Regulation
Web3 companies are preparing for cryptocurrency regulation
Web3 emerged due to the demand for better experiences that benefit end users, and the development of the industry has surpassed regulatory oversight.
The current state of cryptocurrency regulation varies from country to country, but if there is one thing in common it is that implementing regulatory oversight in the industry is a challenge that has not yet been resolved. There is a strong desire for fair and robust regulation among many cryptocurrency companies, and governments are eager to strengthen their authority over the sector, but that desire has yet to translate into action. As a result, the pace of regulatory change is extremely slow, creating a large gap between Web3 innovation and the existence of adequate regulatory frameworks.
In many ways, Web3 regulation can be compared to the story of the tortoise and the hare. The hare represents the cryptocurrency industry, which has leapt forward and built an entire ecosystem of decentralized services, in finance, gaming, travel, healthcare and more. Regulators are the tortoise, struggling to keep up with the hare.
In response to regulators’ slow response, some Web3 companies have taken it upon themselves to future-proof their platforms for what they see as the inevitable arrival of more concrete regulatory frameworks. They do this to ensure that innovation in the sector doesn’t stop when the government finally catches up.
A conflicting regulatory landscape
Less than a decade ago, no one had even conceived the idea of Web3 or a decentralized Internet, and when the concept emerged, its development was so rapid that a vast ecosystem had already arisen by the time it arrived on the internet. regulators’ radar.
The initial response from many regulators can best be described as reactive, with the introduction of strict rules designed to crack down on illicit activities enabled by cryptocurrencies.
However, many jurisdictions have since come to recognize the incredible benefits that Web3 can bring. Still others continue to view the arrival of decentralized networks as a threat, resulting in a nascent regulatory regime that varies greatly from one territory to another.
Crypto-friendly jurisdictions
Some of the more open-minded nations include Singapore, Japan, the United Arab Emirates and Switzerland, which have introduced flexible and accommodating laws designed to enable innovation around digital assets. They have been widely recognized as hubs for Web3 innovation.
For example, in 2017 Japan announced that it would legalize Bitcoin payments. Although not officially legal tender, Bitcoin is freely accepted by hundreds of stores across Japan, and numerous payment service providers have emerged in that country that allow cryptocurrencies to be exchanged for fiat currencies and spent in stores. Japan subsequently adopted a licensing regime for cryptocurrency exchanges, designed to prevent a repeat of the Mt. Gox collapse, and while this created some additional hurdles, it also signaled the acceptance of cryptocurrencies in that country.
Few countries have reacted more positively to cryptocurrencies than El Salvador, which has legalized Bitcoin and actively encourages its citizens to use it for payments and invest in it. He even created a treasury that regularly adds Bitcoin to invest in the country’s future.
Another positive example of Web3 regulation is that of the United Arab Emirates, which has created a regulatory framework under the Virtual Assets Regulatory Authority. With VARA, crypto companies can apply for licenses to provide a wide range of cryptocurrency-related services to consumers around the world.
Prudent jurisdictions
Some economies, such as the United States and the European Union, have opted for a more delicate balance, seeking to encourage innovation but also ensure strong consumer protections. These jurisdictions are wary of stifling innovation, but believe there is a strong need for caution and clarity to ensure consumer safety.
The United States, the Responsible Financial Innovation Act of 2022 aimed to provide greater clarity to agencies overseeing digital asset markets, including a framework that attempts to integrate cryptocurrencies into existing tax rules.
Meanwhile, in the EU, regulators have introduced the Markets in cryptocurrency regulation framework, which aims to cover digital assets not covered by existing legislation. The idea is to standardize crypto assets, protect consumers and support market integrity, while encouraging innovative development in the Web3 industry.
Restrictive jurisdictions
Some countries have reacted much more harshly to the Web3 innovation. One of the best known is China, which has repeatedly imposed numerous, albeit ambiguous, bans on cryptocurrencies in the past, even discouraging the use of certain types of Web3 applications. These stringent measures are believed to be motivated by the Chinese government’s concerns over economic disruption and a desire to maintain a strong grip on its financial ecosystem and economy.
Other countries, such as Iraq and Saudi Arabia, have reportedly adopted similarly harsh regimes completely ban cryptocurrencies.
Self-regulation in Web3
As governments struggle to keep up with the rapid development of Web3, some cryptocurrency companies are busy preparing for the day when they catch up.
MultiBank.io is one of the key players in this regard, actively designing its cryptocurrency trading and investment platforms for a regulated future. He does it by exploiting his strong experience in regulated financehaving made a name for itself as a platform for trading foreign currency, commodities and other traditional assets.
According to MultiBank.io, the idea is to ensure the full legitimacy of its crypto operations and promote trust among its users. It implements the same type of regulatory checks and balances on its cryptocurrency trading platform as traditional platforms, ensuring that users are verified to create a safe trading environment.
Other examples of Web3 platforms pushing for regulation include Swarm, the German tokenization platform that voluntarily follows the standards of that country’s Federal Financial Supervisory Authority. In the meantime, Token has created a compliant infrastructure platform for tokenizing real-world assets, enabling companies to issue, manage and transfer digital assets in a fully compliant manner.
Cooperation to advance Web3
The regulatory measures implemented by these pioneering companies serve as an example for the rest of the Web3 industry, and many others are following suit, creating a regulatory framework that eliminates opportunities for bad actors to abuse digital assets. By enforcing compliance, MultiBank.io, Swarm, Tokeny and others help reduce the risk of fraud, increase transparency and instill greater trust in their platforms, setting an example for others to follow.
At the same time, they also help encourage regulators to take a more conciliatory approach to the industry, engaging with participants to create more flexible structures that support innovation and growth in Web3.