Web3 Sector Needs Stricter Regulation of Centralized Crypto Players





Web3 sector needs stricter regulation to ensure that these technologies are used in a fair manner

As the Crypto and Web3 industry continues to grow and mature, regulation can no longer predominantly be done through enforcement actions. Instead, the industry should move toward a regulatory and legislative framework that recognizes the potential and importance of digital currencies and applications like decentralized finance (DeFi), a term used to describe a variety of financial services that can be conducted without the institutional intermediaries of the traditional finance world. Let’s find out why we need more decentralization in 2023 and also why the Web3 sector needs stricter regulation of centralized crypto players.

While some crypto users argue that regulation destroys the fundamental decentralization of Web3, there are benefits to Web3 regulation for users and “investors”, and also for crypto players such as wallet providers, exchanges, token issuers, and Decentralized Finance (DeFi) companies. Let us zoom in on the particular benefits that both users and companies can get from a good set of standards fit for Web3 and the crypto market. Government regulations seem impossible for truly decentralized protocols, and they are. This is why Indian and global Web3 stakeholders are not asking for regulating decentralized networks.

In a recent blog post, Coinbase CEO and Co-founder Brian Armstrong wrote: “The role of financial regulators should be limited to centralized actors in cryptocurrency, where additional transparency and disclosure are needed. In an on-chain world, this transparency is built in by default, and we have an opportunity to create even stronger protections.” Crypto regulations for centralized players can only come from government authorities, and they are designed to protect consumers and ensure that these technologies are used fairly and transparently.


The banking giant added that recent crypto collapses have not been from decentralized protocols but from centralized crypto players. With this, the Web3 industry worldwide is expecting accelerated crypto regulations across jurisdictions in 2023.

FTX collapses a lens to scrutinize a volatile market

FTX Trading Limited was founded in 2017, incorporated in Antigua and Barbuda, and headquartered in the Bahamas. The founders were Sam Bankman-Fried, who became CEO of the company, and Gary Wang, chief technology officer. The privately held entity operated a major cryptocurrency derivatives exchange and trading platform, FTX.com, claiming over 1.2 million registered users in early 2021. In January, FTX raised $400 million in a series C funding round, valuing the cryptocurrency exchange at $32 billion. In March, the FTX token, FTT, had a capitalization of $14 billion. FTX was commonly cited as the second-largest cryptocurrency exchange after behemoth Binance Holdings Ltd., which dwarfs competing exchanges.

A 2021 NASSCOM Industry report on Cryptotech has estimated that over 800,000 new jobs could be created by the year 2030 in the Indian Web3 industry. But the vacuum around proactive policy discussions could eventually snowball into talent and capital flowing outward from our country and a loss of India-centric IPs in the Web3 space. Currently, the policy narrative around Web3 is unfortunately seen from the prism of a single-use case of crypto trading.



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