Current regulations influence innovation within the Web3 space
Until fairly recently, regulation has been focusing on the financial aspect of Web3, and the impact of these emerging fintech tools on the traditional banking system. As these were disruptive and had a yet unknown repercussion on national economic stability, this type of legislation has had the aim of “restricting” or even blocking the growth of finance-focused Web3 projects. In this sense, we have seen many regulators worldwide arguing that these are needed to protect the end consumer, financial security, etc.
However, this is not all there is to it. Our team at Caerus always likes to look at regulation as we do with life — from a wider perspective. This provides a longer-term vision on what the higher-level debates in policy are touching upon. What does that mean exactly? Instead of focusing on local or even national legislative updates at a specific moment in time, it is particularly useful to follow up with how the international debates have been developing over time. Once we take that step away from the daily “noise”, we can see how these stakeholders are, of course, analysing the risks, but also studying the opportunities that Web3 brings to their economies and societies.
Critical areas where policy changes are needed to support Web3 growth
The relationship between policy-makers and the industry. Policy will only change to support Web3 when more policy-makers understand the vision of the ecosystem as a whole, of how the technology can be applied to analyse and solve our common -and so-called “real”- issues. They have to see Web3 and all its components as an ally to the public goals and KPIs. Web3 has to learn how to speak their language as well.
So, more and more agents within the Web3 ecosystem need to start acknowledging and approaching regulators, to have honest conversations, and to provide support and training where needed. This takes time, and time is money, but we have to look at it as an investment for the better and healthier future of all projects in Web3, a common win. And having an expert team to support your project’s endeavours in this area is highly valuable.
Addressing common misconceptions regulators have about Web3
The current reality is this: Web3 has been brought to a large audience through crypto and, since crypto is an alternative to a long-standing banking system, it brought fear upon some well-established powers. The way to address it is by showing regulators that Web3 projects can serve other aspects and sectors, they can take digitalization and citizen responsibility and ownership to the next level.
As a project adapts their pitch to please investors’ expectations, it is a similar exercise when preparing your “public affairs pitch”. For that, projects need a strategy that includes government relations and regulatory analysis, so to know and understand the context, the current national priorities, and adapt the narrative to the right stakeholders, and know when the timing is right to deliver those messages. This is where an expert consultancy can bring clarity and support.
Regulatory developments that could positively impact Web3 growth
There are several aspects that are developing quite similarly developing around the world that can bring a positive impact to Web3 growth. For instance, certain regulations that facilitate both research and testing of the technology, or the establishment of sandboxes. Also, governments designating specific parts of their cabinet to digital policy or parliaments creating tech-focused commissions to develop regulation and bring experts to explain certain topics to congress people.
Moreover, we are also seeing cooperation between regulators from different parts of the world, to understand from each other's experiences. An example is the recent meeting between representatives from Argentina and El Salvador. Another example would be collaborations between regulators and the industry, as we see happening in Brazil and increasingly in other parts of Latam. Finally, there are even startup competitions organized by ministries or certain departments and, if one looks at the conditions, in most cases the organizers express willingness to adapt policy around the “winning” project or solution that brings most positive impact to their society.
Advice to startups and investors navigating the complex regulatory environment of Web3
We would advise you to book a consultation with the team here at Caerus. Surely, startups and investors will appreciate having the right analysis and strategy to support each project’s goals. One of our most demanded deliverables are general regulatory analysis reports and tailor-made ad hoc reports for particular policies. As regulation in the Web3 space is still much under development, there is a need to look at various factors, such as the political landscape, government strategies, economic conditions, public stakeholders, etc.
Once we have that information, we can then provide a strategy for intelligent growth in the markets of interest. This can be useful for startups and investors alike, as an expert thorough opinion on what to expect, the risks and opportunities for any project’s success.