L08: Regulation & Future

Examine how regulation shapes the crypto ecosystem — from stablecoin oversight to ETF approvals and on-chain compliance.

Guided Activities

Link DeFiLlama

Go to defillama.com/stablecoins (opens in new tab)
Look at the historical chart of total stablecoin market cap.
Can you identify any sharp drops? (Hint: look at May 2022 — the UST/LUNA collapse)
Research: what regulatory or market events caused the biggest changes?
Compare the current market cap to its peak. Has the market fully recovered?

Discussion: How does regulatory uncertainty affect the stablecoin market? Why did the UST collapse have such widespread impact?

Link Etherscan

Go to etherscan.io — USDT contract (opens in new tab)
This is the USDT (Tether) smart contract on Ethereum — the world's largest stablecoin.
Look through the contract's Read functions. Find isBlackListed — this function checks if an address has been blacklisted by Tether.
This means Tether can freeze funds at specific addresses — even though it runs on a "decentralized" blockchain.
Think about: who has the power to blacklist addresses? Under what circumstances might they do so?

Discussion: Should regulators require all stablecoins to have blacklist capabilities? What does this mean for the idea of "decentralized" money?

Research Exercise

Research the current legal status of Bitcoin in three countries: United States, China, and El Salvador.
For each country, find: Is Bitcoin legal to own? Is mining legal? Are crypto exchanges regulated?
The US treats Bitcoin as property (taxable). China banned crypto trading and mining. El Salvador made Bitcoin legal tender.
Think about: how do these different approaches affect innovation and adoption in each country?

Discussion: Why do different countries take such radically different approaches to crypto regulation? What are the tradeoffs of each approach?

Link CoinMarketCap

Go to coinmarketcap.com and look at Bitcoin's all-time price chart.
The US approved spot Bitcoin ETFs on January 10, 2024. Find this date on the chart.
Note: the price before the approval, the price on the day of approval, and the price 3 months later.
ETFs allow traditional investors to gain Bitcoin exposure through their regular brokerage accounts.
Research: how much money has flowed into Bitcoin ETFs since approval? (Hint: billions of dollars)

Discussion: Did the Bitcoin ETF approval lead to a sustained price increase? How do institutional investors change market dynamics?