WalletConnect Says Crypto Regulation Has Shifted to Implementation

WalletConnect released a 68-page report titled "Current Status of Policy, Compliance, and Regulation," covering payments, DeFi, trading, custody, and tokenization. The report indicates that major markets have shifted from "whether to regulate" to "how to implement," with legislation entering execution at different speeds, while cross-border rules remain highly fragmented.

The EU's MiCA will be fully applicable from December 2024, with the transition period for member states ending on July 1, 2026. The report states that there are about 330 authorized crypto asset service providers on the ESMA temporary register, while over 1,000 companies reportedly did not obtain authorization before the deadline. Unauthorized entities must orderly reduce their EU operations. External registration tracking shows about 340 authorized legal entities that can passport across approximately 26 jurisdictions.

Asia and the U.S. are on different timelines. Hong Kong will issue its first stablecoin issuer licenses in April 2026; Japan's revised Payment Services Act will take effect in June of the same year. The U.S. GENIUS Act has become law, with related regulations set to fully take effect by January 18, 2027, while broader market structure legislation remains incomplete. The same stablecoin and trading activities will thus face the already implemented EU licensing, newly issued Hong Kong rules, and the yet-to-be-fully-implemented U.S. regulations.

The enforcement structure summarized in the report is "regulated touchpoints are responsible": issuers, exchanges, payment and custodians must still comply with anti-money laundering, sanctions screening, travel rules, and record-keeping when interacting with self-custody addresses. Sanctions screening, on-chain analysis, address control verification, and reusable identity credentials are already being used in some businesses to demonstrate that compliance and self-custody can coexist. How decentralized software and protocols will be incorporated into regulation remains unclear, with DeFi cited as the largest unresolved issue in global regulation.

WalletConnect itself is a wallet connection infrastructure, and the report is positioned as an industry bulletin rather than a legislative text. Its business scenario falls at the touchpoint of "self-custody addresses connecting with licensed service providers," consistent with the obligations outlined in the report. Cross-border fragmentation means the same address may face CASP travel rules in the EU, wait for GENIUS regulations in the U.S., and first encounter stablecoin issuer licensing in Hong Kong.

In market mechanisms, this is compliance procurement driven by rule implementation, not a cryptocurrency price event. Buyers are exchanges, stablecoin issuers, and payment companies that must maintain licenses to access self-custody traffic; sellers are providers of on-chain analysis, sanctions lists, address ownership proof, and reusable credentials. Funds are flowing from unlicensed tail service providers to over 300 authorized EU CASPs and licensed stablecoin channels. Beneficiaries are licensed touchpoints that can embed screening into withdrawals and exchanges; under pressure are over 1,000 legacy EU companies that remain unauthorized after the transition period ends, as well as pure protocol layer projects that cannot be classified as "touchpoints."

On a supplementary level, after the MiCA grandfather clause ends on July 1 in the EU, the focus of enforcement will shift from the number of licenses issued to how unlicensed entities exit and handle customer assets. Until GENIUS is fully effective, cross-border issuance of USD stablecoins will still proceed according to state and transitional arrangements.

Source: Public Information