This week, multiple seemingly scattered news stories have pushed blockchain to the forefront of financial governance in the East 8 Time Zone: Richard Tice, Vice Chairman of the Reform Movement in the UK, publicly proposed using on-chain technology to strengthen anti-fraud efforts in finance; Coinbase and its Chief Policy Officer Faryar Shirzad once again called on the U.S. to rewrite cryptocurrency tax rules; meanwhile, small and medium-sized enterprises like Sticker Mule, which focus on custom stickers, quietly integrated crypto payments to serve global customers. At the same time, on-chain data presents a starkly different reality: according to Kaiko, the trading volume of euro-denominated related assets has dropped by about 50% this year, while the cross-chain protocol LayerZero has connected over 165 public chains, laying the foundation for institutional-level cross-chain asset handling.
A gradually clearer contradiction emerges from these clues: on one end, blockchain capabilities are quickly taking root in anti-fraud, tax reform, cross-chain settlement, and enterprise payment scenarios; on the other end, regulatory frameworks regarding taxation, taxation, accounting standards, etc., remain stuck in an outdated paradigm centered on traditional currency and account systems, with a pace of update far slower than technological evolution. This mismatched scenario is not only reflected in the stark contrast between the halved trading volume of euro-related assets and the continued dominance of dollar assets, but also reflects the repeated tug-of-war among various countries between "making good use of on-chain traceability" and "avoiding stifling innovation."
The UK Political Scene Names Blockchain: Anti-Fraud Becomes the Entry Point
In the UK political arena, Richard Tice directly includes blockchain in the anti-fraud toolbox, with the core advocacy of tracking the flow of funds and increasing the cost of crime through an accounting system linked to on-chain assets. His vision is not simply to "ban," but to utilize the programmable features of related assets and transparent ledgers, allowing fraudulently acquired funds to leave clear traces during cross-border transfers and money laundering, thus supplementing the shortcomings of traditional anti-fraud methods that rely on manual checks and retrospective investigations. This idea poses a challenge to the existing anti-fraud system because it partially shifts responsibilities that originally depended on internal bank risk controls onto public and shared infrastructure.
The on-chain data’s traceable and tamper-proof characteristics are seen as potential advantages in combating money laundering and telecom fraud. Compared to traditional bank "peer-to-peer" reconciliations, a unified distributed ledger allows suspicious fund paths to be clearly visible, enabling law enforcement agencies, once they possess the necessary permissions, to more efficiently freeze and recover involved fraudulently obtained funds. This model will also reshape banking compliance and KYC processes, moving from "only looking at the bank's own accounts" to "reviewing overall funding behavior in conjunction with on-chain trails"; banks will need to incorporate on-chain analytical tools and redesign transaction monitoring indicators; they may even need to assess the risk profile of clients' on-chain addresses at the account opening stage.
On a deeper level, Tice's technical governance proposal conveys clear political and industry signals: traditional finance and crypto infrastructure are beginning to be re-bundled under the narrative of "public safety" and "financial order". As anti-fraud becomes a widely accepted issue among mainstream voters, incorporating on-chain tools into governance is not merely a technical issue but rather a symbol of regulators "acknowledging the existence of crypto infrastructure and attempting to manage it." The resulting consequences are two-fold: on one hand, on-chain networks are incorporated into regulatory oversight and even become official anti-fraud tools, enhancing their "legitimacy"; on the other hand, controversies surrounding privacy protection, address blacklists, and transaction reviews may also be pushed to the forefront at the same time.
Coinbase Pressures Tax Reform: The Gap Between Compliance and Exodus
Unlike the UK’s approach to anti-fraud, in the U.S., the main tug-of-war between the crypto industry and regulators still revolves around tax systems. Coinbase and Chief Policy Officer Faryar Shirzad have repeatedly stated that current U.S. cryptocurrency tax rules are increasingly difficult to adapt to industry developments. The issue lies not only in the tax rates but also in the rules' design based on traditional securities and cash transaction logic, which makes it challenging to encompass new scenarios such as on-chain interactions, cross-platform transfers, airdrops, and liquidity mining, leading to enormous uncertainties for businesses and individuals during reporting.
For ordinary users, the complex reporting requirements mean having to account for the costs and benefits of every on-chain interaction, which is nearly unmanageable in high-frequency trading, DeFi interactions, or multi-chain operations; for businesses, it results in the continuous rise of compliance costs and system overhaul costs. Accounting teams must not only understand the tax definitions of each on-chain behavior but also maintain the technical stack for capturing, classifying, and valuing on-chain transactions, while regulatory interpretations are often lagging or vague. The result is that some project teams and practitioners choose to migrate to jurisdictions with clearer tax and regulatory frameworks, taking their innovations and job opportunities along.
This tension between institutional lag and heightened regulatory sensitivity is particularly evident in the U.S. Congress's inquiries into Kraken's bank accounts. Legislators, on one hand, demonstrate a heightened awareness of the flows of funds and customer risk exposures on crypto platforms through hearings and inquiries, emphasizing the systemic risks that may arise from the integration of traditional banking systems and crypto businesses; on the other hand, they have not yet been able to provide an actionable and predictable tax and compliance pathway, making it difficult for institutions to determine "whether compliance investment is worthwhile and when recovery can occur." In this environment, Coinbase, in the name of "tax reform," is essentially forcing regulators to provide a new framework that aligns with on-chain practices; otherwise, the speed of compliance innovation will inevitably be slowed down by institutional uncertainty.
Euro-Denominated Assets Cool Off: The Structural Awkwardness Behind Trading Volume Halving
Compared to the intense debate around regulatory frameworks in the United States, Europe faces a different dilemma in the related asset markets. According to Kaiko data, the trading volume of euro-denominated related assets has dropped by about 50% this year, while dollar-denominated assets continue to dominate for an extended period. The existing information reveals only the fact of a "halving" in trading volume without pointing out a single clear reason, but this change itself is enough to indicate that users and institutions still prefer the liquidity and inertia advantages represented by the dollar system in actual choices.
From the perspective of market depth, dollar assets have already accumulated substantial order books, over-the-counter liquidity, and market-making networks, making it easier to find counterparties and lock in reasonable slippage for any large inflows or outflows. In terms of use cases, global trade, cross-border settlements, crypto trading pairs, and derivatives are mostly based on dollar-denomination, and related assets are more naturally embedded within these scenarios. Adding to this is the regulatory uncertainty: while Europe strengthens risk control through anti-money laundering and prudent regulation, there remain many details lacking before a new framework is put into place, making institutions more cautious when planning euro-related asset products.
In response to these issues, Europe has been promoting a more unified regulatory framework, such as ongoing discussions around anti-money laundering and MiCA regulations, which strengthen issuer responsibilities, review the risks of on-chain activities, and attempt to establish cross-border coordination mechanisms. This risk-control priority path helps to reduce regulatory arbitrage and obvious violations, but it also leads to a real outcome: the euro-related asset ecosystem struggles to achieve scale before unified rules are truly implemented. When compliance costs are high and demand lacks urgency for euro-denominated assets, even as on-chain infrastructure continues to mature, capital and applications remain more willing to stay within the dollar-dominated deep water zone, leading to a structural awkwardness of "stricter regulation and a smaller market."
LayerZero and Canton: Technical Channels Established, Institutions Only Need Institutional Permission
At the infrastructure level, technological evolution has almost cleared "road obstacles" for the on-chaining of institutional-level assets. The cross-chain protocol LayerZero has currently connected over 165 public chains, meaning that both mainstream layer-one networks and emerging public chains can interoperate under a unified protocol for their assets and messages. At the same time, it has integrated with the institutional-focused distributed network Canton, providing a channel for brokerages, custodians, trading platforms, and others to experiment with on-chain settlement and asset tokenization within the "compliance fence."
Envisioned scenarios include: large brokerages registering securities holdings and settlement instructions within the Canton network, then using controlled interfaces with public chains to map some assets or their derivative rights to the public chain for circulation or collateral; custodians providing institutional clients with on-chain staking, lending, or yield distribution through cross-chain bridges while maintaining traditional compliance custodianship; regulated compliant trading spots migrating parts of order matching and settlement to the chain under KYC/AML standards to achieve more transparent settlement processes. All these attempts point in the same direction: to make on-chain an extension of existing financial infrastructure rather than a parallel world.
However, compared to the "everything is ready" on the technical end, the institutional side still lacks "the last wind." On one hand, political figures emphasize the need to utilize on-chain traceability to enhance enforcement efficiency under anti-fraud issues; on the other hand, in key areas like tax attribution, capital adequacy measurement, accounting treatment, and investor protection, legislative and regulatory frameworks are notably lagging. The result is that combinations like LayerZero + Canton have already proven "it is technically safe to connect institutional networks with public chains," yet they are still waiting for regulators to provide systematic approval. Demands for anti-fraud, tax reforms, and cross-chain infrastructure create subtle interactions: capabilities already exist, but usage boundaries remain unclarified.
From Sticker Mule to Global Business: Real Demands Are Forcing System Upgrades
Beyond macro policies and infrastructure, real-world business practices are quietly offering their answers. Taking Sticker Mule as an example, this small company specializing in custom stickers and related products has chosen to enable crypto payments, fundamentally motivated by expanding its global customer base, reducing cross-border payment costs, and minimizing settlement friction. For similar enterprises, traditional payment channels are unfriendly regarding fees, arrival times, and chargeback risks, whereas on-chain payments offer nearly real-time clearing and lower marginal costs, making it possible to reach global buyers without relying on local banking networks.
Compared to large institutions that emphasize cross-chain and custodial layouts, small and medium-sized enterprises make decisions more directly: if they can receive payments more cheaply and quickly, they are motivated to try new payment methods. This demand is forcing payment gateways, settlement networks, and tax reporting tools to upgrade in tandem: payment service providers must support multi-chain, multi-asset acquiring and automatic currency exchange, settlement networks need to address interoperability between on-chain and fiat accounts, and tax tools must be able to automatically generate compliance reports, identify income types and corresponding tax items. Technically, these are not difficult problems; the challenge lies in how to operate continuously in areas where regulations are still unclear.
The problem is that the internal accounting systems of businesses and external tax law frameworks are still designed according to traditional currency logic. How to account for on-chain payment income once it arrives: should it be converted to local currency income at the spot exchange rate, or treated as assets held and valued separately? Are the differences caused by asset price fluctuations operating profits or financial asset re-evaluations? How will auditing agencies view the compliance of these subjects? When regulatory rules do not provide clear guidance, businesses may face the risks of audit challenges and tax investigations if they expand in scale. This means that even cases like Sticker Mule, which prove that "crypto payments are useful for business," still face obstacles to large-scale implementation due to the lag in accounting standards, auditing methods, and compliance responsibilities.
Technology Is Engaged, Rules Are Stagnating
Overall, the current landscape is represented by the anti-fraud appeals led by Richard Tice, the calls for tax reform represented by Coinbase and Faryar Shirzad, the cross-chain infrastructure exemplified by LayerZero and Canton, and the enterprise payment practices represented by Sticker Mule, all of which are advancing simultaneously yet stuck at the same bottleneck due to differences in the pace of institutional updates. Technology continually proves that it can make funds more transparent, settlements more efficient, and markets more globalized, yet regulators and tax systems remain viewing everything through traditional paradigms and hesitating as to what extent these capabilities should be "written into rules."
Key future observations will focus on how Europe and the United States reconstruct the boundaries of regulation and taxation: first, whether they can find a balance between using on-chain traceability to combat crime and protecting personal privacy, avoiding becoming a panoramic surveillance while not abandoning the benefits of technology; second, how the tax system can simplify on-chain compliance pathways so that individuals and companies can report income and assets within a clear, executable framework rather than being forced to operate in gray areas; third, under the current volume structure, whether euro-denominated assets have a chance to break free from their marginalized state and cultivate globally attractive products and scenarios while ensuring risk control.
It is foreseeable that the next round of integration between crypto and traditional finance will no longer be a purely abstract debate about "whether to accept," but rather will focus on who can be the first to deeply embed blockchain capabilities into financial and business processes within compliance frameworks. Whether it is anti-fraud systems, tax administration, cross-border settlements, or enterprise payments, jurisdictions and institutions that dare to pilot, iterate, and establish industry standards under clear rules will dominate competitive landscapes, while those still stuck in wait-and-see and emergency regulation may be compelled to accept established facts.
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