Economic gloom is universal with China’s recovery being stymied by lockdowns, the US’ by worrying inflation readings, and Europe’s by sky-high energy bills.

With monetary tightening set to continue for the rest of the year, things are unlikely to improve in the short term. Yet, national governments are at least considering potential plays for rebooting their tired economies.

Web3 is seen by many as one of the few silver linings in an increasingly cloudy sky. The digital sphere, its advocates assert, will become ever more important as traditional industries are hamstrung by continuing geopolitical turbulence.

Web3, however, must not only win regulatory and fiscal support, but do so at a time when crypto and DLT are hardly the flavor of the month.

As a consequence, digital innovators are having to assess which jurisdictions are friendly and which are not in order to guide where they invest and operate. On the flipside of that coin, there will obviously be economic rewards for jurisdictions that attract investment in crypto and other Web3-led innovations.

So, how do we assess the regulatory landscape at present?

The US, in terms of adoption, is the crypto market’s lodestar with major players like Bitcoin, Ethereum, and Ripple all listed on the NASDAQ. Wall Street funds and US retail investors also contributed significantly to the market’s pre-2022 boom.

In light of the crypto bust, however, the country’s top regulators have taken a distinctly skeptical turn.

This April, the Securities and Exchange Commission (SEC) Chair Gary Gensler indicated that his remit will extend to cover crypto platforms. It was later announced that the SEC would double the number of staff responsible for crypto oversight.

Hester Pierce, one of his commissioners, struck a similar note at May’s DC Blockchain Summit:

‘We’ve sort of dropped the regulatory ball…we’re not allowing innovation to develop and experimentation to happen in a healthy way’.

It seems clear that while commodity tokens will remain the purview of the Commodity Futures Trading Commission (CFTC), US crypto regulation will tighten significantly.

And yet, Pierce’s comments are encouraging because fostering innovation is clearly important to the SEC, rather than simply blunting a flawed, but popular market.

Indeed, while traditional finance regulation has evolved significantly in the past forty years, it has been detrimental in places (e.g. the pre-2008 chokehold of credit rating agencies), without forestalling major crises (see 2008).

To find such a balance between stability and experimentation, the SEC would do well to consider the approach of a number of the ASEAN nations.

In terms of regulation, despite there being no unitary regulatory structure in Southeast Asia, the region’s national governments have broadly welcomed crypto adoption.

Singapore’s central bank, for example, has partnered with industry players on Project Ubin, to explore the use of DLT for the clearing and settlement of payments or securities.

Malaysia, the home of CoinGecko, offers tax incentives for crypto investment, a regulatory decision-making process based on case law, and excellent digital infrastructure.

Perhaps shaken by the crypto crash earlier this year, however, both jurisdictions (and others like Thailand) have moved to tighten regulations over the past few months, with authorities extending their remits to cover crypto assets.

While stability must be maintained through proper licensing arrangements and cybercrime protections, investors will hope that Southeast Asia is not on the verge of stunting its crypto industry’s impressive growth.

According to TechCrunch, more than 600 crypto or blockchain companies are now headquartered in Southeast Asia, with startups attracting approximately $1 billion in funding so far this year.

Web3 in particular is seen by the region’s crypto firms as a key development area for any business model and a potential force for economic recovery:

Toya Zhang, CMO of full-suite crypto exchange Bit.com, notes that sustained innovation in Web3 could precipitate the next ‘financial boom’, driving growth and crypto adoption in the process.

In a global context, this means that for Zhang, the regions that will recover fastest from the current economic malaise will be the ones with well-designed incentives for Web3 investment and intelligent tech regulation more generally.

When it comes to stagnation, Europe can only look on in envy at Southeast Asia’s entrepreneurial zeal.

The continent has been famously slow in the adoption of financial technology, forever short on ‘unicorns’ and temporarily stunned by the rise and fall of Wirecard.

Yet, experts note that the EU’s incoming regulatory framework for crypto – the Markets in Crypto Assets Regulation (MiCA) – at least offers a unified, transparent regime for crypto firms to operate within.

Leading firms put a high value on certainty and clarity and there is a consensus that if MiCA toes this line, then Europe could become a hub for Web3 innovations. The continent would then reap the benefits of investment and high-skilled jobs as a result.

In reality, with an intelligent regulatory regime in place, any one of the jurisdictions above could become the preeminent destination for Web3 and crypto innovation.

While it will take real political willpower to get there, the winter ahead is sharpening minds and may even facilitate widespread buy-in for the next phase of the digital era