Blockchain projects face ‘lack of appetite’ from US regulators, says Austin Federa

Austin Federa, chief strategy officer at the Solana Foundation, spoke to Cointelegraph at the ETHDenver conference about the network’s disruption, the impact of regulation on other projects, and the launch of the mobile device.

Federa said the New York Department of Financial Services — or NYDFS, one of the state regulators responsible for licensing crypto firms — essentially put up roadblocks for many projects looking to issue stablecoins or similar blockchain services. He added that Solana had heard from projects facing “quite draconian” rules in the EU related to transitioning to non-custodial wallets.

“DFS has not certified Solana yet,” Federa told Cointelegraph on March 1. “We’re trying to get it off the ground, but I think what we’ve seen is a lack of appetite from DFS anywhere. If a new entrant – let’s say a large Web2 financial services company – feels they want to start issue a stablecoin, they feel they need DFS approval to be able to do something like that.”

In response to the recent decline in block production, which resulted in a restart of the Solana network, Federa said there was “no specific root cause analysis” reported by the team’s engineers. He added that there may have been “something about the interaction” between the network’s version 1.13 and 1.14 or in the last attempt to upgrade that forced the validators to restart.

“The thing is about 1.14, it was running on the testnet for several months before it was actually migrated to maintenance,” Federa said. “So, what it really highlighted is that the test infrastructure for releases is not quite as robust as it needs to be right now, because it wasn’t like this was just something that was just, you know, thrown onto the mainnet as benevolence. It’s just the testing that didn’t catch what this error was.”

Federa said Solana’s approach has been to develop a faster ecosystem in a matter of months, unlike networks like Ethereum, which had taken years. He added that many projects were detrimental to venture capital funds amid the bear market and negative press coverage related to crypto and blockchain, with stability being an important factor in retaining users.

“One of the risks there is downtime, and so stability has been sacrificed to get more things out faster to help the network grow faster.”

The collapse of FTX in November 2022 sent ripples that also affected Solana’s mobile device ambitions. According to Federa, Solana had temporarily scrubbed the “loss to pay” fiat-to-crypto feature without a replacement for FTX — the firm had been expected to facilitate transactions — but planned to launch in “the first or second week of April.”

Related: Solana State: Will Layer 1 Protocol Rise Again in 2023?

Many on social media have criticized Solana for network outages, with various causes including a denial of service attack in 2021, overload from non-fungible token minting bots in May 2022, and a consensus failure in June 2022. The cause of the latest outage was still unknown at the time of publication, but Solana Labs founder and CEO Anatoly Yakovenko said it was not the result of clogging the network’s on-chain voting system.