Sebastian Sinclair

The World Economic Forum (WEF) has taken a stab at presenting solutions to global crypto policy, which it warns is too patchwork to properly protect markets and investors.



In a fresh white paper, &#8220;Pathways to the Regulation of Crypto-Assets,&#8221; the global body reasoned that protections baked into traditional finance might not fully extend to crypto due to its decentralization. Addressing its “borderless nature” would help bridge the gap.



“At their current level, crypto assets represent a small portion of the overall global financial system,” WEF <a href="https://www3.weforum.org/docs/WEF_Pathways_to_the_Regulation_of_Crypto_Assets_2023.pdf" target="_blank" rel="noreferrer noopener">said</a>, echoing sentiment from <a href="https://blockworks.co/news/europe-raises-alarm-over-crypto" target="_blank" rel="noreferrer noopener">Europe’s systemic risk board</a>.



“Even so, the lack of regulation in some jurisdictions and the absence of a harmonized regulatory framework is raising concerns as to whether this market could pose a threat to global financial stability.”



WEF targeted its recommendations at three major stakeholders categories: international organizations, regional or national regulators and the industry as a whole.



<ol class="wp-block-list">
<li>Establish best practices for crypto (internationals organizations)</li>



<li>Harmonize terminology and definitions (internationals organizations)</li>



<li>Foster cross sector coordination among regulators (regulators)</li>



<li>Coordinate efforts to establish interoperable technical standards (regulators)</li>



<li>Share best practices for addressing operational and cybersecurity risks (industry)</li>



<li>Innovate &#8220;responsibly&#8221; and engage with policymakers and regulators (industry)</li>
</ol>



Lax standardization of crypto regulations, policies and definitions are holding back progress for sufficient oversight, WEF said. 



A light touch approach in some jurisdictions, including those considered crypto hubs like Singapore or Hong Kong, are “leading to problems of regulatory arbitrage.”



WEF is an international non-governmental organization famously known for its annual Davos conferences, which play host to world and business leaders intent on influencing global conversations and agendas. 



The body said it built its crypto policy report with contributions from policymakers, regulators and industry figures.



Dante Disparte, chief strategy officer and head of Global Policy at Circle, as cited in the white paper, said the WEF’s “vital work,” in collaboration with the Digital Currency Consortium, offered an accessible blueprint for jurisdictions to work with.



“The advent of crypto-assets and blockchain-based financial services is proving to be more about convergence than disruption of the traditional economy, banking and finance,” he said. “This should be encouraged.”



<h2 class="wp-block-heading">World Economic Forum warns of Ethereum ‘concentration risk’</h2>



WEF flagged areas of the crypto industry which could suffer from concentration risk, including stablecoins (a handful of issuers dominate the market) and crypto exchanges (FTX contagion was widespread).



The ecosystem could suffer without clear regulatory frameworks to handle market abuses, competition policies and conflicts of interest, the report said.



But WEF also cited Ethereum’s dominance as a potential risk: “There are several decentralized applications powering the crypto asset ecosystem, but the underlying technology is dominated by Ethereum, one of the most decentralized blockchains.”



Other layer-1 protocols operate within the sector, but “most are based on Ethereum technology,” WEF said, adding that layer-2s such as Optimisim, Arbitrum and Polygon are addressing some concentration risks.



“Moreover, a trend towards more EVM-compatible chains that do not depend on Ethereum for consensus, such as Avalanche, can further create competitive networks that share the same developer support,” WEF said.



Ethereum aside, worldwide agencies are voicing similar concerns. Dubai’s Financial Services Authority this week <a href="https://www.bloomberg.com/news/articles/2023-05-26/dubai-watchdog-warns-on-risks-of-crypto-s-global-regulatory-gaps" target="_blank" rel="noreferrer noopener">called</a> for regulators to come together in a bid to curb exploitation of regulatory loopholes.



The Dubai watchdog took grievance with the complex nature of many global crypto firms, which operate across multiple jurisdictions under a single umbrella organization.



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crypto policy

World Economic Forum Thinks it Knows How to Fix Crypto Policy

Raullen Chai

In the crypto and blockchain space, the “machine economy” will emerge this year as one of the most promising opportunities for consumers, businesses, and enterprises.



The metaverse is one of the four major machine economy use cases and the one with the most potential to unlock a multi-trillion-dollar economy for users, businesses, and smart device makers.&nbsp;&nbsp;



Out of the three metaverse sectors — <a href="https://www.weforum.org/reports/demystifying-the-consumer-metaverse/" target="_blank" rel="noreferrer noopener">consumer</a>, <a href="https://bernardmarr.com/the-enterprise-metaverse-what-it-means-for-businesses/" target="_blank" rel="noreferrer noopener">enterprise</a>, and <a href="https://new.siemens.com/global/en/company/insights/what-is-the-industrial-metaverse-and-why-should-i-care.html" target="_blank" rel="noreferrer noopener">industrial</a> — the latter has more potential.



The industrial metaverse, a hot topic during this year&#8217;s World Economic Forum (WEF) summit in Davos, is set to outgrow the rest by at least threefold due to its wider range of applications, such as advanced training, industrial simulations, medicine and surgery, among many others. It combines immersiveness, real-time data, and digital twins to create new business models and accelerate digitalization.



And while technologists try to figure out how the metaverse will impact businesses and consumers, the industrial metaverse has already transformed how we design, manufacture, and interact with physical entities across industries.



One of the industrial metaverse&#8217;s critical applications is digital twins, a virtual replica of a product or process used to predict how the physical entity will perform throughout its lifecycle.



BMW, for example, created a virtual twin of its production plant in Bavaria before building the physical facility. Boeing uses a digital twin development model to design its airplanes. The government of Singapore even created a digital representation of the Southeast Asian nation —&nbsp; Virtual Singapore — to support its policy decisions and test new technologies.



However, challenges remain. One of the puzzle pieces of the industrial metaverse is to connect edge devices and trusted data flow with the digital twins to create near real-time simulation and prediction for real-world situations.



That’s where Web3 comes in.



<h2 class="wp-block-heading">Machine economy, the next digital frontier</h2>



The metaverse showed tremendous growth in 2022 despite the global economic slowdown. Experts believe it will continue to grow significantly — the WEF, for instance, predicts the market will reach $800 billion in 2024.&nbsp;



According to Deloitte, the global metaverse market <a href="https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/center-for-the-edge/sg-metaverse-in-asia-deloitte-center-for-the-edge-nov22.pdf" target="_blank" rel="noreferrer noopener">could grow</a> to $13 trillion in the next seven years. McKinsey <a href="https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/value-creation-in-the-metaverse" target="_blank" rel="noreferrer noopener">states</a> that metaverse is a massive business opportunity that companies should pay attention to because it has the potential to grow to $5 trillion by 2030.



The machine economy represents an era of automation driven by billions of intelligent, connected and economically independent machines interacting and transacting with each other on behalf of people and businesses, unlocking trillions of dollars in business value.



Vast amounts of user data — which today has become the most valuable commodity worldwide — are powering this thriving new Internet of Things (IoT) frontier which, according to PwC, will contribute to 70% of the global gross domestic product in the next seven years.



Within that frontier, the machine economy — which combines distributed ledger technology, such as blockchain, with artificial intelligence and machine learning — will transform the IoT industry, according to <a href="https://www.iiconsortium.org/journal-of-innovation/" target="_blank" rel="noreferrer noopener">research</a> conducted by two leading tech firms, IoTeX and Siemens, published by the Industrial IoT Consortium.



<h2 class="wp-block-heading">Benefits and challenges</h2>



While IoT is already a fast-growing sector, blockchain or Web3 democratizes the multitrillion-dollar machine economy, benefiting intelligent device security, scalability, transparency, efficiency, speed and automation.



A chief problem with current IoT systems is their security architecture, with a centralized model managed by a central authority, making it highly susceptible to a single point of failure. Blockchain addresses this problem by decentralizing the decision-making process into a consensus-based network of devices.



The most visible challenges are that Web3 may not be accessible to advanced gadgets, it needs to become more user-friendly, and — due to a lack of understanding and education — it is still difficult for authorities to regulate, potentially leading to an increase in cybercrime.



Other challenges are for countries and organizations with legacy systems, which are difficult and expensive to replace. And social and human labor concerns still loom over the potential for digital automation because it is clear that decision-making AI and machines will be the primary driver of economic growth in the coming years.



<h2 class="wp-block-heading">Paradigm shift</h2>



The machine economy will shake the status quo for intelligent device makers and users. The combination of Web2 businesses and their IoT market footprint, plus a vibrant, ultra-dynamic environment of Web3, creates the perfect ground for significant disruption. In this context, the speed of adoption will once again be the primary driver for success.



However, to embrace the machine economy successfully and build a reliable and sustainable position in the future, business owners should consider several factors, including business model fairness and transparency, as well as the effectiveness of customer engagement strategies.&nbsp;



Also, the robustness of token economy models is needed — critical for incentivizing all stakeholders in a machine economy ecosystem. With these factors in place, we can ensure long-term sustainability and steady growth of machine economy businesses.



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metaverse

Industrial Metaverse Primed To 3x Consumer, Enterprise Applications

Ornella Hernandez

<div id="highlights-block_628fe8d9cc4a9" class="highlights">
 <ul>
 <li>Companies including LEGO Group are working on augmented reality technologies to grow metaverse usage</li>
 <li>LEGO, alongside Sony, invested $1 billion into Fortnite’s developer to scale their metaverse dealings</li>
 </ul>
 
</div>



The metaverse took center stage at much of Davos this week.&nbsp;



The consensus: It’s still early days for digital realms that proponents say will one day replace much of our daily lives, from work to play.&nbsp;



One <a href="https://www.weforum.org/open-forum/event_sessions/the-possibilities-of-the-metaverse" target="_blank" rel="noreferrer noopener">panel</a> at the annual gathering of the world’s elite, hosted by the World Economic Forum (WEF), “The Possibilities of the Metaverse” gathered thought leaders including Philip Rosedale, the founder of High Fidelity and Second Life, Magic Leap CEO Peggy Johnson, as well as Edward Lewin, vice president of government and public affairs at the LEGO Group.



Asked to define the metaverse, Johnson described it as the digital infrastructure of the internet, a network of different — sometimes overlapping — virtual worlds accessible via a phone or computer.&nbsp;



Johnson, who heads enterprise augmented reality platform Magic Leap, said corporations will drive widespread metaverse adoption — including tapping emerging technology to develop training for firefighters and medical students.&nbsp;



The future of the metaverse is going to be “inspired by our inner child,” Lewin said. One in three internet users is a child or young adult well-positioned to design virtual worlds that work for them, he added.&nbsp;



The LEGO Group’s parent company, KIRKBI, recently <a href="https://cms.blockworks.co/fortnite-developer-epic-games-gets-2b-from-sony-kirkb-to-drive-metaverse-efforts/" target="_blank" rel="noreferrer noopener">invested</a> $1 billion with Sony into Fortnite developer Epic Games as it grows its metaverse ambitions. He added their main goals are to promote the safety and well-being of kids and families, as well as promote privacy and ensure choice when it comes to sharing data. 



Rosedale’s avatar-based virtual platform, Second Life, meanwhile, has been around for almost two decades and has its own economy. But it’s not built on the blockchain.&nbsp;



He described the million person user base to be on average 40 years or older, and they “come together, get to know each other or work together.”



Asked his views on digital privacy, he said it’s a “tremendous challenge” to balance security, privacy and freedom of speech.



Unlike in the real world with safeguards like passports, in Second Life, he added: “There must be a balance between preserving your identity so you can truly be someone else if you wish to, while still being able to connect with others in a way that creates responsibility and consequence.”



The <a href="https://cms.blockworks.co/davos-survey-finds-metaverse-optimism/" target="_blank" rel="noreferrer noopener">WEF released a poll</a> Wednesday that gauged public opinion of the metaverse. More than two-thirds of respondents from China, India and Peru were bullish, while only a third of those surveyed from Great Britain, Canada, Japan, Belgium, France and Germany were keen on a hyper-connected metaverse.



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