The pandemic not only brought hordes of retail traders into the stock market and crypto sector and sent the popularity of non-fungible tokens skyrocketing, but also massively intensified issues around cyber security, with people and businesses becoming more dependent than ever on digital infrastructure.
In the case of cryptocurrency, the 2022 bear market that followed the massive COVID-19 bull run revealed high levels of incompetence and/or fraud in the sector, raising the need for increased cybersecurity to new levels and sending the phrase “not your keys, not your crypto ” mainstream.
Cogni, a neobank that prides itself on allowing people to use, hold and manage both cash and digital assets on a secure platform, has negated the risks associated with centralized exchanges and even traditional banking with a decentralized architecture built on Web 3. The platform uses multi -signature security and data encryption and allows users to self-custody crypto and NFTs following a Know Your Client (KYC) process.
Identity security is of great importance given the amount of time people spend online and the number of apps and websites people rely on. “This is actually a source of a lot of problems that the US government is now looking to solve. In fact, it’s now agreed that this year there will be new rules around KYC as it relates to the Web 3 environment, and a lot of people are now running around and trying to figure out how to solve it, says Cogni Head of Web 3 Simon Grunfeld Benzinga told in a recent interview.
Cogni has already solved that problem, Grunfeld said, by “using a Solbound NFT to tag your wallet with information that we treat as a traditional Web 2 company, but we transfer all of that information to a Web 3 environment.”
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Simon Grunfeld on the benefits of Cogni versus centralized exchanges
Grunfeld, a registered CTA, with a background spanning capital markets, IT, crypto, blockchain and fintech joined Cogni in July 2022. Cogni is a multi-chain wallet designed to fit the modern lifestyle.
“I think that’s what it really means to me as the head of Web3 — it’s about preserving the internal lifestyle of a person (who) wants to keep all access to all their assets in a single app.”
“For anyone banking, it basically means being able to use the same app you use for banking, but using it to store all your digital assets as well. Not just your fiat but also your crypto (and) your NFTs,” he added.
“Unlike centralized exchanges like Coinbase, Kraken, Gemini or Binance, when users come to us, and they get their wallet, it’s a non-custodial wallet, which means you own the keys to it,” Grunfeld said.
“Unlike centralized exchanges, number one, we actually provide a lot of privacy, we don’t know what you have in your wallet, we don’t know what access you have and don’t have. Two, and this is the real kicker, if the centralized exchanges goes up you become a creditor, you have to chase those guys down. If Cogni goes up, or any neobank for that matter, because that’s what Cogni is – a neobank – if any neobank goes up, two things, a your fiat is protected up to $250,000. Two, we can’t take your digital assets because they don’t have access to them.”
“It’s much safer for an end user to come to a neobank and do transactions as opposed to working with a centralized exchange that’s just based on the value of the sanctity of funds and who has access to it,” he said.
“You have to put your trust in Coinbase, and in Gemini, that they’re going to follow the right procedures and the right protocols. History has shown us that it’s kind of a gamble.”
This became evident during the bear market, when many crypto trading platforms began to go bankrupt, causing fear to abound in the crypto sector, and rightly so.
Simon Grunfeld on the collapse of Sam Bankman Fried’s FTX and Celcius
Regarding crypto app Celsius (CRYPTO: CEL), which filed for bankruptcy in July 2022, Grunfeld saw red flags before the event. About a year before Celcius was delisted, Grunfeld contacted Celcius on behalf of a colleague who wanted to transfer a large account to the trading app, but Celcius said they weren’t interested, according to Grunfeld. “If you’re trying to bring legitimate business to an organization that says ‘we’re not interested,’ that smells bad,” he said.
Although Grunfeld does not personally know the co-founder of Celcius, Alex Mashinskyor many others involved, he said, “they have tons of connections in the world of casinos and online gambling, and I’m 99% convinced that’s exactly where they made their money if it wasn’t just a big Ponzi scheme.”
Speaking about the FTX debacle, Grunfeld said it was a case of incompetent individuals running an organization backed by major US investors, who were in love with Sam Bankman-Fried. “Massive red flags from day one. Anyone sitting at a game console playing games when you have a business meeting – you know something’s not right.”
“So you had negligence, you had clear fraud, clear fraud, you can’t trust a word this guy says anymore,” Grunfeld said.
“It’s a good thing for Cogni, to be honest, even if it sucks for the industry as a whole,” he said, adding, “It just proves our point that at the end of the day, digital assets and the world of Web 3 should are kept with the owner. They shall not be kept with a third party.”
“People make that choice to keep their assets with a platform because they feel safer trusting someone else,” Grunfeld said. However, the job of these exchanges is not to protect investors’ assets, Grunfeld said. “They are not focused on anything other than making money. So, they’ll take shortcuts, they’ll do fugazi things like we’ve seen with FTX, with Celcius, with Voyagerwith Lunawith USTthe list goes on and on.”
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