Crypto Payment Rails and Regulatory Clarity

As Nathaniel Hawthorne wrote in the 1800s, “families are always rising and falling in America.”

And the same goes for the cryptocurrency and Web3 space in 2024.

That’s because, whether it’s the sector’s market valuation, or education and adoption around Web3 technologies, or even the promised land of scalable usability, the journey from an arms-length distance from crypto to a potential embrace of blockchain-based solutions has had its fair share of ups and downs in the decade and a half since bitcoin first appeared on the scene in 2009.

But while awareness, acceptance, and adoption are all crucial to driving the evolution of cryptocurrency, it is two other critical factors that will determine crypto’s success: its usability and usability—especially across payment ecosystems.

The foundation of these two factors is of course the elephant in the room to establish a productive regulatory framework to govern Web3.

This, as the past week has brought a basket of news that all point to the potential thawing of the ice surrounding crypto’s regulatory and usability problems. That’s why, from legal moves to fundraising, to payment use cases and more, these are the top stories around the Web3 landscape that PYMNTS has been tracking this past week.

Read more: Making Sense of the State of Crypto in 2024

The digital asset sector is heading to Washington

The crypto community is playing politics to win, with the 440,000-member-strong non-profit group Stand With Crypto reportedly forming a political action committee (PAC) to support candidates friendly to cryptocurrency and blockchain.

The new PAC aims to raise money from Stand With Crypto’s nearly half a million members, and it comes against a backdrop where the crypto sector’s super PACs have become one of the top three fundraisers in the 2024 election cycle.

The crypto industry hopes that a friendlier and more educated group of lawmakers can finally push through a regulatory framework for cryptocurrencies.

And on Friday (May 10), that goal moved a step closer to the finish line, as a bill promising regulatory clarity for digital assets moved a step closer to a vote in the US House.

The House Committee on Rules said Friday it will consider the Financial Innovation and Technology for the 21st Century Act (FIT21) (HR 4763), meaning the bill could go to a floor vote later in May, the House Committee on Finance Services said.

FIT21 will delineate when a cryptocurrency is a commodity or security and allocate oversight appropriately between the CFTC and the SEC.

But that wasn’t the only legal news in Web3 this week. As it prepares to go public, stablecoin issuer Circle is also planning to transfer its legal base from Ireland to the United States, as reported on Wednesday (May 15).

While on Monday (May 13), US President Biden issued an order barring a Chinese-backed cryptocurrency mining firm from owning land near a US nuclear missile base, citing the mining firm’s proximity to the military base as ‘ called a “national security risk”.

After all, crypto has its dangers. North Korea laundered $147.5 million through virtual currency platform Tornado Cash in March after stealing it from a cryptocurrency last year, according to a report on Tuesday (May 14).

Pulse Check on the Crypto Marketplace

“It’s important to know that crypto is not just bitcoin and Doge and NFTs,” Sheraz Shere, head of payments at Solana Foundation, told PYMNTS on Monday. “… Blockchains are truly alternative tracks for payments and financial assets.”

“There are a lot of misconceptions among people in the financial services industry about compliance and regulation, and that they don’t want to touch blockchain with a 10-foot pole,” Shere added. “And I think in the past that may have been true, but there’s a whole new set of protocol-level controls that exist now that provide even more fine-grained control that you often have with traditional financial rails.”

Speaking to PYMNTS, he emphasized the need for crypto players and enterprises to focus on real-world use cases, such as cross-border payments, where blockchain solutions offer advantages over traditional systems.

Another use case for the blockchain being experimented with is the use of its immutable ledger for recording and storing digital identities. Humanity Protocol, a startup that aims to verify people’s online identities with scans of their palms, has raised $30 million at a $1 billion valuation, according to a Wednesday report.

Still, for the everyday retail investor, the recent surge in bitcoin prices has the phones at crypto-wallet recovery firms “off the hook,” according to a Thursday report, as investors locked out of their Web3 wallets try to access and market boom.

The surge in the market is leading to a rash of new coins, as nearly 1 million new crypto tokens have been created in the past month, a number that is 2x the total number ever created on Ethereum from 2015-2023.

And PYMNTS wrote in March about how representatives of fraudulent businesses claiming to provide cryptocurrency tracking and promising an ability to recover lost funds are turning to social media and other messaging platforms to contact victims directly about resolving their lost assets.

These recovery scheme scammers charge an upfront fee and either cease communication with the victim after receiving an initial deposit, or provide an incomplete or inaccurate tracking report and request additional fees to recover funds. Fraudsters may claim affiliation with law enforcement or legal services to appear legitimate.