Crypto is evolving, expanding and becoming more and more regulated all over the world. To better understand these developments, we analysed a conference at which Florian Glatz and Marina Merkezic from the European crypto initiative (EUCI) discuss the current challenges and future developments of the crypto sector. Here are the 3 most important takeaways from our side on the current and future status of crypto in Europe and elsewhere.
TAKEAWAY 1: Increased activity of crypto regulation all around the world
Countries and supra-national entities like the EU all over the world are becoming increasingly interested in crypto and its regulation. This wave of regulatory activity is organised and coordinated between countries and will likely produce a common play-ground for the crypto industry regardless of the country of activity, although it might take years or even decades. Examples of crypto regulation today are the European Market in Crypto assets (MiCa) regulation and the US stablecoin bill. On the side of crypto companies and agents, it is necessary to develop a more dynamic and organised discussion with regulators.
TAKEAWAY 2: Upsides of regulation
The MiCa regulation is only limited to centralised crypto finance and does therefore not apply to DeFi. In this regard, self-custodial wallets and fully anonymous Proof of Work (PoW) or Proof of Stake (PoS) will not be affected by the new regulation. Nevertheless, questions arise about how crypto companies will be able to prove that they are decentralised because a clear definition of what is decentralised and what not is still lacking. Furthemore, although PoW has not been affected by MiCa, its massive use of energy will probably make it fall again within the scope of new regulations, even more in case of an energy crisis. Although PoW enables decentralisation, it is still realised by physical actors which can be sensitive to regionally enforced legislation. Fortunately many cryptocurrencies, including Ethereum, have already made the move towards Proof of Stake.
TAKEAWAY 3: Lessons for the future
According to Florian Glatz and Marina Merkezic, the negative events within the crypto environment of the last few years have generated a low legitimacy of the crypto space in the public opinion. Scams and frauds have happened and will probably happen also in the future but this does not have to affect the image of the whole crypto industry. This is why it is essential to resurface the goodness of crypto and show it to regulators in an attempt to change the public opinion about this environment. At zkPortal, we believe that increased adoption of KYC will play a large role in this. Making KYC more privacy-preserving and targeted can increase acceptance in the crypto space and balance both decentralisation and regulatory compliance.
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