Crypto market 2023-2024. How will it change?

Since 2016, as a law student at the time, I have become interested in the topic of cryptocurrencies and their development. The technology and the goals were impressive! I started to read more scientific articles about it, which were a limited number then and mostly American made. Cryptocurrency regulation in the US, Switzerland and Singapore has become a pioneer in the industry. But generally it was the wild west market in those times of great uncertainty.

Now I am head of the Fintech department of the international law firm SBSB Fintech Lawyers. From my own experience, I can say that the “Wild West” era is over. Regulators around the world have realized that if this market remains unregulated, it will begin to threaten their financial system at some point. And some regulators realized that they could make money from their regulations. So I will make four predictions based on my experience of what we will see in 2023-2024.

First, tightening the regulation of crypto companies around the world. I assume that this trend will continue during 2023-2024 with increased strength. There are special prerequisites. For example, Europe will enforce the MiCA – Markets in Crypto-Assets regulatory memorandum.
The Markets in Crypto-Assets regulation focuses on specific categories of crypto-assets that are currently outside the scope of existing rules. Moreover, it establishes a unified approach to regulate all crypto projects in the EU region. Furthermore, we expect new laws from states such as Hong Kong, Panama, Seychelles and others, where crypto projects have previously escaped regulation. The mass implementation of CBDC by various countries will also accelerate this process.

Second, there will be a lot of crypto litigation in 2023-2024. The activity of law enforcement agencies will be noticeable. The evidence is the latest case with Tornado Cash, where the areas of responsibility are significantly expanded. Tornado Cash was a decentralized crypto-mixer with no clear beneficiary. The service is accused of being a cryptocurrency mixing service that was allegedly used to launder stolen funds linked to powerful hacks. OFAC’s latest virtual currency guidance stated that each type of business and anyone else that interfaces with the crypto industry “is encouraged to develop, implement, and routinely update a tailored, risk-based sanctions compliance program. Such compliance programs should generally include sanctions lists, geographic screening, and other appropriate measures as determined by the company’s unique risk profile.” Tornado Cash broke the rules for being a decentralized project. So it is believed that in 2023-2024 there will be a doctrine when law enforcement agencies can prosecute even just for developing software if it is suspected that the goal of this software is to violate regulations. And this is a warning for many decentralized platforms that still adhere to the anonymity standards.

Third, 2023-2024 are the years of the fight against anonymity. It will accelerate with the full implementation of CBDC. Unfortunately, it all boils down to the fact that anonymity = a crime. I suspect that this may even be formalized into a legal doctrine over time.

Fourth, the technological development of DEFI, the NFT market, the implementation of new solutions in AML / KYC and cyber security give us a reason to say that we are on the threshold of a new era of crypto projects. In 2023-2024 we will most likely see an even more perfect DEFI market, updated DEXs and NFT marketplaces. But the most important thing is to establish a deep connection with the banking industry. We will see new, progressive, technologically advanced centralized exchanges that will be classified as cryptobanks. Classic Fintech projects that do not implement cryptocurrency on their platform will not survive in the competition. Therefore, it is likely that in 2023-2024 we will see many mergers and acquisitions within classical Fintech and crypto business. The giants of the crypto industry may well become the giants of the crypto banking industry and expand their market dozens of times.

To summarize, the trend will look as follows. The regulator’s aim will be to crush or control the market. The purpose of the major players in the crypto market is to stay on top and adapt to the new requirements of the regulator with maximum benefit for themselves. Innovation and start-up projects must aim to find solutions to meet society’s demands for privacy and anonymity.