Will the next bull market opportunity be triggered by blockchain being brought under regulation?

2022 is almost over, and one can’t help but look forward to what the blockchain world will look like in 2023.

2022 is a bear market, but it is completely different from 2018. In 2018, 1CO was falsified, and everyone from retail investors to practitioners was confused and unsure of what we could do with blockchain. This situation did not last until the prototype of Defi slowly emerged in 2019, and the thorough ignition of Defi Summer in 2020 brewed a new bull market.

In this round of bear market, almost everyone knows what blockchain can be used for, and the advancement of various infrastructure and application layers is in an orderly manner. However, both investors and practitioners have underestimated the impact of the macro environment on funds in the circle. The water released during the epidemic was slowly withdrawn by a series of interest rate hikes and balance sheet reduction operations . In the second half of 2022, every investor in the circle was forced to become a "quasi-financial enthusiast" who cares about Powell's (current Federal Reserve Chairman) speeches, CPI, US stocks and the US dollar index every day.

What will the blockchain world look like in 2023, or in the next 2-3 years? I think few people can make an accurate judgment.

I vaguely remember that in 2020, a media outlet interviewed many top KOLs in the circle and asked everyone what their judgment on the trends in 2021 was. The results were mostly focused on Layer2, Defi, Staking and Polkadot, but what actually became popular were PFP avatars, Gamfi and new public chains.

The top investors’ perceptions are so different from the market, so it is easy to imagine how difficult it is for ordinary investors to predict market trends.

As for the macroeconomic level, will the Fed raise interest rates to the top and then start to cut interest rates and release more money next year? Will the US economy fall into recession? Mainstream economists are still unclear about these things, or have different opinions. We, the "quasi-finance enthusiasts" who pay attention to the economy halfway through investment, should not make any accurate predictions.

However, one thing is worth paying attention to, that is the news about the circle policies of various countries . After all, blockchain is not a utopia, nor is it a lawless place. It will eventually have to be integrated with the real world. The attitude of various governments towards the circle is still worthy of close attention from investors and practitioners.

01. Public chain - Ethereum is undoubtedly at the forefront

The successful transition from POW to POS has technically prepared for the future Danksharding expansion plan, economically significantly reduced the annual issuance, and even entered a deflationary state from time to time. It has also greatly reduced energy consumption and become extremely "green and environmentally friendly". It is a particularly good thing no matter how you look at it.

However, the only thing that has happened is that Ethereum, which is a POS system, has the possibility of being recognized as a security by the SEC. (SEC refers to the U.S. Securities and Exchange Commission, abbreviated as SEC)

Although insiders believe that POS Ethereum does not meet the four principles of the Howey test of securities regulations:

1) Investment of funds

2) In a common enterprise

3) Reasonable expectations of profits

4) Entirely from the efforts of others

But as we all know, the law is dead and people are alive. In many cases, the right to interpret the law is the most critical . Otherwise, there would not be so many cases appealed to the Supreme Court in the United States every year, and some legal provisions would even be judged "unconstitutional", just as different interpretations of the Bible gave rise to various sects such as Catholicism and Christianity.

Will the SEC use its power to interpret securities laws to forcibly determine that ETH is a security? No one knows now. We only know that once this happens, it will not be good news for all new public chains. After all, all public chains are POS now. The outcome of everyone's supervision depends largely on the SEC's judgment on ETH.

02. Defi and Stablecoins

Defi and stablecoins are also facing these challenges.

First, the United States. There is news that the United States may pass a "Digital Goods Consumer Protection Act" in the next three months. Although this is "possible", if it is really passed, the behavior of most current Defi projects will become "illegal". Of course, there are policies from above and countermeasures from below. Will there be Defi projects that start various models such as KYC and transform into a model similar to Cefi on the chain?

As we all know, there have always been great differences in the United States on how to regulate the crypto industry. The government and Congress often hold meetings to discuss this issue, but the current trend is leaning towards strict regulation. After all, the industry is bigger now, with more funds, so naturally, it has attracted more attention.

As for stablecoins, the EU has made it clear that by 2024, only centralized stablecoins (such as USDT and USDC) will be allowed to be used in Europe, and the daily trading volume in Europe cannot exceed 200 million euros, which is really... a bit small. Native crypto-collateralized stablecoins like DAI are directly non-compliant because they cannot meet various requirements. As for the various calculations of stability... of course, don't even think about it. At most, it can only be tossed around in the circle.

03. NFT

The policies on NFT are not so optimistic either.

First of all, for this bunch of small pictures, the basic standard issuance volume is 10,000 NFTs. Do you think this number is too much or too little?

Because the EU has also said that only NFTs with a smaller circulation can be considered works of art and are not within the current regulatory framework for crypto assets, so the question is, how do you define "smaller"? Does 10,000 count?

Personally, I feel that 10,000 is a bit far-fetched.

And our NFT leader, Yuga Labs, the parent company of Bored Ape, is definitely a practitioner who feels the temperature of regulation firsthand on the front line, as they are being investigated by the SEC this month to see whether their NFT sales violate federal law .

There is no way. After all, you are the king of NFT. Not only did you airdrop new NFTs to old NFTs, you also issued B to the holder of NFTs. After such a series of operations, it would be strange if the SEC did not invite you for tea.

The regulatory results for Yuga Labs this time will definitely be one of the key events in the NFT circle. After all, most NFT projects are priced at 10,000, and more and more projects are thinking of following Yuga Labs' example and sending a wave of B to NFT holders in the future. Whether it is useful or not is another matter. Let's draw the pie first and make some money first.

Is this behavior considered securities?

God knows!

04. New hope?

As we all know, among all the countries currently, Singapore is currently one of the most friendly countries in the circle.

At the end of last month, Singapore’s “TOKEN 2049” crypto conference directly attracted 7,000+ attendees, 2,000+ companies and 250+ sponsors, and held hundreds of events.

A real feast for the industry!

This month, Hong Kong Financial Secretary Paul Chan Mo-po published an article titled "Hong Kong's Innovation and Technology Development", in which he directly mentioned "promoting Hong Kong to become an international virtual asset center". The FinTech Week to be held early next month will officially release a policy statement on the development of virtual assets in Hong Kong. You see, this is the rhythm of a head-on confrontation with Singapore.

What’s even more exaggerated is that news came out again two days ago: Hong Kong regulators are considering allowing retail investors to invest directly in crypto assets and reconsidering current crypto asset trading requirements.

For us investors or practitioners, this is certainly something worth celebrating. After all, the more countries and regions we support, the more talents, projects and users we can attract. The most direct benefit is that the assets in your hands may be getting closer and closer to being released.

As the saying goes, you can’t have your cake and eat it too. The blockchain under unregulated conditions is a wild and untamed place, fraught with dangers but also with opportunities. After regulation, the blockchain will become formalized and connected to entities, and huge profits will most likely no longer exist, and there will also be fewer pitfalls.

Friends, do you prefer regulated or unregulated blockchain?