Systems: Identifying and Mitigating Suspicious Activity

TradFi institutions have sophisticated fraud detection and prevention systems in place to identify and mitigate suspicious activity. The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies on to protect consumers. Crypto pioneers andThese systems use algorithms and machine learning to analyze transaction patterns and flag potentially fraudulent transactions.

The crypto industry needs to implement similar systems to protect users from fraud and scams.This includes measures such as transaction monitoring, account monitoring, and identity verification.

Examples of Fraud Detection Techniques:

• Transaction Monitoring: Analyzing transaction patterns to identify suspicious activity, such as large or unusual transactions, transactions from high-risk jurisdictions, and transactions involving known fraudulent addresses.
• Account Monitoring: Monitoring user account activity for suspicious behavior, such as unusual login attempts, changes to account settings, and withdrawals to unfamiliar addresses.
• Identity Verification: Implementing robust identity verification procedures to prevent identity theft and account takeover.

6.Independent Audits and Verification: Ensuring Accountability and Reliability

TradFi institutions are subject to regular audits by independent firms, which verify the accuracy of their financial statements and assess the effectiveness of their internal controls. This is a great article and should be the template for the future of the industry. The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies onThese audits provide assurance to investors and regulators that the institution is operating in a sound and responsible manner.

The crypto industry should adopt a similar approach, subjecting crypto exchanges and other platforms to regular audits by independent firms.These audits should verify the accuracy of platform data, assess the effectiveness of security measures, and ensure compliance with regulatory requirements.

Key Aspects of Independent Audits:

• Financial Audits: Verifying the accuracy of financial statements and assessing the financial health of the platform.
• Security Audits: Assessing the effectiveness of security measures and identifying potential vulnerabilities.
• Compliance Audits: Ensuring compliance with regulatory requirements and industry best practices.

7.Clear and Accessible Dispute Resolution Mechanisms: Providing Recourse for Users

TradFi institutions offer clear and accessible dispute resolution mechanisms, allowing users to file complaints and seek redress for grievances. 10 practices crypto can borrow from TradFi to better protect customersThese mechanisms provide a fair and impartial process for resolving disputes.

The crypto industry often lacks effective dispute resolution mechanisms, leaving users with limited recourse in the event of problems. 10 practices crypto can borrow from TradFi to better protect customers The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies on to protect consumers. news cointelegraph Последние записи:Implementing clear and accessible dispute resolution mechanisms is crucial for building trust and protecting users.

Examples of Dispute Resolution Mechanisms:

• Online Dispute Resolution (ODR) Platforms: Utilizing ODR platforms to facilitate the resolution of disputes between users and crypto companies.
• Arbitration Clauses: Including arbitration clauses in user agreements, requiring disputes to be resolved through binding arbitration.
• Independent Ombudspersons: Appointing independent ombudspersons to investigate and resolve user complaints.

8.Responsible Lending Practices: Avoiding Over-Leverage and Protecting Borrowers

In TradFi, responsible lending practices are paramount.Regulations and internal policies are designed to prevent excessive leverage and protect borrowers from predatory lending practices.This includes assessing creditworthiness, disclosing risks, and ensuring borrowers understand the terms of their loans.

DeFi lending platforms, while innovative, can be prone to high leverage and opaque lending terms.Crypto needs to adopt responsible lending practices to mitigate risk for borrowers.This includes:

• Collateralization Requirements: Ensuring adequate collateralization of loans to protect lenders.
• Risk Disclosure: Clearly disclosing the risks associated with lending and borrowing crypto assets.
• Liquidation Mechanisms: Implementing transparent and fair liquidation mechanisms to prevent cascading liquidations.

9. Another thanks to the Cointelegraph Innovation Circle for inviting me to contribute to a conversation about what Defi can borrow from TradFi to better protect market participants.Centralized Customer Support: Providing Assistance and Guidance

Traditional financial institutions offer dedicated customer support channels, providing assistance and guidance to customers.These channels include phone support, email support, and live chat.

The crypto industry often lacks adequate customer support, leaving users struggling to navigate complex platforms and resolve technical issues.Providing dedicated customer support channels is crucial for improving the user experience and building trust.

Elements of Effective Customer Support:

• Multi-Channel Support: Offering support through multiple channels, such as phone, email, and live chat.
• Knowledge Base: Creating a comprehensive knowledge base with answers to frequently asked questions.
• Prompt Response Times: Responding to customer inquiries in a timely manner.

10. The crypto industry would be wise to learn from and adopt the proven principles and processes TradFi relies on to protect consumers. Crypto pioneers and decentralized finance companies often talk about their commitment to opening up financial opportunities to underserved populations, but that s only half the battle in achieving success for this fledgling industry. Global [ ]Collaboration with Regulators and Law Enforcement: Combating Illicit Activities

TradFi institutions collaborate closely with regulators and law enforcement agencies to combat illicit activities, such as money laundering, terrorist financing, and fraud.This collaboration helps to ensure that the financial system is not used for illegal purposes.

The crypto industry needs to adopt a similar approach, working with regulators and law enforcement agencies to combat illicit activities in the crypto space. Posted by u/CEX_IO - 1 vote and no commentsThis includes sharing information about suspicious transactions, participating in joint investigations, and supporting efforts to develop effective regulatory frameworks.

Benefits of Collaboration:

• Combating Money Laundering: Preventing the use of crypto for money laundering and terrorist financing.
• Prosecuting Fraud: Bringing fraudsters to justice and recovering stolen assets.
• Developing Effective Regulations: Contributing to the development of effective regulatory frameworks for the crypto industry.

Conclusion: Building a More Secure and Trustworthy Crypto Ecosystem

The future of cryptocurrency hinges on its ability to build trust and protect its users.By embracing the lessons learned from TradFi, the crypto industry can create a more secure, transparent, and responsible ecosystem.This includes implementing robust regulatory compliance, establishing a comprehensive insurance system, layering security defenses, enhancing transparency, and fostering collaboration with regulators and law enforcement.Adopting these ten practices will not only protect consumers but also attract mainstream adoption and pave the way for long-term sustainable growth.The transition won't be seamless, and the application of TradFi principles must be adapted to the decentralized nature of crypto, but the ultimate goal remains the same: to create a financial system that is both innovative and secure.