Crypto Market 2023-2024. How will it Change?

Since 2016, being a law student at that time, I have become interested in the topic of cryptocurrencies and their development. The technology and goals were impressive! I started reading more scientific papers 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 market of the Wild West in those times with a lot of uncertainty.

Now, I am the 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 worldwide have realized that if this market is left unregulated, it will begin to threaten their financial system at some point. And some regulators realized that they could make a profit from their regulations. So, I want to make four predictions based on my experience of what we will see in 2023-2024.

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

Secondly, there will be a lot of crypto litigation in 2023-2024. The activities of law enforcement agencies will be noticeable. The evidence is the latest case with Tornado Cash, where the areas of responsibility are significantly expanding. Tornado Cash was a decentralized crypto-mixer with no clear beneficiary. The service is accused of being a cryptocurrency mixing service allegedly used to launder stolen funds linked to powerful hacks. OFAC's most recent guidance on virtual currency stated that each business type and any others that interface with the crypto industry "are encouraged to develop, implement, and routinely update a tailored, risk-based sanctions compliance program. Such compliance programs should generally include sanctions list, geographic screening, and other appropriate measures as determined by the company's unique risk profile." Tornado Cash violated the rules of being a decentralized project. So it is supposed that in 2023-2024 there will be a doctrine when law enforcement agencies can prosecute even just for developing software if there is any suspicion that the goal of this software is to violate regulations. And this is a warning for many decentralized platforms that still follow the anonymity standards.

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

Fourthly, the technological development of the DEFI, NFT market, the implementation of new solutions in the field of 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 is establishing a deep connection with the bank industry. We will see new, progressive, technologically advanced centralized exchanges that will be classified as crypto banks. 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 in the fields of 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 following. The regulator's goal will be to crush or direct the market. The purpose of the big players in the crypto market is to stay on top and adapt to the new requirements of the regulator with the maximum benefit for themselves. Innovation and start-up projects will aim to find solutions to meet society's demand for privacy and anonymity.