Outside Source
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Many developers and companies are finally focusing on improving the user experience in crypto. This is great, and we can expect the days of copy-pasting long strings of numbers, writing down countless seed phrases, and struggling with transaction fees to be gone soon. A seamless and intuitive interface can be used by a much larger base of users, which drives engagement and, most importantly, mass adoption. Nevertheless, UX is often thought of as its own silo, without taking into account other important factors in the product development process and the necessary changes that might be needed in the future.
Regulatory compliance stands out as one of these key factors since it can be fairly complex to understand for UX designers, product managers, and developers. As the overall UX gets better with wallets, protocols, and platforms, one of the last big hurdles is compliance, which is still not taken into consideration enough.
Compliance is here to stay
The days of a complete lack of regulation are gone for the crypto industry. Governments worldwide are tightening the reins to prevent financial crime, and as the world keeps evolving, companies have to adapt to new financial regulations that require a great deal of resources. In many ways, this is not much different from the traditional financial sector, which was radically transformed from a compliance perspective following the 9/11 terrorist attacks.
Just think about how many times you had to go through a clunky onboarding process that required ID verification and the disclosure of large amounts of the same data over and over again. While the regulatory intentions are understandable, this is massively to the detriment of the end user, both in terms of usability and privacy.
The question I’ve been thinking about during the past decade is whether all these companies must make the process so painful for the end user. My conclusion is that it’s often not the case. Let me explain why.
The old and the new way of doing things
When designing an app or a protocol during the initial stages of a project, builders rarely take regulations into account. Instead, they add any necessary layer of compliance to the process once the product is close to being finalized. This approach, which can be considered reactive, is usually done after consulting with a specialist and requires constant adaptation every time the rules change. Reactive compliance is not a huge problem for large companies such as banks, but it can be particularly burdensome for smaller projects such as crypto startups.
Instead, I have been advocating for crypto companies to adopt a proactive approach—whereby the needs of the regulators are directly addressed a priori by directly embedding compliance components into the product design. This approach is different because it involves long-term and directional prediction of what regulators will do. In other words, you won’t be able to predict the details of new rules that will be implemented next year, and your product design will only need to be slightly modified based on future rules.
Leaving behind traditional inefficiencies
This is crucial to understand in terms of UX. The reason why compliance processes for banks are currently so painful is that the product has not gone through many foundational changes for a very long period of time.
It’s enough to see how hyper-fragmented the industry is today to understand how likely we are to end up with a system that inherits the inefficiencies of the legacy financial world: if only crypto businesses could start talking to each other, it would open up a wide range of opportunities, not only for compliance but also in terms of UX improvements. Proper data sharing is already considered one of the best ways for virtual asset service providers to comply with Europe’s EBA Travel Rule Guidelines, which mandate that certain information must accompany transfers of funds or crypto assets.
While the nature of crypto itself is decentralized and permissionless, the companies involved in the industry might have to go through many regulatory requirements that will end up negatively affecting the user’s experience in the long run. To avoid inheriting the same regulation-induced inefficiencies that we’ve seen in the banking sector, the crypto industry should proactively focus on compliance and make it central in product development. This is why the UX-compliance combination is a marriage made in crypto heaven.
This article first appeared at crypto.news
