He The cryptocurrency industry had a historic 2022. Amid macroeconomic headwinds, a bear market, insolvencies of major exchanges and providers (as FTX and BlockFi), which were preceded by the amazing TerraUSD stablecoin collapseGlobal crypto market capitalization fell to $858 billion in early December from highs of $3 trillion.
It's easy to lose sight of the big picture in the aftermath of a year marked by so many challenges. Around 10% of people around the world own digital assets. Blockchain and cryptographic technologies have proven their value in addressing real-world challenges for millions in financial services and beyond.
The growth of blockchain technology will also become a core differentiator for economies and a key measure of international competitiveness in the coming decade to attract foreign direct investment, cultivate innovation, and create jobs. Investor appetite and sentiment around the technology's potential clearly bear out that view.
The top 10 cryptocurrency and blockchain VC funds raised more than $12.5 billion in 2022, making it a record year for fundraising activity in the industry despite a notable drop in the second half of the year. The drop follows a resilient first half and reflects more significant and persistent one-year declines in other sectors that were spurred by the broader macroeconomic and geopolitical environment.
Crypto seems to be in a regulatory tipping point in many places around the world. Governance, consumer protection and security remain major concernsunderstandably accentuated by recent events and/or persistent misconceptions about technology.
Financial stability and integrity are also a priority for regulators. Although crypto assets represent only a small part of the assets of the global financial system, with a total market capitalization of less than $1 trillion as of June 2022, their rapid growth makes a good case for significant regulatory attention.
At this important juncture, the right balance is crucial to enable responsible innovation and growth. TO digital asset regulatory framework ought:
- maximize user protection and successfully eliminate bad actors
- favor simpler technologies that offer tangible solutions to the most pressing needs
- provide clarity and avoid duplication or conflict with other regulations
- adopt a proportionate and risk-based approach as the industry and technology continue to mature and
- create a level playing field to enable world-changing innovation.
The backdrop of challenges and rapid growth arguably made 2022 the busiest year to date for crypto policymaking, accelerating the need for regulatory clarity to protect consumers. The industry saw a flurry of global legislative and regulatory developments, as well as standard-setting activity and industry action.
The European Union published its Markets in regulation of Crypto-Assets, the first and most comprehensive regulatory framework for digital assets to date, although it will not come into force for another year. In the US, the work launched by the March 2022 White House executive order resulted in the first comprehensive framework for the US, the United Arab Emirates, Saudi Arabia, Bahrain and most of the United States. of Brazil have also introduced cryptographic regulations.
In addition, a large amount of guidance has been put out by global standard-setting bodies in different areas, such as the Financial Stability Board framework, the International Organization of Securities and Exchange Commissions roadmap, the Financial Action Task Force guidelines International for virtual assets and the recommendations of the Basel Committee. In 2023, there will be many quick moves by countries to implement these proposals. Much attention will also be paid to areas that MiCA and other frameworks have left out of scope, such as decentralized finance and non-fungible tokens.
Exchanges around the world have also been proactive and quick to launch their own voluntary initiatives to reassure consumers, increase transparency and (re)build trust in the ecosystem. Examples include publishing wallet addresses, testing reserves, and launching recovery funds.
With the proper railings in place, Web3 It can improve the lives of millions by transforming financial services and beyond, but only smart regulations and serious industry efforts can (re)build the trust needed to make it happen.
Rana Kortam is Director of Global Public Policy at Binance.
This article was originally published in the year 2023 from the Digital Monetary Institute.
