This Week in Web3: Crypto Payment Rails and Regulatory Clarity

As Nathaniel Hawthorne wrote in the1800s, “families are always rising and falling in America.”

And the same holds true for the cryptocurrency and Web3 space in 2024.

That’s because, whether it is the sector’s market valuation, or education and acceptance around Web3 technologies, or even the promised land of scalable usability, the journey from an arm’s-length distancing of 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 emerged on the scene in 2009.

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

Underpinning those two factors, of course, is the elephant in the room of establishing a productive regulatory framework to govern Web3.

This, as the past week brought with it a basket of news all showing that the ice around crypto’s regulatory and usability woes would potentially be thawing. That’s why, from legal moves to fundraises, to payments use cases and beyond, these are the top stories around the Web3 landscape that PYMNTS has been tracking for the past week.

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

The Digital Asset Sector Heads to Washington

The crypto community is playing politics to win, with the 440,000 member-strong nonprofit group Stand With Crypto reportedly forming a political action committee (PAC) to support candidates who are 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 is hoping that a friendlier and more educated group of lawmakers could finally push through a regulatory framework for cryptocurrencies.

And on Friday (May 10), that goal got one step closer to the finish line, as a bill that promises regulatory clarity for digital assets has moved a step closer to a vote in the U.S. House.

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

FIT21 would delineate when a cryptocurrency is a commodity or security and assign 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 reportedly also planning  to transfer its legal base from Ireland to the United States, as reported Wednesday (May 15).

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

After all, crypto does have its perils. North Korea laundered $147.5 million through virtual currency platform Tornado Cash in March after stealing it last year from a cryptocurrency exchange, per a report 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 really alternative rails for payments and financial assets.”

“There’s a lot of misconceptions with people in the financial services industry about compliance and regulation, and that they wouldn’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 are a whole new set of protocol-level controls that exist now that provide even more fine-grain control that you often have with traditional financial rails.”

In the conversation with PYMNTS, he stressed the need for crypto players and enterprise businesses alike 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 using scans of their palms, has raised $30 million at a $1 billion valuation, per a Wednesday report.

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

The market surge is resulting in a rash of new coins, as there were nearly 1 million new crypto tokens created in the last month, a number that is 2x the total number ever made on Ethereum from 2015-2023.

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

These recovery scheme fraudsters charge an up-front fee and either cease communication with the victim after receiving an initial deposit, or produce an incomplete or inaccurate tracing report and request additional fees to recover funds. Fraudsters may claim affiliation with law enforcement or legal services to appear legitimate.