GuShiio.com Through global collaboration and moderate intervention, promote the Web3 ecosystem from chaos to maturity and stability.
Author: Luke, Mars Finance
1. Celebrity Meme coin chaos: The call for harvesting and supervision
One of the charms of Web3 lies in its ideal of decentralization, but driven by the celebrity effect, this ideal is often distorted into a hotbed of speculation. Recently, the LIBRA token promoted by Argentine President Javier Milei has become a typical case of market manipulation. When Millay first promoted LIBRA, the market value of the token once exceeded US$4.5 billion. However, just four hours later, the token plummeted 85%, the market value shrank by more than US$4 billion, and investors suffered heavy losses. On-chain data revealed that the project party had quietly amassed funds before the tweet was released and cashed in through large-scale sales, with a cumulative profit of more than US$100 million. After the tweet was deleted, Millay argued that he “did not understand the details of the project.” However, when the token information was forwarded again on February 17, speculative sentiment in the market was further stimulated, and doubts emerged one after another. Even so, Millay still insisted in a television interview: “I just shared information and did not participate in the project,” although this behavior has caused losses to many investors.
Millay’s words and actions made investors feel that they were being used, especially before and after the entire incident. He neither assumed political responsibility nor provided any substantial protection to retail investors, but played Web3 like a monkey. This chaos has made Web3 investors increasingly vocal, who urgently need a regulatory framework that balances market freedom and investor protection.
In this case, regulatory issues in the Web3 field become particularly urgent. The negative consequences of market manipulation and false propaganda have not only destroyed investor confidence, but also put the legitimacy of the entire encryption industry to a severe test. How to establish an effective legal framework while maintaining the spirit of decentralization? How to avoid the abuse of celebrity effects like Millay? These issues have sparked widespread discussions inside and outside the industry, and calls for supervision have become increasingly louder.
2. Exploration of regulatory frameworks: From MiCA to technology-driven compliance innovation
With the barbaric growth of Web3, the lack of supervision has gradually revealed its shortcomings, but how to find a balance between the core values of decentralization and market norms has always been an urgent issue to be solved. The European Union’s Cryptographic Asset Markets Regulation (MiCA) provides a regulatory framework worth learning from, aiming to control the risks posed by crypto assets through hierarchical management. MiCA has set strict reserve requirements for stablecoins such as asset reference tokens (ARTs) and electronic currency tokens (EMTs), and has set a cap on single-day trading volume to avoid excessive fluctuations causing systemic risks. Regulatory requirements for crypto asset service providers (CASPs) emphasize the isolation of customer funds, transparent pricing and licensing systems to ensure compliance in the market.
This hierarchical supervision model can be effectively extended to the management of Meme coins. For project parties, it is particularly important to forcibly disclose the token allocation mechanism and lock-up strategy. By setting more transparent rules, celebrities can be prevented from making short-term profits through “taking advantage of their influence”. At the same time, learning from MiCA’s practice, setting risk warnings on highly volatile assets on exchanges and imposing appropriate restrictions on leveraged trading can further protect the interests of retail investors and prevent them from becoming “cannon fodder” in violent market fluctuations.
However, there is still a clear conflict between the traditional KYC (Customer Authentication) mechanism and the decentralization principles of Web3. In order to make up for this contradiction, technological innovation provides new solutions. For example, zero-knowledge proof (ZKPs) technology has found a balance between privacy protection and compliance. Through innovative tools such as zCloak, users can selectively disclose necessary information (such as nationality, age, etc.) without exposing complete personal data. This practice not only meets regulatory requirements such as anti-money laundering, but also fully protects users ‘privacy rights.
For high-risk assets such as Meme, this technology should be especially adopted to ensure that only investors with appropriate risk tolerance can participate. In addition, the application of smart contracts also has great potential in monitoring market manipulation and identifying insider trading. For example, smart contracts can track the transfer of large coins in real time, combine on-chain data analysis, identify abnormal behaviors, and promptly warn of possible market manipulation behaviors. This technology-driven compliance approach can not only strengthen market supervision, but also ensure transparency through decentralized means.
To sum up, from the regulatory framework of the MiCA Act to technology-driven compliance innovation, the regulatory prospects in the Web3 field are not without merit. Although we still face a game between technology and regulations, with the continuous development of technology and the gradual improvement of regulatory policies, a more secure and transparent Web3 market may be just around the corner.
3. The balance between decentralization and centralization: building a regulatory philosophy of “moderate intervention”
The core value of Web3 is to eliminate intermediaries, promote the ideal of decentralization, and give individuals greater freedom and control. However, completely letting this freedom go may eventually lead to chaos in the market or even disorderly competition like the “law of the jungle”. To this end, the ideal regulatory framework should pursue “moderate intervention”, which can not only ensure the spirit of decentralization and innovation, but also prevent the market from falling into extreme speculation and manipulation.
The primary goal of regulation should focus on core areas-anti-money laundering, investor protection and market fairness. Excessive interference in the technical agreement itself may undermine the innovation foundation of Web3. Therefore, supervision should avoid excessively touching the agreement level and focus on more substantial risk points. For example, how to ensure the safety of investors ‘funds during the platform’s operation, how to prevent market manipulation, and how to ensure transparent information disclosure are areas that should be focused on by supervision.
At the same time, the characteristics of decentralization have made the concept of “code is law” increasingly popular in the Web3 field. This means that regulatory rules don’t just stay on paper, and technical means such as smart contracts can enable legal provisions to be implemented directly on the chain. For example, rules such as token lockups and tax withholding can be automatically enforced through smart contracts, thereby reducing human discretion. With this “code is law” approach, supervision no longer relies on a single third-party agency to implement it, but uses decentralized technology to ensure its fairness and transparency.
In addition, global collaboration is also an important part of building an effective regulatory framework. Web3 is a global digital ecosystem, and regulation in a single country or region is often difficult to cope with the complex situation of cross-border transactions and market manipulation. In order to prevent regulatory arbitrage, countries around the world need to strengthen coordination, establish a transnational regulatory sandbox, and provide a compliance “testing ground” for various crypto assets and trading platforms. This mechanism will help unify regulatory standards globally and avoid market chaos caused by policy differences among countries.
Take the EU’s MiCA bill as an example. Its implementation adopts a phased strategy, such as setting a transition period of 12 to 18 months, aiming to balance market adaptability and risk prevention and control. This transition period not only allows the market enough time to adjust and adapt to new regulations, but also effectively reduces the suppression of industry innovation. In addition, regulators should also work closely with the Web3 community to ensure that the policy formulation process is more transparent and inclusive. For example, consider incorporating decentralized autonomous organizations (DAOs) into the governance framework, involving communities in rule-making, and ensuring that more stakeholders ‘voices are heard.
Finding a balance between decentralization and centralization is not easy, but with the advancement of technology and the deepening of global regulatory cooperation, a regulatory framework that can protect the rights and interests of investors and maintain the spirit of decentralization will surely gradually take shape. This regulatory philosophy of “moderate intervention” may be the key to the development of the Web3 field.
4. Future prospects: from chaos management to ecological reconstruction
Milai’s Memecoin incident exposed the fragility of the Web3 ecosystem and sounded the alarm for the lack of supervision in the industry. However, this incident does not represent the end of Web3, but rather the only way for the industry to mature. In the future, Web3 will not only be a market full of speculative bubbles, but is expected to become an important infrastructure to promote financial democratization and promote economic innovation.
Advances in technology will play a key role in this process. Through innovative means such as smart contracts, on-chain monitoring and privacy protection technologies, Web3 can enhance market transparency while ensuring investors ‘rights and interests. The application of these technical tools can effectively monitor market behavior, prevent manipulation and insider trading, and lay the foundation for the healthy development of the industry.
However, the role of supervision is not only to crack down on illegal activities, but also to guide the industry to develop in a more stable and mature direction. Through a reasonable regulatory framework and technology symbiosis, Web3 has the potential to achieve a balance between decentralization and compliance, avoid extreme speculation in the market, while encouraging innovation and value creation.
The future of Web3 requires the joint efforts of all parties. With the deepening of global regulatory collaboration and continuous innovation of technology, Web3 can not only get rid of the bubble and gradually mature, but can also become an indispensable part of the global financial system. In the end, Web3 will not just be synonymous with digital currency, it will bring profound changes to the global economy.
