The cost of innovation — Regulations are Web3’s greatest asset
Web3 requires a regulatory framework that addresses innovation and user safety in decentralized finance (DeFi). A one-size-fits-all regulation is ineffective; instead, custom, risk-based approaches are necessary. Regulatory scrutiny has increased uncertainty for crypto businesses, particularly following lawsuits against major platforms. The SEC's dismissal of the Coinbase lawsuit indicates a potential shift towards clearer regulations. Key DeFi characteristics include openness and transparency, but without regulations, risks such as Ponzi schemes persist. Self-regulatory frameworks can enhance security and transparency. The Markets in Crypto-Assets (MiCA) framework aims to provide regulatory clarity, attracting institutional investment while imposing compliance costs on some projects. Regulatory clarity can facilitate DeFi and banking integration, addressing barriers that currently hinder crypto operations. Regulatory sandboxes allow startups to innovate under supervision, promoting growth and competition. Clear regulations can foster innovation through collaboration between regulators and DeFi innovators.
