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THE ROAD TO RECOVERY - Key Trends Shaping the Future of Blockchain and Cryptocurrency Markets

Monday, 30 September 2024

by Maurizio Camponovo, CEO & Founder, MFG consulting SA and Andrea Briganti, Director and Head of e-Learning at Indigita SA

After a challenging period following the collapse of the Terra Luna ecosystem and the FTX Exchange scandal—which severely impacted market confidence, capitalization, and volatility—the second half of last year began to show tentative signs of recovery.

 

Several factors contributed to this recovery. These include the rise of new segments such as Real World Assets, the integration of Blockchain with Artificial Intelligence, the expanding tokenized Carbon Credit market, and significant improvements in the transparency and stability of Stablecoin reserves.


Anticipation for key events in 2024 has also bolstered the market's fundamentals, alongside notable advancements in the security of Decentralized Finance (DeFi) protocols and the early stages of collaboration between some protocols and regulatory authorities, particularly in the United States.

The year opened with the much-anticipated approval of Bitcoin Spot ETFs by the U.S. Securities and Exchange Commission. This marked a major step toward institutional legitimacy and acted as a catalyst for new liquidity flows, influencing European markets as well, even though similar products had been available there for some time. Major institutional investors quickly showed interest in this new asset class, with Ethereum-based ETFs soon following, reigniting a complex regulatory debate in the U.S., especially in the lead-up to the presidential elections.

 

While Bitcoin ETFs set records in terms of Assets under Management (AuM) and trading volumes, Ethereum ETFs were less disruptive than anticipated. Regulatory authorities also rejected similar ETF applications for smaller cryptocurrencies, such as Solana, and imposed penalties on decentralized protocols like Uniswap, citing elements of centralization that require licensing.

 

In contrast, the European market saw a significant regulatory milestone with the implementation of the MiCA Regulation.


Approved in June 2023 and entering its first phase in mid-2024, MiCA represents the first comprehensive cryptocurrency regulation in a major jurisdiction, potentially giving Europe a competitive edge in what is shaping up to be a global contest for market share.

Switzerland, a key innovation hub in the sector, continues to update its legislative framework. Despite minor disagreements over less critical areas, such as Stablecoin issuance, Switzerland has found consensus on key topics like Staking through constant dialogue with market participants.

 

As the market evolves, regulations will inevitably face new case studies and challenges that will require international cooperation. The decentralized and borderless nature of key market players complicates regulatory enforcement. Additionally, the fluid definition of decentralization and peer-to-peer operations, as well as traditional requirements like Know Your Customer (KYC), remain areas of ongoing collaboration. On-chain analysis firms are already making strides in these areas.

 

Given the growing real-world applications of blockchain technology across key economic sectors, this emerging field—though complex—presents vast opportunities for the global financial system.

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