Final winter, I discovered myself at a cocktail party within the metropolis. It was a combined crowd, by which I imply individuals who understood my work, those that didn’t, or those that had been skeptical of it. I’m a crypto lawyer and coverage advocate, so I’m used to questions like: Are you a lawyer for Bitcoin? And do you even use a financial institution?
As everyone knows, the crypto trade had been rocked on the finish of 2022, which meant I fielded extra questions than normal. At one level, a good friend pulled me apart and requested, “Is that this the tip of crypto? Are you okay?”
Now, a yr later, I can reply with confidence: Not solely was it not the tip, however 2023 was additionally really good for crypto. I’m extra dedicated to this house than ever, and going into 2024, I’m assured that the know-how will persist — that crypto is right here to remain — even within the face of repeated adverse press, continued naysayers, and chronic world regulatory strain.
The optimist’s case for crypto is easy: Technical maturity is happening in tandem with regulatory headway and wider adoption.
However to be an optimist in crypto is definitely to be a realist, to acknowledge not solely the thrilling developments we see coming into 2024, but additionally the challenges we should take head-on within the yr forward. I name this strategy “crypto optimist realism”: an acknowledgment of each how far we’ve come and the way far we’ve to go.
Even when 2023 exceeded the expectations of optimists like myself, it doesn’t imply that 2024 can be a cakewalk. In actual fact, within the three points that matter most to crypto — technical development, regulatory progress, and adoption — the tailwinds taking us into 2024 can be met with continued headwinds we should overcome to progress right into a mature trade.
The know-how superior quicker than anybody imagined. Now we have to present why that issues.
Within the wake of centralized “crypto-in-name-only” monetary collapses, 2023 bore out a vitalized recommitment to advancing sustainable, hardened, decentralized networks. The know-how, throughout different networks, is lastly attending to a spot that may deftly deal with what “normies” would anticipate from the web itself, whether or not or not it’s for monetary, social, communication/messaging, or informational functions.
Final yr, the trade obsessed over zero-knowledge know-how, zkEVMs, and scaling options, rightly so. Large technological leaps got here to life at scale, defying the expectations of many who believed that if such know-how had been attainable exterior of mathematical theorems, it wouldn’t be attainable for many years.
Throughout practically any vertical you’ll be able to think about, some ingredient of blockchain has begun to seem.
There at the moment are quicker, extra reasonably priced, and extra environment friendly methods to transact and work together on the web, secured by decentralized databases hosted by computer systems globally that enable people to protect and management their very own information, worth, and content material. The present state of blockchain positively appears like one thing out of “Neuromancer.”
However right here we’re, dwelling it.
Now the problem is guaranteeing that hundreds of thousands of individuals worldwide can dwell this future, too.
The primary chasm to cross is how you can discuss accessibly about what blockchains really do and why they’re higher, not less than for sure use instances, than what we’ve now. The usage of insider phrases (“rollups,” “good contracts,” “oracles”) with the standard world is usually counterproductive. Jargon makes the tech and the trade esoteric, isolationist, and inaccessible. A lot of the lexicon related to blockchain developed for a small, developer viewers, which implies to develop alongside the increasing attain of the tech, we should change how we discuss it, too.
With some tech challenges nicely on their approach to being solved at scale, a main hurdle stays to make the why of blockchain higher understood.
This implies explaining how the know-how offers actual, tangible advantages in a fashion simply grasped on a world foundation and throughout techies, normies, and industries.
“Regulatory readability” superior in sudden methods, however the AML quicksand requires an answer
For these of us participating on coverage issues, the tip of 2022 was existential. It was onerous to fathom how regulators and policymakers may have interaction meaningfully after the trade writ massive had been plastered with integrity points that arose from the downfalls of companies that shall not be named (and that you recognize nicely by now). A lot to my nice shock, final yr noticed important engagement by policymakers across the globe on crypto issues, in lots of optimistic methods I couldn’t have anticipated. Globally, 2023 noticed:
- Japanese lawmakers printed a “Cool Japan” whitepaper in April. It proposed a regulation for decentralized autonomous organizations (DAOs — one other phrase to make accessible!) as methods for much less linked cities and communities to be engaged with the federal government and confide in non-yen-backed stablecoin (with stringent stablecoin regulation)
- The EU formally handed and started implementing the Markets in Crypto-Property regulation (MiCA). A primary-of-its-kind complete laws targeted on centralized companies and repair suppliers within the crypto house, MiCA units out stringent necessities for crypto companies within the EU whereas additionally permitting for continued innovation on the tech facet.
- The U.Okay.’s Treasury Division issued a complete proposal for crypto regulation.
- In France, policymakers started excited about frameworks for decentralized finance (DeFi), taking the know-how critically sufficient to contemplate rules that gained’t stifle innovation whereas additionally defending customers and preserving market integrity.
- Hong Kong and the UAE created crypto licensing regimes for centralized crypto companies and repair suppliers, together with — in Hong Kong — a brand new proposed regime for issuance of stablecoins.
- Within the U.S., two main items of proposed laws, the Monetary Innovation and Expertise for the twenty first Century Act (FIT Act) and the Clarity for Payment Stablecoins Act, made their means out of the Home Monetary Providers Committee in a bipartisan method, with potential preparations to maneuver to the Home flooring in 2024. And final June, the U.S. Home Committee on Power and Commerce performed a significant listening to on nonfinancial use cases for blockchain. This was a firsthand demonstration that policymakers are starting to know the in depth scope of what might be achieved utilizing blockchain.
In parallel, developments on crypto coverage within the U.S. additionally got here in hoped-for however sudden selections from the courts.
Quite a few federal judges — appointed by presidents from each events — confirmed a specific understanding of the nuances and variations introduced by the know-how and the way in which the trade features. The Ripple, Grayscale and Uniswap courts all acknowledged a lot of the arguments round decentralization and self-custody that the trade has been making for years. In doing so, these courts confirmed that sure regulators’ positions actually attempt to match the crypto sq. peg into the TradFi spherical gap, with restricted outcomes.
The choice in Risley v. Uniswap Labs et al. is especially noteworthy for 2 causes. First, the choice dives deep into the know-how round decentralized finance. It acknowledges that software program builders innovating with new know-how can’t be responsible for the actions of unknown, unaffiliated third events who could have interaction in “unhealthy acts” through the software program (a corollary to the selections in Napster and Grokster greater than 20 years in the past). Second, the choice acknowledged that we don’t know what crypto belongings are at the moment — “securities, commodities or one thing else.” Making that distinction is a choice in Congress’ purview. This latter recognition can be noteworthy because the SEC’s case in opposition to Coinbase, which hinges largely on whether or not “tokens are securities,” is earlier than the identical court docket.
Regardless of these developments, the trade doesn’t have the “regulatory readability” for which it has been asking. In actual fact, the problem for 2024 is larger than ever: How will we work with regulators and policymakers globally to fight unhealthy actors utilizing crypto for illicit means? This query, one which’s usually known as the AML (anti-money laundering) situation, is essential for crypto to not solely flourish, but additionally to outlive.
How the trade can and will deal with the query of AML requires its personal article (or articles!), however our problem on the regulatory entrance is evident. The trade should band collectively to offer viable options that talk to the regulatory targets of detection and deterrence of unhealthy actors.
Broader use instances now abound, however we have to make them extra helpful
It should come as no shock that I might dub 2023 “the Yr of the Use Case.” It was a yr during which I used to be concerned in serving to launch an open, interactive web site, The Value Prop (thevalueprop.io), to showcase use instances for blockchain know-how all around the world. This website aggregates novel blockchain-based functions already in existence.
Assume avatars on Reddit, digital footwear on Nike, or loyalty NFT reward applications with Starbucks. Assume main manufacturers experimenting with what it seems to be wish to let go of whole management over loyalty applications and factors, as a substitute relinquishing these into the custody and possession of customers. The California DMV appeared into tokenizing car titles; there are experiments with placing land registration on-chain in Peru; and round half of Indian states have begun to include throughout completely different providers, together with police complaints.
Assume tokenization of off-chain belongings within the monetary sector and past, the place JPMorgan, Franklin Templeton, BNY Mellon, Mirae Asset Securities, and lots of others have already begun tokenizing belongings, with some estimates placing the variety of whole tokenized belongings already at $3 billion. Tasks like Courtyard and Regen Community enable for tokenization of belongings like Pokémon playing cards and carbon credit.
Whereas the previous group will enable our present monetary system to maneuver extra rapidly and effectively, the latter will remodel who can take part within the financial system, and the way.
Throughout practically any vertical you’ll be able to think about, some ingredient of blockchain has begun to seem.
Though an increasing number of individuals are interacting with some side of some blockchain daily, many with out even understanding it, the problem now’s focusing the trade on use instances which might be the most impactful, the most recreation altering. Builders have to preserve constructing, however in ways in which have highly effective attraction. Which means pondering past the long-standing narrative of “banking the unbanked,” which, for higher or for worse, is a narrative we’ve moved past.
With a purpose to be certain that adoption proliferates and the worth of this know-how is accepted, particularly within the face of very loud crypto pessimists (the doomers!), builders ought to lean into product-market match (PMF) that’s already robust with some crypto use instances, like stablecoins. Constructing and innovating on this success means pondering past previous narratives, with PMF in thoughts.
This can be a problem. A lot of this house has been targeted on worth and quantity for quite a lot of years, indicators of adoption.
This winter, I skipped the dinner events, opting to work and plan for a few of the challenges mentioned above. The momentum of 2023 has led to a rising sense, even amongst mates and acquaintances who don’t comply with the house intently, that the trade and I are okay, that crypto is right here to remain.
Whatever the challenges the trade faces going into 2024, I’m as optimistic as ever: Those that are nonetheless constructing are one of the best, most passionate individuals who will enable the trade — and this know-how — to achieve its full potential.