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The digital asset space continues to surprise us. Even during these turbulent times, new use cases for digital assets and blockchain technology emerge every day. In fact, bear markets are often a great time to build, and innovation in the space is currently booming.However, building the future of Web3 is not a straightforward task, and many evolving factors must be considered. As a blockchain leader, we wanted to understand what these factors mean for the digital asset community?With that in mind, we joined EisnerAmper and The Wall Street Blockchain Alliance (WSBA) at the “Digital Assets—Thinking Forward” webinar to discuss:
The webinar panelists were:
Keep reading for a recap of the discussion.
“Digital assets are here to stay”, said Donna Redel, Angel Investor and Blockchain-Digital Assets Professor. Therefore, governments must establish clear pathways for people who interact with and invest in digital assets. In the last 12 months, there has been some movement in the right direction. The U.S. government released the following frameworks:
However, there’s still work to be done. For example, the legislation above doesn’t clearly define crypto tax. The infrastructure bill says “a brokerage” needs to keep track of your digital asset earnings. But you can enter into a smart contract without a brokerage, so who is responsible for reporting? Would a minor be considered a brokerage? The U.S. still has a long way to go in establishing clear guidelines for cryptocurrency investors. “We have to take the first step and propose legislation or else it’s never going to get done. My hat’s off to our government for taking that first step, but I think we have a long way to go”, explains Jason Price, Director of Regulatory Relations at Blockdaemon.
“There’s a great divergence between how some countries will essentially ban crypto, and others really embrace it”, said Joshua Ashley Klayman, U.S. Head of FinTech and Head of Blockchain and Digital Assets, New York. The EU has been proactive and set out guidance for the 27 member states. The Markets in Crypto-Assets agreement (MiCA) is one of the more recent and important developments. MiCA is a provisional proposal “which covers issuers of unbacked crypto-assets, and so-called “stablecoins”, as well as the trading venues and the wallets where crypto-assets are held. This regulatory framework will protect investors and preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector”. This is a big step forward for the crypto community. Some EU member states already have their own national legislations. However, the MiCA agreement brings a unified regulatory framework for the entire European Union.
Countries like Singapore and Dubai have become recent favorites for crypto investors. However, eventually, all these countries will become more restrictive when it comes to crypto. This is why in today’s market, it’s common for people to do a little jurisdiction shopping. On the other hand, Bermuda (a British overseas territory) has released a thorough blockchain and cryptocurrency regulation. Bermuda is “keen on adequate regulation and it’s very much part of their reputation to be regulated”, adds Donna Redel. Bermuda’s regulation is one of the world’s first comprehensive regulatory and legislative crypto frameworks and aims to provide industry participants with legal and regulatory certainty. The Bermuda Monetary Authority (BMA) has even approved Jewel Bank to launch a blockchain-based stimulus token for use in Bermuda’s retail market, which is a Bermuda dollar-backed stablecoin.
The crypto community involves everyone from developers, business owners, miners, investors to traders. In times when regulatory frameworks aren’t clear, it’s important the community relies on each other to maintain stability. The US government will continue writing various digital asset bills, frameworks, and regulations, but the adoption will be slow. A lot of the regulators writing these frameworks aren’t involved in the community and aren’t even using DeFi products.“They’re not mining, they’re not trading, they’re not building. So it’s difficult to sit in an office and write a regulation on something you aren’t familiar with”, explains Jason Price. As with every community, there are bad actors, but this is where consensus mechanisms like Proof of Work (PoW) and Proof of Stake (PoS) come into play. Without a proper consensus algorithm, a blockchain network is no more than a database. Consensus algorithms ensure that blockchain networks can:
Education is also important to maintain community stability. “People coming in who are new to the space and want to have a piece of the action, but they don’t really understand the interconnectedness of the entities and foundations — it’s critical to get people educated in this industry”, explains Joshua Ashley Klayman.
McKinsey recently released a report stating that the metaverse will become a $5 trillion industry by 2030. Interestingly, most video game companies are highly centralized (not building on the blockchain). However, with the metaverse, there are a lot of opportunities for incorporating NFTs. “So it seems that some of these video game companies are coming around”, adds Joshua Ashley Klayman. The community is bound to see a large emergence of new DevOps tools and infrastructure capabilities. When it comes to NFTs, “I think it’s going to get very commercialized very quickly. We’re going to have a monopoly of issuers”, explains Jason Price. For example, companies who are not in crypto will use other companies to issue NFTs for them. The alternative is to build in-house NFTs capabilities, but this requires a lot of capital and talent. “The NFTs that we see today, they’re only the tip of the iceberg”, adds Jason Price. In the future, we will hold NFTs for flights, cinema tickets etc. The bottom line is it’s going to be commercialized. To stay up-to-date on all things crypto, follow us on Twitter @BlockdaemonHQ.