The cryptocurrency world is in a siege

Projects that advocate decentralization and uphold the spirit of blockchain have begun to move closer to regulation and compliance with an unprecedented attitude in order to find new development paths.

At the same time, large and invincible Internet companies and financial institutions have begun to plan their layout in emerging fields such as DeFi and NFT, knocking on the door to a new world.

Behind this extremely sharp contrast is the result of the interweaving of the external environment of tightening global regulation and the internal environment of rapid growth of DeFi and NFT, which directly drives the cryptocurrency circle to stage a "siege".

1. The regulatory storm has suddenly subsided, and blockchain-native projects are actively seeking compliance

"Binance US is considering an IPO," said Binance CEO Changpeng Zhao at an event on July 23.

Although he claimed that the plan has not been 100% confirmed, his remarks are very different from his previous attitude. Since 2018, Binance, known as a "wanderer" by the outside world, has publicly stated many times that it will not IPO. Zhao Changpeng even said bluntly, "The IPO in the traditional financial industry has become a tool for financing or VC unwinding. Binance has no VC investors. Blockchain has brought us to the next era."

From being determined not to go the IPO route to considering going public, Binance's change of attitude is largely due to the urgent reality of stricter global regulation. In the first half of this year, the United States, Japan, France, India, Dubai, South Korea, Mexico, Nigeria, Thailand, Turkey, Germany and Colombia have successively issued statements on cryptocurrency regulation.

By July, the regulatory storm began to intensify. The United States planned to take action on the regulation of the stablecoin industry, and Santander Bank and Barclays Bank suspended payment services to Binance, which restricted its payment channels.

In this market environment, not only did Binance begin to actively cater to regulation, launching a tax filing tool API and announcing that it would share data with regulators, but Uniswap, the largest DEX platform in the DeFi market, also restricted user access to tokenized stocks and derivative tokens on the grounds of "regulatory environment."

Unlike Binance, the cryptocurrency exchange ShapeShift chose to convert its corporate entity into a decentralized autonomous organization (DAO). The exchange's founder Erik Voorhees said that part of the reason for converting the company into a DAO was "regulatory friction."

2. DeFi and NFT grow strongly, and giants such as Twitter and Shopify take a sharp turn

As blockchain-native projects have to face regulatory issues, giants such as Twitter and Shopify are beginning to prepare to enter the DeFi and NFT fields.

On July 16, Twitter CEO Jack Dorsey tweeted that he would launch DeFi services. He said, "Square is creating a new business focused on building an open developer platform with the sole goal of easily creating non-custodial, permissionless and decentralized financial services. Our main focus is Bitcoin. Its name is currently to be determined."

Jack Dorsey has always been a die-hard fan of Bitcoin and has expressed his optimism about Bitcoin on many occasions in public. His announcement of the development of decentralized financial services is undoubtedly related to the strong momentum of DeFi since last year.

According to Debank data, since the beginning of the year, the net locked amount of DeFi has increased by tens of billions of dollars. Although it has dropped from $67 billion in mid-May, it has still increased by 230% from the beginning of the year to $45 billion. Although the current volume of DeFi is far less than that of the traditional financial market, it has achieved a significant increase compared to the level at the beginning of 2020 (US$300 million), showing strong development potential, which also explains why Twitter and State Street Bank recently revealed their involvement in the DeFi field.

Another track that is growing as fast as DeFi is "NFT". At the beginning of the year, NBA Top Shot and Beeple achieved sales of over one million US dollars, igniting the first fire for the explosion of the NFT market. Since then, with the popularity of more NFT collectibles, the penetration of the traditional art circle into the NFT market, the rise of the metaverse concept, and the explosion of the blockchain game Axie Infinity, the NFT market has continued to be hot to this day.

Correspondingly, there are also constant reports of traditional companies entering the NFT market. In the e-commerce market, well-known platforms such as eBay and Shopify have announced support for NFT sales. Some companies that were not originally involved in trading services are also preparing to enter the NFT trading market, including DraftKings, a US-listed sports betting company. On the 21st of this month, the company announced that it would launch the DraftKings Marketplace platform to provide users with an NFT collection ecosystem and trading services.

3. Conclusion

If all new markets derived from blockchain technology can be likened to a city, then the exchanges currently plagued by regulatory issues are trying to find ways to get out of the "decentralized city" and actively embrace centralized institutions to cater to regulation; while Internet companies and financial institutions outside the city are constantly gazing at the beautiful scenery in the city and trying to find a way to enter the new world.

For the cryptocurrency industry, strong regulation is not a disaster. On the contrary, it shows that it has developed into a market that is worthy of the attention of regulators, and regulation will promote the entry of institutions and promote the maturity of the industry. "People think that regulation is bad for cryptocurrencies, but it is actually the biggest single driver of the bull market. More regulatory clarity means good things for cryptocurrencies." Bitwise CIO Matt Hougan said.

On the other hand, the entry of traditional enterprises is conducive to expanding the scale of the industry, but it also brings challenges to those emerging blockchain projects. After all, the former have accumulated a large amount of market resources and have certain competitive advantages.

All in all, this is the best year yet for the cryptocurrency industry, which will mature in a bumpy way.