Consensys

Global Regulations

The world needs smart regulation of web3

The world needs smart regulation of web3

Web3 and blockchain technology are at the forefront of innovation, relentlessly driving the development and evolution of new applications.

At Consensys, we believe that having a fit-for-purpose regulatory scheme necessitates flexibility to adapt to new developments quickly, which in turn requires close cooperation between regulators and stakeholders throughout the ecosystem.

As a leading blockchain and web3 software company, we want to caution against setting strict rules.

Instead, we encourage a new, thoughtful approach to develop regulatory standards, the flexibility of which will better achieve the right regulatory outcomes without undermining innovation.

Aligned with the ethos of web3, which empowers communities and encourages everyone to contribute, we want to share our vision for global regulations for web3 as we continue to encourage collective dialogue that fuels the unstoppable evolution of the space.

READ OUR THOUGHTS

Latest on regulation

ETH ETF SEC LETTER

Our comment letter to the SEC on ETH ETF approval: “We urge the Commission to recognize the advanced safeguards inherent in Ethereum’s design”

March 29, 2024

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Consensys Lawyer Breaks Down SEC v. Coinbase

January 22, 2024

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Defining Market Participants for General-Use Digital Consumer Payments

January 16, 2024

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Consensys Responses to IRS Proposed Rulemaking for Digital Asset Transactions

December 21, 2023

Global Crypto Networks and U.S. National Security

Global Crypto Networks and U.S. National Security

December 15, 2023

Washington DCs View On The Crypto Bull Run and Regulation

Washington DCs View On The Crypto Bull Run and Regulation

December 15, 2023

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On the Ledger: Treasury Broker Rules with Block, Consensys and Blockchain Association

December 15, 2023

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Ethereum's Move From POW to POS | Interview With Bill Hughes

December 13, 2023

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Crypto Crime in Context: Breaking Down the Illicit Activity in Digital Assets

December 13, 2023

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What's Next for Crypto Regulation?

December 13, 2023

Stablecoin bill is a ‘no-brainer’ — Consensys director on US legislation

Stablecoin bill is a ‘no-brainer’ — Consensys director on US legislation

November 23, 2023

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The IRS Should Heed This Warning

November 13, 2023

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Consensys Responds to IOSCO’s Policy Recommendations for Decentralized Finance

October 24, 2023

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Consensys Responds to the AMF’s Discussion on Decentralised Finance

October 20, 2023

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Will California’s BitLicense Chase Crypto Firms Out of the State?

October 18, 2023

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Judge sides with Ripple again, denies SEC appeal: Law Decoded

October 9, 2023

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Ethereum cofounder says US regulators will ultimately embrace crypto

September 14, 2023

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Ethereum co-founder says ‘clear heads will prevail’ in the SEC’s legal battles with crypto firms

September 14, 2023

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Consensys Responds to the EBA Consultation on Revised Guidelines on Money Laundering and Terrorist Financing Risk Factors

September 12, 2023

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Consensys Comments on Letter from Finance Committee Leaders on Uncertain Tax Treatment of Digital Assets

September 8, 2023

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MetaMask Developer Consensys Responds to European Banking Authority's Consultation on Anti-Money Laundering Measures

September 1, 2023

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Consensys’ Response to UK Consultation on Financial Promotions and Staking

August 25, 2023

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Reasons why the SEC doesn’t want the Ripple case to go to the Supreme Court

July 21, 2023

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Ripple's Legal Win Means It's Time for Crypto to Stand Up to the SEC

July 14, 2023

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Consensys’ Letter to UK HMRC Arguing for New Tax Rules for Liquid Staking

June 29, 2023

It’s A 'Forgone Conclusion' That Ethereum Is A Commodity, Says Joe Lubin

It’s A 'Forgone Conclusion' That Ethereum Is A Commodity, Says Joe Lubin

June 28, 2023

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MetaMask Developer Consensys Challenges SEC's Proposed 'Exchange' Definition, Citing Blockchain Misunderstandings

June 15, 2023

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SEC’s DeFi Rulemaking DoOver Falls Short

June 12, 2023

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The EU’s AntiMoney Laundering Strategy Is a Mistake

May 24, 2023

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Self-custody, control and identity: How regulators got it wrong

May 1, 2023

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UK regulators shake up financial services with new bill

April 17, 2023

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Staking is Data Validation, Not Investment

March 10, 2023

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Consensys Exec on State of U.S. Crypto Regulation

February 22, 2023

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Consensys releases statement of support for continuation of the Jarrett tax case

February 7, 2023

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Liquid Staking Needs Clear Tax Rules – The UK Shows a Possible Way Forward

January 11, 2023

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2023 Should Be the Year of OnChain User Security

December 22, 2022

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Consensys Responds to U.S. Department of the Treasury's Request for Comment on the Responsible Development of Digital Assets

November 8, 2022

Money Crypto Versus Tech Crypto

Money Crypto Versus Tech Crypto

November 7, 2022

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SEC definition for ‘Exchanges’ has big implications for Crypto

April 5, 2022

Our Vision on Web3

Regulatory-Hub-Globe

Bitcoin changed the world, and Ethereum further transformed it. And the world will not go back to the way it was. 

01

Bitcoin solved a longstanding problem of computer science by creating a new higher-powered form of trust: decentralized trust. A system that is not built on trust between counterparties but trust in rules set out in computer code.


02

Launched in 2015, Ethereum took the innovation in technology further by going beyond peer-to-peer transactions (“A sends to B”) and instead permitting the publishing and use of smart contracts, which are software programs composed of code and data that resides on the Ethereum blockchain.


03

Blockchain technology was created by informal online global communities of developers and first adopted by the general public, and is only now being picked up by industry and governments.


04

There is no rolling back this grassroots innovation. To stop this growing movement would require nothing short of ending the internet itself. The essential question is which jurisdictions will capitalize on blockchain technology which, much like the internet, is connecting and empowering us in ways we could not have earlier imagined.

Regulatory-Hub-Lightbulb

Web3 and blockchain technology will unleash economic productivity like nothing before.

01

The internet of today is centrally run by Big Tech, which gatekeeps data and extract fees from users. In contrast, blockchain data is publicly and collaboratively maintained, and each person using that database actually retains the ownership and use of their data.


02

Ethereum and similar blockchains are computing platforms. They are meant to be used much like the conventional internet, and are enabling various use cases such as democratizing access to financial services through decentralized finance; and shifting control back to the user by putting them in charge of their online data and digital identity.


03

Web3 and blockchain technologies offer a new way of economic engagement where the value created isn’t pocketed by industry intermediaries, but is passed on to the users themselves.


04

It is fundamentally different to the current internet because it lowers barriers to entry and offers individuals the opportunity to develop, and profit from, the digital economy infrastructure directly.

Regulatory Vision - Countries

Countries that embrace web3 will get ahead, and those that don't will fall behind.

01

The best and brightest talent are turning away from traditional finance and Big Tech in favor of emerging technologies, particularly blockchain technology. This new era of innovation allows research and development to occur outside the walls of established institutions.


02

Blockchain lowers the barriers for innovators to create and distribute new software products in competition with Big Tech and big finance. Developers are also  building applications that go beyond finance. Commercial, social, and community apps will be as numerous as financial ones.


03

Unlike almost all other areas of technology that are experiencing skills shortages, open software incentivizes shared upskilling (one developer can seamlessly integrate and improve another developer’s product) and the direct reward for the work put in attracts more talent.


04

Countries that build a sensible regulatory regime and bolster training in the areas of this new technology will be go-to destinations for these web3 builders, who are not tied to a geographical location and can be based anywhere because blockchain is global. 


05

Countries that adapt their labor laws and tax rules to be inline with a global, digital workforce will have a competitive advantage.

Policy Principles

Novel web3-native solutions require novel regulatory frameworks.

The first step in crafting effective regulatory frameworks is to understand that the risk profile of web3 is different, demanding a novel regulatory response.

Blockchain removes traditional intermediaries and substitutes them with software, presenting some risks that look familiar but a lot that are new.

To reduce risk, regulators have a choice: undermine the new technology by reintroducing intermediaries so that traditional regulatory schemes can be applied in full, or create new solutions to effectively mitigate blockchain’s novel risks.

Many of the new risks can be reduced by blockchain technology itself. For example, by using the transparency of the transaction ledger, bad actors can be monitored in real-time and their transactions can always be tracked from anywhere. Many governments are already leveraging these tools to successfully combat bad actors.

Distinguish between utility and speculation.

Blockchain is a development platform, not an investment scheme.

Regulations that treat blockchain as purely an investment scheme effectively create a regulatory moat protecting financial incumbents and Big Tech, preserving the gatekeeping behavior that public policy, now more than ever, seeks to remedy.

Holding ETH or similar blockchain tokens for investment purposes is not betting on an unbacked asset that lacks fundamental value. Much to the contrary, such assets are necessary inputs when building and using blockchain infrastructure. As market hype dissipates, asset prices will more closely reflect demand for the infrastructure generated by use cases built on it, i.e. smart contracts. This is similar to the behavior of any asset through market cycles.

Further, proof of stake infrastructure, like the one that Ethereum operates on, allows anyone who believes in these use cases to help maintain the infrastructure and be financially rewarded for it. This is called staking. Staking is an act of infrastructure maintenance that is economically incentivized by the network. It is meaningfully different from lending or another type of financial transaction.

Regulate services, not the web3 network.

Community-governed, global protocols spread power across participants and operate by transparent and reliable rules through free, open-source software (FOSS) networks. Regulating FOSS development and use will meaningfully harm not only the blockchain ecosystem but also software innovation generally.

Software as a service projects that are centrally controlled and operate for profit are legitimate subjects for regulation if the services they are performing are regulated in the traditional economy.

In any regulatory environment, a clear distinction needs to be made between financial applications and non-financial applications. Unintentionally, capturing non-financial products would undermine the development of blockchain applications ranging from healthcare and energy to transport and agriculture.

Summary

We encourage a new, thoughtful approach to develop regulatory standards

01

The world stands on the brink of a technological revolution with web3 and blockchain technology.

02

At Consensys, we advocate for smart, flexible regulation of web3 that evolves with the technology. We caution against rigid rules that could stifle innovation and instead, promote a constructive dialogue between regulators and stakeholders that fuels the evolution of this technology.

03

Web3 and blockchain technology carry the potential to unleash unprecedented economic productivity, democratize access to financial services, and shift control back to users. Countries that embrace web3 will thrive, attracting the brightest talent and innovators.

04

However, this new technology requires novel regulations that correctly understand the unique risks it brings with it. We need to regulate services, not web3 itself, to continue fostering innovation.

05

In this new technological era, we need to distinguish between utility and speculation; and understand that blockchain is a technology development platform, and not an investment scheme.

06

The future, enabled by web3, is bright, and we need to adopt the right approach to ensure the paradigm shift in data ownership and decentralized innovation fueled by this digital revolution reaches its full potential.

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