Regulation
Web3 Companies Prepare for Crypto Regulation
Web3 emerged due to demand for better experiences that benefit end users, and industry development has outpaced regulatory oversight.
The current state of crypto 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 crypto companies, and governments want to strengthen their authority over the sector, but this desire has not yet been translated into action. As a result, the pace of regulatory change is extremely slow, creating a significant gap between Web3 innovation and the existence of appropriate regulatory frameworks.
In many ways, Web3 regulation can be compared to the story of the tortoise and the hare. The hare represents the crypto industry, which has forged ahead and built an entire ecosystem of decentralized services, in finance, gaming, travel, healthcare and elsewhere. Regulators are the tortoise, struggling to catch up with the rapid pace set by the hare.
In response to the slow response from regulators, 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 industry won’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 large ecosystem had already emerged by the time it landed on regulators’ radars.
The initial response from many regulators can be described as reactive, with the introduction of strict rules designed to crack down on illicit activity enabled by crypto.
However, many jurisdictions have since recognized the incredible benefits that Web3 can bring. Still others continue to view the arrival of decentralized networks as a threat, leading to the emergence of a regulatory regime that varies greatly from one territory to another.
Crypto-friendly jurisdictions
Among the most open-minded countries are Singapore, Japan, the United Arab Emirates and Switzerland, which have introduced flexible and accommodating laws designed to enable innovation around digital assets. They have become widely recognized as hubs of Web3 innovation.
As an example, Japan announced in 2017 that it would legalize Bitcoin payments. Although not officially legal tender, Bitcoin is freely accepted by hundreds of stores across Japan, and a number of payment service providers, which allow crypto to be exchanged for fiat currency and spending it in stores, emerged in this country. Japan subsequently adopted a licensing regime for cryptocurrency exchanges, designed to prevent a repeat of the collapse of Mt. Gox, and while this created a few more hurdles, it also signaled an acceptance of crypto in this country.
Few countries have responded more positively to crypto 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 the United Arab Emirates, which created a regulatory framework under the Virtual Asset Regulatory Authority. Under VARA, crypto companies can apply for licenses to provide a wide range of crypto-related services to consumers around the world.
Cautious jurisdictions
Some economies, such as the United States and the European Union, have opted for a more delicate balancing act, seeking to encourage innovation while ensuring strong consumer protections are in place. These jurisdictions fear stifling innovation, but believe caution and clarity are absolutely necessary to ensure consumer safety.
The United States, the Responsible Financial Innovation Act of 2022 aimed to provide more clarity to agencies that oversee digital asset markets, including a framework that attempts to integrate crypto into existing tax rules.
Meanwhile, in the EU, regulators have introduced the Markets in Cryptoasset Regulation framework, which aims to cover digital assets not covered by existing legislation. The idea is to standardize crypto activities, protect consumers and maintain market integrity, while encouraging innovative development in the Web3 sector.
Restrictive jurisdictions
Some countries have reacted much harsher to Web3 innovation. One of the most well-known countries is China, which has repeatedly imposed numerous, albeit somewhat ambiguous, bans on cryptocurrencies in the past, also discouraging the use of certain types of Web3 applications. These strict measures are reportedly driven by the Chinese government’s concerns about economic disruption and its desire to maintain a strong grip on its financial ecosystem and economy.
Other countries, such as Iraq and Saudi Arabia, have adopted similar and apparently harsh regimes ban cryptocurrencies outright.
Self-regulation in Web3
As governments struggle to keep up with the rapid development of Web3, some crypto companies are busy preparing for the day when they catch up.
MultiBank.io is one of the leaders in this regard, actively designing its crypto trading and investment platforms for a regulated future. To do this, he exploits his solid experience in regulated financehaving made a name for itself as a trading platform for currencies, commodities and other traditional assets.
According to MultiBank.io, the idea is to ensure full legitimacy around its crypto operations and promote trust among its users. It implements the same type of regulatory checks and balances on its crypto trading platform as on its 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 built a compliant infrastructure platform for the tokenization of real-world assets, enabling businesses 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 structure that eliminates opportunities for bad actors to misuse assets digital. By enforcing compliance, MultiBank.io, Swarm, Tokeny and others help reduce the risk of fraud, increase transparency and build greater trust in their platforms, setting an example for others.
At the same time, they also help encourage regulators to take a more conciliatory approach to the sector, engaging with participants to create more flexible frameworks that support Web3 innovation and growth.