Summary of the six highlights and trends from Consensus 2023

Source: Nancy, PANews

From April 26 to 28, the annual cryptocurrency event Consensus was held in Austin, Texas, USA. Launched in 2015, the Consensus conference is organized by blockchain media Coindesk and attracts industry leaders, developers, KOLs, government officials, artists, and others each year.

However, due to the deteriorating regulatory environment in the U.S., the overall downturn in the cryptocurrency market, and the debt crisis of the organizer's parent company DCG, this year's Consensus conference was somewhat quieter compared to previous years. For example, the number of participants in Consensus 2023 was about 12,000, a decrease of about 8,000 from 20,000 in 2022; there were 231 sponsors, down about 30 from last year, with a significant reduction in top sponsors, and exchanges saw the most noticeable decrease, with only Huobi, OKX, and BitMart remaining, compared to last year which included Binance.US, Bitget, and Bybit.

Nevertheless, the Consensus conference still attracted around 150 guests, including Yuga Labs CEO Daniel Alegre, Animoca Brands co-founder Yat Siu, former CFTC Chairman Chris Giancarlo, Circle CEO Jeremy Allaire, a16z partner Sriram Krishnan, Google News VP Richard Gingras, and Near Protocol co-founder Illia Polosukhin. The topics of their speeches covered Web3, security compliance, DAO, DeFi, CeFi, NFT, crypto art, and the metaverse.

As an important barometer of the cryptocurrency market, what exciting viewpoints and collisions emerged from this year's Consensus conference? What trends are worth paying attention to?

Regulation: A Urgent Need for Clarity

"Crypto Dad," former CFTC Chairman Chris Giancarlo, seemed to criticize the current U.S. regulatory agencies for their crackdown on the cryptocurrency industry. He stated that the successful case of the CFTC approving Bitcoin futures contracts in 2017 (during Giancarlo's tenure) proves that regulatory agencies can successfully engage with cryptocurrency. Regarding CBDCs, Giancarlo believes that those who openly oppose central bank digital currencies (CBDCs) are essentially wasting their time, as a government-backed digital dollar is largely inevitable and will certainly coexist with private stablecoins. Giancarlo also called for discussions and experiments on how to create CBDCs in the U.S., rather than losing the competitive edge in national digital currencies. "Choosing between stablecoins and CBDCs is the wrong choice; the real choice is between financial freedom and financial control."

Coinbase has challenged the U.S. SEC's claim that most of its business is illegal and is attempting to convince the court that "Wall Street regulators lack the authority to oversee the cryptocurrency market." "Coinbase is the same company it was two years ago when the SEC allowed it to go public, and it has not listed any securities then or now. We do not like to sue the SEC, but we will actively defend ourselves. We will continue to call on Congress to legislate and require the SEC to establish rules." If the SEC sues Coinbase, it would threaten the unregulated business model of cryptocurrency trading platforms, which is the reason for their early profitability and rapid growth. If Coinbase loses, the company may be forced to register some of its business with regulators or stop offering trading services for many crypto tokens, which regulators claim are securities and should comply with investor protection rules.

Kate Brady, Pepsi's next-gen DTC contact and innovation director, stated that there is an urgent need for regulatory clarity to help the next generation of Web3 consumers join. Brands like Reddit, Starbucks, Nike, Adidas, Pepsi, and hundreds of others have developed Web3 and NFT ecosystems over the past year as a way to deepen their relationships with audiences and customers. However, with the extensive enforcement actions by U.S. regulators, the current lack of regulatory clarity has been "our biggest challenge so far" in launching Web3 strategies. "We must build our own structures to comply with current regulations, which unfortunately are very limited or based on written securities laws from the 1940s that are very limited or outdated. Until we can clarify most of this, what we can do remains limited."

Michael Sonnenshein, CEO of digital asset management firm Grayscale, pointed out that Grayscale expects to know by the end of the third quarter whether it will be allowed to convert its $2.7 billion Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund. It is reported that the U.S. Securities and Exchange Commission (SEC) rejected the asset management company's request to convert the Bitcoin Trust GBTC into a Bitcoin ETF last year, and Grayscale has sued the SEC over this decision. Sonnenshein expects the SEC to make a ruling on the case by the end of September.

Web3 is Not Just Technology, But Aligns with the Values of the New Generation

"Web3 has not disappeared, but it needs to be reformed for mass adoption," said Marc Mathieu, head of Web3 at American software giant Salesforce. He stated that if builders of Web3 focus on creating a community around decentralization and other values that are important to young people, Web3 could make a comeback, as these young people will ultimately own these experiences.

At the same time, he mentioned that the decentralization of the internet serves the people… This is one of the key elements to rebooting Web3. It will make a comeback because fundamentally, it is not just a technology, but aligns with the values of the new generation."

Real-World Assets (RWA)

Jonathan Steinberg, CEO of asset management firm WisdomTree, believes that if blockchain allows investors to purchase government bonds with additional functionalities, it would have a tremendous appeal to mainstream users. For holders of real-world assets (RWA), this type of illiquid asset has a significant advantage: "We believe that through tokenization and blockchain finance, you can increase functionality… When you combine tokenized, physically-backed gold with peer-to-peer trading and payments, gold becomes currency, just like it was hundreds of years ago."

"Just as large companies were initially uneasy about cloud computing, it has now become normalized for cautious institutions like the CIA. Tokenization represents the next chapter of cryptocurrency, and real-world assets will ultimately be tokenized on private chains, then on permissioned chains, and finally on public chains," noted Carlos Domingo, CEO of digital asset securities market Securitize.

Morgan Krupetsky, Director of Institutional Business Development at Avalanche Labs, stated that the concept of tokenization is not new, but it has seen new developments in the past. "Since the idea first appeared in the market in 2017, significant progress has been made, and institutions and investors have become satisfied with this technology. Moreover, the rise in interest rates has increased the urgency to prepare this technology for mainstream adoption, as rising interest rates compress token prices and create demand for new on-chain innovations. We are at a stage where users just need to say 'yes' to tokenization."

NFTs and the Metaverse

Erick Calderon, co-founder of Art Blocks, stated that NFT royalties are an added value built on the fundamental premise of proving digital asset ownership, which is valuable for creators and the broader NFT ecosystem, including collectors and investors. This concept is attractive to creators, as they do not have to constantly release works to make a living, but can think more deeply about their art, creating better and more valuable pieces while continuously engaging with the NFT community. Aside from royalties, many things in the traditional art world are conducted in secrecy, while NFTs are fundamentally more friendly to artists. "As for those NFT buyers who want to avoid royalties cutting into profits, Calderon believes that if royalties are only viewed as a transfer tax, they may miss out on great opportunities."

"The lack of regulatory clarity around gaming and the metaverse is, in my view, because many regulators believe they do not need systemic regulation, so they have not paid much attention. Regulation focuses more on cryptocurrencies and assets, but gaming is clearly a form of entertainment and still a cultural form. Just as you would not regulate the art industry, I think this is intentional; they have not specifically studied the regulation of NFTs and gaming because they believe it is unnecessary," said Yat Siu, co-founder of Animoca Brands.

Stablecoins

Jeremy Allaire, CEO of stablecoin issuer Circle, stated that USDC has emerged from the U.S. banking crisis in March stronger and safer. "We have successfully navigated this crisis and have actually upgraded the market infrastructure behind USDC, making it the most powerful and secure digital dollar on the internet today." However, Allaire also mentioned that USDC still needs to become even safer, but this can only be achieved through federal-level legislation.

During the Consensus conference, Circle announced the launch of a cross-chain transfer protocol (CCTP) for developers based on Ethereum and Avalanche, which will support the flow of USDC across partnered chains, providing interoperability, security, liquidity, and a simplified user experience.

DeFi and CeFi

Sidney Powell, CEO of institutional lending protocol Maple Finance, stated that the core difference between CeFi and DeFi is "self-custody." When users use centralized exchanges, although they deposit assets into their wallets, they are controlled by an opaque entity behind the scenes, such as BlockFi and Celsius Network. DeFi is not like this, as the way funds are stored and transferred is much more transparent; you can always see the flow of funds and are always in control using Solidity and smart contracts. He also added that this does not mean that the DeFi ecosystem will be quickly adopted on a large scale, as in the short term, CeFi may still be the primary avenue for traditional financial clients and users to adopt digital assets.

Salman Banaei, head of policy at Uniswap Labs, believes that the current regulatory environment in financial markets can integrate well with the CeFi model. "CeFi has an advantage in some sense because their business model has clear controllers, making it easier for CeFi to adapt to securities, commodities, or banking laws. DeFi, on the other hand, has a disadvantage in this regard because it relies on an open-source protocol, which reduces its controllability from a regulatory perspective. But over time, this situation will change; DeFi will ultimately become the main infrastructure of the financial system in the future, but the role of CeFi will not see a huge change. He believes that in the future, DeFi will become a pillar of the new economy, while CeFi will continue to play a transitional role in this richer DeFi environment.