The year is fast approaching. By 2025, Web3 would not have been some fringe, niche experiment. It will have been intricately interwoven into the complex, beautiful fabric of our digital lives. We're talking tokenized real estate, fractionalized ownership of fine art, DeFi protocols impacting global finance, and DAOs managing everything from community gardens to complex supply chains. The question is not whether Web3 will come, but rather, in what form will it come. That hinges on one thing: regulation.

Web3's Wild West Needs a Sheriff?

If we’re being real, the state of Web3 right now is pretty chaotic – it’s the Wild West out there. We all read about these revolutionary innovations every day. We are looking at rug pulls, scams and enough volatility to make even the most weathered Wall Street traders queasy. The promise of decentralization is deep, but absent any guardrails, it’s a fast track for all manner of bad actors.

Think about it: you wouldn't invest your retirement savings in a company that refused to disclose its financials, would you? That’s exactly what most people are doing when they jump into the deep end of the noncompliant crypto waters. Blockchain’s transparency is remarkable in theory only. It doesn’t catch bad code in smart contracts or flat out scams.

Here's where the "unexpected connection" comes in. Consider the early days of the internet. It quickly and against all odds became revolutionary, democratizing information and connecting people across the globe. It has turned into a petri dish for misinformation, cybercrime, and privacy violations. This kind of regulation, though commonly seen as an infringement, produced the internet as we know it today, a much more developed and stable platform that users can trust. Perhaps regulation could be the key to Web3’s long-term survival, as well.

I get that anger, which drives a lot of the broad-based anti-regulatory sentiment we see in the crypto space today. Nobody wants government overreach. The outrage over potential limitations needs to be balanced with the anxiety about the potential for catastrophic losses if the current laissez-faire approach continues.

Innovation vs. Investor Protection?

The core dilemma is this: How do we balance fostering innovation with protecting investors and consumers? Overreaching regulation may suppress the same innovation that makes Web3 so exciting and full of potential. Just picture a world where each and every DeFi protocol has to figure out a complex legal web before they can launch. As a result, the next Bittensor or MakerDAO will never even get off the ground.

A failure to regulate at all creates a recipe for disaster. The collapse of FTX was a reminder about the risks that exist when centralized, opaque entities are allowed to flourish without sufficient oversight. What we want is rules of the road, consensus norms for how DAOs should operate and clearer, standardized processes for auditing smart contracts. We need investor protection.

Consider the tokenization of real-world assets (RWAs). Now, picture that participation happening as easily as owning a tokenized security tied to that commercial real estate opportunity. The benefits are clear: increased liquidity, lower transaction costs, and greater accessibility. Absent the right regulatory framework, how do you protect the investors that the underlying asset is for real? How do you protect yourself from fraud?

This isn’t simply a paternalistic concern for wealthy investors, either. Web3 can be a powerful tool for underrepresented communities, providing alternative channels to financial inclusion. Unfortunately, though, those communities that are most targeted are the most vulnerable to scams and predatory practices. We can’t rely on consumers to be financially literate or nefariously well connected enough to seek out alternatives—we need regulation that protects everyone.

International Harmony or Regulatory Chaos?

Web3 is global. Bitcoin doesn't care about borders. Ethereum operates 24/7, across every time zone. So, how do you regulate something that by definition goes above and beyond any one country’s borders?

The answer, of course, is international cooperation. But that's easier said than done. Countries vary in priorities, legal frameworks, and levels of familiarity with Web3 technology. The US is attempting to do the same with recently passed, bipartisan legislation — but is that sufficient?

Otherwise, we’ll just be left with a chaotic patchwork of clashing regulations. This would set the stage for regulatory arbitrage, where companies move to the jurisdiction with the friendliest rules. This would not only strip the public of the most effective form of regulation, but it would inject more uncertainty to businesses and investors.

Now picture that future where Coinbase and Kraken face different sets of regulations in every country they do business in. It would be a compliance nightmare, crushing innovation and overall making it more difficult for users to find and use Web3 services.

International organizations such as the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) need to go first. It’s concerning, but more specifically, it’s imperative that they come up with global standards for Web3 regulation. That doesn’t require developing a cookie-cutter approach. Rather, we need to set broad principles and guidelines for best practice, which nations then apply in innovative ways to their specific context.

The clock is ticking. In a few years, by 2025, one could argue the regulatory landscape for Web3 and its constituent technologies will be much more pronounced. Have we laid the groundwork for a new paradigm that encourages innovation, protects investors, and enables cooperation with allies on the international stage? Or will we have just set the conditions for a chaotic, disjointed, risky, and recall-worthy foundation? The opportunity is huge, and the choice is ours.

Remember, your voice matters. Engage in the debate. Contact your elected officials. Support appropriate regulation that balances innovation with adequate protections. The future of Web3 depends on it.