Last winter, I found myself at a local diner. It was a mixed group, I mean people who understand my work, people who don't understand it, or people who are skeptical about my work. I'm a cryptocurrency lawyer and policy advocate, so I'm used to being asked questions like: Are you a Bitcoin lawyer? And do you use at least one sofa?
As we all know, the cryptocurrency industry is in crisis at the end of 2022, which means I'm answering more questions than usual. At one point, a friend pulled me aside and asked, "Is this the end of cryptocurrencies?"
Now, a year later, I can confidently answer: not only is it the end, but 2023 is a good year for cryptocurrencies . I am more engaged in this area than ever, and in 2024 I am convinced that this technology is here to stay - cryptocurrencies are here to stay - even in the face of repeated negative press, persistent opponents and ever-increasing regulatory pressure around the world. . .
The view of crypto-optimists is simple: technical maturity emerges as regulation progresses and adoption spreads.
But being optimistic in the world of cryptocurrencies means being truly realistic, recognizing not only the exciting developments we see beyond 2024, but also the challenges we face in the year ahead. I call this approach “crypto-optimistic realism”: an acknowledgment of how far we've come and how far we still have to go.
Even if 2023 exceeds the expectations of optimists like me, that doesn't mean 2024 will be an easy year. Indeed, among the three most important issues for cryptocurrencies – technical progress, regulatory progress and adoption – the obstacles we face until 2024 will present themselves as persistent challenges we must overcome to move towards a mature industry.
Technology is evolving faster than you think. Now we need to show why this is important.
After the collapse of centralized finance, 2023 sees a strong commitment to sustainable, strengthened and decentralized networks. This technology, through multiple networks, is finally able to meet the expected "standards" of the Internet itself, for financial, social, communication/messaging or information applications.
Last year, the industry was obsessed with zero-knowledge technologies, zkEVM and scaling solutions, and rightly so. Huge technological advances have been made on a large scale, contrary to the expectations of many people who believed that if such technology were possible beyond mathematical theorems, it would be impossible for decades.
In almost every industry imaginable, some element of blockchain has already begun to emerge.
Today, there is a faster, more convenient, and more efficient way to transact and interact on the Internet, backed by a decentralized database hosted by computers around the world that allows users to store and control their data, its value, and its content. The current state of blockchain looks like something out of "Neuromancer."
But here we are, living.
The challenge now is to ensure that millions of people around the world also experience this future.
The first chasm to overcome is how easily we can talk about what blockchains actually do and why they are better, at least in some use cases, than what we have today. Using internal conditions ("rollup", "smart contract", "oracle") with the traditional world is often counterproductive. Jargon makes technology and industry esoteric, isolated and inaccessible. Much of the blockchain-related lexicon was developed for a narrow audience of developers, which means we also need to change the way we talk about it to evolve as the technology develops.
While several technological challenges are on the verge of being solved on a large scale, the biggest challenge that remains is to facilitate the cause of blockchain.
This means explaining how the technology delivers real, tangible benefits in an understandable way across the world and across technologies, standards and sectors.
"Regulatory clarity" appears unexpectedly, but the quicksand of anti-money laundering needs a solution
For those of us involved in political affairs, the end of 2022 is of great importance. It's hard to imagine how regulators and politicians can meaningfully engage in an industry riddled with integrity issues stemming from the collapse of faceless companies (and you already know that). I was pleasantly surprised to see the significant engagement of politicians around the world on cryptocurrency issues over the past year, with many positives that I could not have predicted. Globally, in 2023 there will be:
Japanese lawmakers released the "Cool Japan" white paper in April. They proposed legislation for Decentralized Autonomous Organizations (DAOs - another handy word!) to connect less connected cities and communities with governments and open up to non-yen-backed stablecoins (with strict regulations on stablecoins).
The EU has officially adopted and started implementing the Cryptocurrency Markets Regulation (MiCA). As the first comprehensive law targeting centralized businesses and service providers in the cryptocurrency industry, MiCA sets strict requirements for cryptocurrency businesses in the EU, while enabling continuous technological innovation.
The UK Treasury presents comprehensive proposals for regulating cryptocurrencies.
In France, policymakers are beginning to explore a framework for decentralized finance (DeFi) that takes the technology seriously enough to consider regulations that don't stifle innovation while protecting consumers and preserving market integrity.
Hong Kong and the United Arab Emirates have created crypto licensing regimes for companies and centralized cryptocurrency service providers, including a new stablecoin issuance regime in Hong Kong.
In the United States, two major bills, the Financial Innovation and Technology 21st Century Act (FIT Act) and the Stablecoin Payments Clarity Act, were bipartisanly approved by the House Financial Services Committee, with possible preparations for their approval. . a in 2024 in the Chamber. And last June, the US House of Representatives Committee on Energy and Commerce held an important hearing on the non-financial use cases of blockchain. This is a direct demonstration that politicians are beginning to understand the scope of what can be achieved with the help of blockchain.
At the same time, the advancement of cryptocurrency policy in the United States is due to an expected but unexpected decision.
Many federal judges appointed by presidents of both parties demonstrate a unique understanding of the nuances and differences that technology and the way industries operate. The Ripple, Grayscale and Uniswap courts have recognized most of the decentralization and self-regulation arguments the industry has made over the years. In doing so, this court demonstrated that the positions of some regulators were trying to fit a cryptographic anchor into a TradFi circular hole, with limited results.
Risley v. Uniswap Labs et al. this is very important for two reasons. First, the decision examines decentralized financial technology. This agreement recognizes that software developers who innovate with new technologies cannot be held liable for the actions of unknown third parties and affiliates who may commit "bad acts" through that software (an outgrowth of the Napster and Grokster decisions over twenty years ago. ). Second, the decision acknowledges that we currently do not know what cryptoassets are: "securities, commodities, or something else." It is up to Congress to make that distinction. This latest admission is also notable because the SEC's lawsuit against Coinbase, largely over whether "tokens are securities," was filed in the same court.
Despite this progress, the sector does not have the "regulatory clarity" it needs. Indeed, the challenge in 2024 is greater than ever: how can we work with regulators and policymakers around the world to combat criminals who use cryptocurrencies for illicit purposes? This problem, commonly referred to as the AML (anti-money laundering) problem, is essential for cryptocurrencies not only to thrive, but to survive.
How the industry can and should address anti-money laundering questions needs its own article (or articles!), but our regulatory challenges are clear. The industry must come together to provide viable solutions that meet regulatory objectives to detect and deter criminals.
There are much broader use cases today, but we need to make them more useful
No wonder 2023 is being called "the year of the use case." This year I helped launch an open and interactive website, The Value Prop (thevalueprop.io), to showcase blockchain technology use cases from around the world. This website covers new applications based on existing blockchains.
Think Reddit, Nike's digital shoes, or Starbucks' NFT loyalty programs. Imagine big brands experimenting with giving up full control of loyalty programs and points, instead of leaving them under the supervision and ownership of users. Considering Tokenization of California DMV Auto Titles; There are land registry experiences in Peru; and about half of India's states have started implementing services, including police reporting services.
Imagine the tokenization of chain assets in the financial sector and beyond, where JPMorgan, Franklin Templeton, BNY Mellon, Mirae Asset Securities and many others have already started tokenizing assets, with some estimating that the total amount of tokenized assets is set at $3 billion. . . Projects like Courtyard and Regen Network enable the tokenization of assets like Pokemon cards and carbon credits.
While the first group will allow our current financial system to evolve more quickly and efficiently, the second group will change who can participate in the economy and how.
In almost every industry imaginable, some element of blockchain has already begun to emerge.
As more people interact with aspects of the blockchain every day, often without realizing it, the challenge now is to focus on the most impactful and revolutionary use cases in the industry . Builders must continue to build, but in a way that has great appeal. This means we need to move beyond the old narrative of "we pay the unbanked"; for better or worse, it's a story we've evolved into.
To ensure that adoption increases and the value of this technology is recognized, especially in the face of die-hard cryptocurrency doomsayers (pessimists!), developers must leverage the already strong product-market fit (PMF) with multiple cryptographic uses. cases such as stable currencies. Building on that success and innovating means thinking beyond the old narrative, thinking PMF.
It will be a challenge. For several years, much of this industry has focused on price and volume as indicators of adoption.
This winter I skipped dinner and instead chose to work and plan some of the challenges mentioned above. The 2023 push has created a feeling, even among friends and acquaintances who don't follow global developments closely, that the industry is doing well and that cryptocurrencies are here to stay.
Despite the challenges the industry will face in 2024, I remain optimistic that those still building it are the best and most passionate people who will allow the industry – and this technology – to reach its full potential.