Crypto adoption in institutions is still not as widespread as some would have you believe

Artur Gulinski said that in the last part of our conversation with him, the issue of interest is not crypto, but infrastructure. He also spoke about layer three, and how it is used to comply with regulatory requirements.

He says, “Everyone has been talking since 2020 about mass adoption.” “Another half a billion retail customers does not equal mass-adoption.” When institutions arrive, they will bring with them people. They can’t report unless they come.

Blocking Adoption

Gulinski thinks institutions are hesitant to adopt blockchain technology because of regulatory uncertainty and operational risks. They don’t wish to be found holding illicit funds. They don’t wish to be a member of a non-auditable system.

Zekret is positioned to fill this niche. It’s a Layer 3-compliant plugin which allows clean entry into any Layer 1 and Layer 2 blockchain. This is achieved by filtering funds and users before they even touch the chain. 

In addition to screening, KYC, KYB, and ZK ID have been built-in. “We track, screen, trace and monitor from day one,” says he. If your funds are dirty they won’t be accepted.

Gulinski highlights a number of challenges traditional institutions face in embracing blockchain. The first is the lack reversibility.

Irreversible mistakes

In traditional finance, the bank can reverse a transfer if it makes a mistake. Once it’s been done in blockchain, it is done. This is the only thing that prevents banks from making a full commitment.”

He also sees payroll as a critical application. “Global companies pay millions in bank fees to transfer money. One company I studied pays over three and half million dollars in transaction fees every year. Blockchain can reduce it to a couple hundred dollars.”

Again, the reporting bottleneck is again the reporting. “They cannot move to blockchain as they can’t trace where the money is going. “They don’t have a clear picture of what money is coming in and going out. Regulators will not accept this.”

Stablecoins or OTC purchases are not sufficient. “People say that institutions have already arrived. They’re not. Adoption is not buying Bitcoin OTC, or launching stablecoins. That’s toe-dipping. Infrastructure is key to real adoption. They haven’t done that yet.”

The dirty money

Gulinski believes that clean capital for institutions is non-negotiable. They must show that all wallets and tokens they use have been checked.

The legacy chains are full with illicit money. It’s impossible to erase. Zekret is a new start. This is why institutions are interested.”

He talks about conversations with regulators and banks who are interested in engaging but do not have the technical means to do so.

“They don’t want to start from scratch and build compliance. They want someone to do it for them and provide a tool. Zekret can be that tool. It’s not all about the hype. “It’s all about trust.”

Even the expectations of returns have changed.

“VCs wanted a 10x return in six months. It’s not what institutions think. They want stability. They want stability. They will come if we offer them that.

Gulinski believes that the message is straightforward.

Fearing chaos, not crypto

“Institutions don’t fear crypto. They are afraid of chaos. “If we give them structure, then they will show up.”

Zekret can help here, it seems. It presents itself as a Layer 3 Compliance Layer designed to be plugged into existing Layer 1 or Layer 2 ecosystems.

He says that at first, “everyone called it Layer zero.” “Chain agnostic and above all else. But that didn’t fit. It’s not above or below. “It is something else.”

Layer 1 refers primarily to the blockchains that are used as a base, like Ethereum or Avalanche. On top of these chains, Layer 2 solutions offer faster or cheaper transaction speeds. Gulinski describes Layer 3 as a protocol plugin that is focused on regulatory compliance.

Scanning and Verifying

“It is not a chain.” It is not a validator. He says it’s more of a filter. “You plug in us, and all the information that passes through this chain is scanned and verified.”

Zekret is a compliance gatekeeper once connected. The system filters each new user as well as every capital inflow. KYC and KYB are initiated. ZK IDs can be obtained. Funds are screened to determine if they have illicit origins. Only verified, clean interactions are allowed to pass.

Gulinski states that “from this point forward, they are in compliance.” “We do not replace the chain. We enable it.”

The complexity of global regulatory frameworks inspired the idea. Most projects are geared towards scaling, or going international. To do so, you have to comply with rules from dozens of different jurisdictions.

How is a start-up supposed to know the rules in the US and the EU at the same moment? He says. “You’d need a hundred-thousand-dollar compliance department. Or you use a plugin.” Zekret Layer 3 is the plugin.

Sparking true adoption

Developers will have faster access to the market. For institutions, this means that they can see who is interacting with their chain.

Gulinski says, “It makes clean rails.” “No need to be concerned about the other side of a transaction.” “If they passed the filter, then they are legitimate.”

The Layer 3 model remains a new concept. Layer 2 solutions such as sidechains or rollups continue to receive the most attention. Gulinski is of the opinion that scalability by itself is not sufficient.

You can be the fastest chain in all of the world. What matters is if you are shut down by regulators. Layer 3 is all about sustainability and not speed. Institutional adoption can now start with compliance.