- The CPO of Mysten Labs said his team fully backs regulation insofar as it clarifies the sector’s boundaries.
- All five Mysten Labs’ founders worked on Facebook`s crypto project Libra.
- Compliant crypto applications are gaining steam as regulators turn their attention to reigning in the industry.
With regulators circulating, Mysten Labs’ co-founder and CPO Adeniyi Abiodun says crypto needs to change its tack — fast.
When asked about the future of crypto as the industry faces even closer watch, he told DL News that “in our thesis, there is no blockchain that exists today that lets you build compliant applications. It just doesn’t.”
Mysten Labs is the firm behind the buzzy new layer 1 blockchain Sui network.
It was founded by members of Facebook’s now-defunct crypto project Libra, later renamed to Diem after it came under scrutiny from regulators and politicians.
“We back regulation, we think it’s a great idea and actually gives a lot of clarity,” said Abiodun.
Since the fall of Diem, the industry has continued to attract regulatory scrutiny.
A 2023 launch
Sui hit the market last spring to compete against other speedy networks like Aptos, Solana and Avalanche.
The launch came amid politicians and regulators increasingly putting the screws to the industry.
Some 80% of jurisdictions worldwide have tightened rules around crypto, according to a report from sleuthing firm TRM Labs earlier this year.
With Europe’s crypto rulebook — the Markets in Crypto-Assets regulation — coming into effect, regulators in the bloc will also be upping their surveillance of DeFi projects, DAOs, wallet providers, and NFT platforms.
Abiodun said Sui would solve these compliance woes but not in the way that others have.
Typical strategies have meant networks tried to keep node operators within jurisdictional limits to remain compliant.
This has the knock-on effect of centralising a network and putting a blockchain in head-to-head competition with hyper-successful database incumbents.
“If you want to have a centralised control system, build on a database. Oracle built an amazing product that people buy by the billions, and it does a really great job,” said Abiodun.
The solution, he suggested, is instead to keep blockchains as public and decentralised as possible and regulate the applications that developers build on top of the network.
“You can write a smart contract on Sui today and, say, unless you have a Google account, unless you have an account with an email address that starts with at Mysten Labs or at-some website.com, unless you have an identity provider that has been given this XYZ credential, you cannot engage with this contract,” he told DL News.
As enticing and novel as Abiodun’s idea of white-listing users at the front door is, he’s not the first to pitch it.
Who’s using your blockchain?
The industry’s largest decentralised exchange, Uniswap, stirred up fierce criticism after introducing its “hooks” concept to the market.
The idea was simple: Let developers build custom features to attach to the exchange’s functionality. Critics said it would be used to verify the identities of new users looking to swap tokens on the exchange — a massive no-no in an ecosystem where privacy is a celebrated virtue.
“Only a JPMorgan credential can trade X asset.”
— Mysten Labs’ co-founder Adeniyi Abiodun
Solana recently entered the fray with its “token extensions” feature. One extension, “token hooks,” allows token issuers to monitor, control, and identify how users use the token.
The key demographic for this type of tooling? Traditional businesses looking to build on the blockchain.
With BlackRock CEO Larry Fink claiming its recent spot Bitcoin exchange-traded fund’s launch is just the “stepping stone” to tokenisation, projects like Sui, Uniswap, and Solana are paving the way — especially those looking to do it in a compliant way.
With Sui, you can enforce “strong rules around asset transfers that match regulatory requirements in addition to leveraging web2 entitlements as gates,” said the Mysten Labs co-founder. One example he suggested:
“Only a JPMorgan credential can trade X asset.”